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STATEMENT on Governor Shapiro’s 2024–25 Budget Address

By PA Budget, Press Statement

FOR IMMEDIATE RELEASE

February 6, 2024

Contact: Kirstin Snow, Director of Communications, snow@pennpolicy.org

STATEMENT on Governor Shapiro’s 2024–25 Budget Address, Pennsylvania Policy Center

A Pennsylvania Budget To Celebrate

Overview

Governor Shapiro took office a year ago at a time when there was a great deal of uncertainty about the economy and the fiscal state of Pennsylvania, and in the wake of a Commonwealth Court decision holding that Pennsylvania’s system of funding public schools is unconstitutional. There was little time for a new administration, led by a new governor and an entirely new set of cabinet members, to develop a long-term plan to address the school funding question. Accordingly, the administration said that its initial budget would be followed by a second-year budget, which would fully address the constitutional mandate to fund K–12 education fully and fairly and other issues. And when we reviewed the budget presented by the Governor last year, we concluded that it set forth the right priorities but did not provide enough funding to meet the needs it identified.

We are very pleased to say that the budget presented by Governor Shapiro today not only has the right priorities but provides the funding needed to meet them, at least in the next fiscal year. The investments the Governor proposes for public K–12 education, higher education, economic development, housing, the minimum wage, and other priorities are substantial and bold. And as important as the new proposed funding is, the Governor’s budget also recognizes the need for Pennsylvania to do some things differently in all these areas.

If adopted by the General Assembly, the Governor’s proposal would put us on a path to answering the impassioned call for adequately and equitably funding schools made by our young people, their parents, and other Pennsylvanians, who have long understood that equality of opportunity, prosperity, and democracy are intricately linked to the education the state provides them.

This proposal is the first step in answering their prayers, and we applaud Governor Shapiro for embracing the BEFC report and adopting its first-year plan in his budget. We think Pennsylvanians should celebrate this budget and work with Governor Shapiro to see it enacted this year.

Our only concern about this budget presentation is that it proposes new investments in K–12 education for only one year. The administration embraced the Basic Education Funding Commission’s seven-year plan to lift state support of K–12 to a level that would meet our moral and constitutional responsibility to fund our schools fully and fairly. However, the long-term budget outlook in the Executive Budget plan released today only contains the first year of the seven-year plan needed to meet that responsibility. The statement of the Governor’s priorities does say that the additional educational investment next year is just the “first year adequacy investment as recommended by the BEFC.” So, we are confident that Governor Shapiro intends to follow through on the commitment to the full seven-year plan his representatives on the Basic Education Funding Commission, as he is both personally committed and constitutionally required to adequately and equitably fund our schools. But the true cost of that plan—and the revenues needed to fund it—are not apparent in the budget documents submitted today. Pennsylvanians deserve a transparent budget process that allows us to consider the alternatives before us.

For the full analysis, click here.
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logo for Penn Policy: Pennsylvania Policy Center

A Pennsylvania Budget to Celebrate

By Budget Analysis, PA Budget, Policy Briefs, Policy Statement

A Pennsylvania Budget to Celebrate

Note: This is an initial review of the fiscal year 2024–25 budget proposed by Governor Josh Shapiro on February 6, 2024. As we delve deeper into the budget we may need to revise or modify the conclusion reached here. Also note that rather than providing one lengthy, in-depth analysis of the entire budget seven weeks or so after it is released, as was done by the previous affiliate of the Center on Budget and Policy Priorities, we will be rolling out our in-depth analysis over the next seven weeks in a series of reports.

Overview

Governor Shapiro took office a year ago at a time when there was a great deal of uncertainty about the economy and the fiscal state of Pennsylvania, and in the wake of a Commonwealth Court decision holding Pennsylvania’s system of funding public schools unconstitutional. There was little time for a new administration, led by a new governor and an entirely new set of cabinet members, to develop a long-term plan to address the school funding question. Accordingly, the administration said that its initial budget would be followed by a second-year budget that would fully address the constitutional mandate to fund K­­–12 education fully and fairly and other issues. When we reviewed the budget presented by the Governor last year, we concluded that it set forth the right priorities but did not provide enough funding to meet the needs it identified.

We are very pleased to say that the budget presented by Governor Shapiro today not only has the right priorities but provides the funding needed to meet them, at least in the next fiscal year. The investments the Governor proposes for public K–12 education, higher education, economic development, housing, and other priorities are substantial and bold. And as important as the new funding proposed is, the Governor’s budget also recognizes the need for Pennsylvania to do some things differently in all these areas.

If adopted by the General Assembly, the Governor’s proposal would put us on a path to answering the impassioned call for adequately and equitably funding schools made by our young people, their parents, and other Pennsylvanians who have long understood that equality of opportunity, prosperity, and democracy are intricately linked to the education the state provides our children.

The proposal is the first step in answering their prayers, and we applaud Governor Shapiro for embracing the BEFC report and including  the first year of its seven year plan in his budget. We think Pennsylvanians should celebrate this budget and work with Governor Shapiro to see it enacted this year.

Our only concern about this proposal in the Executive Budget book is that it proposes new investments in K–12 education for only one year. The administration embraced the Basic Education Funding Commission’s seven-year plan to lift state support of K–12 to a level that would meet our moral and constitutional responsibility to fund our schools fully and fairly. However, the long-term budget outlook in the Executive Budget plan release today only contains the first year of the seven-year plan needed to meet that responsibility. The statement of the governor’s priorities does say that the additional educational investment next year is just the “first year adequacy investment as recommended by the BEFC.” So, we are confident that Governor Shapiro intends to follow through on the commitment to the full seven-year plan made by his representatives on the Basic Education Funding Commission, as he is both personally committed and constitutionally required to adequately and equitably fund our schools. But the true cost of that plan—and the revenues needed to fund it—are not apparent in the budget documents submitted today. Pennsylvanians deserve a transparent budget process that allows us to consider the alternatives before us.

The Budget Overall

The Governor proposes a General Fund budget of $48.3 billion, 8.4% more than the current fiscal year budget of $44.6 billion. This is a substantial increase, but a necessary one. In evaluating the overall size of the budget, it is important to keep in mind two important things. First, looking just at the budget number can be misleading. As our economy and population grow, and inflation occurs, the state budget necessarily must grow. The best measure of the impact of the state budget on our economy is not the number of dollars spent but the proportion of the Gross State Product (GSP) of Pennsylvania that flows through state government. The Governor’s proposed expenditures, if accepted by the General Assembly, would equal 5.02% of the projected GSP of $940 billion.[1] This is higher than the average 4.36% of GSP in Governor Wolf’s budgets. But, it is in line with the 4.66% average during the fifteen years before Governor Corbett. Governor Shapiro is not proposing a major expansion of state government but, rather, a return to the historical path the state budget was on before the sharp budget reductions of the Corbett years.

The second key point to remember in evaluating the overall size of the budget is that Pennsylvania has been falling behind in meeting many responsibilities, not just the  responsibility to educate our children at all levels. We have suffered from a severe public investment deficit. For the last decade, our public schools have been among the most unequally funded in the country; we are fourth from the bottom in higher education funding (and near the top in the cost of public higher education); our public health spending is close to the bottom; we have cut funding for environmental protection even as the need to protect ourselves from the dangers of natural gas fracking has increased the demands for environmental inspectors; we provide less than other states in support for those with mental health issues; and so on. The result of the  public investment deficit is that inequality in our state has increased, and our economy has been growing too slowly. It is going to take higher budget levels this year and, in the future, to close the public investment deficit gap.

Education

Governor Shapiro’s recommendation for education funding closely follows the plan put forward by the BEFC. It calls for over $1 billion in new basic education funding to our five hundred school districts divided into three buckets:

  • $736,000,000 is targeted to school districts that are inadequately funded by the state’s own criteria and as established by the BEFC.
  • $136,000,000 is targeted to school districts that have higher-than-average property taxes because they have had to rely on local funds to make up for inadequate state aid.
  • $200 million will be distributed through the Fair Funding Formula to all five hundred school districts to ensure that state support keeps up with the inflation in education costs.

The Shapiro proposal also accepts the BEFC recommendation to update the current funding formula to improve predictability and stability of funding. The administration embraces the BEFC plan to smooth the poverty factors in the formula to ensure that temporary jumps or statistical anomalies in poverty rates do not lead to sharp changes in state funding. They also call on the General Assembly to reset the BEF base to the 2023–24 allocation. New education funding to school districts in future years would be added to the 2023–24 funding level rather than the 2014–15 level. This means that the school districts that see a decline in the number of students would be protected from a drastic reduction in state funding.

Altogether, total funding for basic education would reach $8.9 billion in FY 2024–25.

The Governor also calls for

  • a $50 million increase in special education funding, a 4% increase over FY 2023–24.
  • a $2.4 million increase for career and technical education, a 2% increase over FY 2023–24.
  • a $7 million increase for dual enrollment programs.

In addition, he calls for $300 million per year for repairing dilapidated and toxic school buildings.

The Governor also proposes to reform the way school districts pay for cyber charter schools. Currently payment rates range from $8,639 to $26,564 per student per year. These payment variations are not at all related to the actual cost of educating children in cyber charter schools. The Governor proposes a fixed $8,000 payment per student per year. This plan would save school districts, including many rural school districts, a total of roughly $262 million per year.

Early Childhood Education

Governor Shapiro proposes $32 million in new funding for early childhood education programs, including $30 million for Pre-K Counts, an 11% increase over FY 2023­–24; $2.7 million for Head Start, a 3% increase over FY 2023–24; and a $17 million increase for Early Intervention, a 5% increase over FY 2023–24.

These proposals are not only welcome but bold. But, as we mentioned above,  they are for one year only. The Basic Education Funding Commission proposal, which Governor Shapiro’s representatives voted for, made clear that reducing the adequacy gap in funding our 500 school districts, as well as addressing tax inequity, would require an additional investment at this scale seven years in a row. At the end of the seven-year plan, state spending on K–12 education would be $6 billion higher than it would have otherwise been. However, the five-year plan in the Executive Budget shows flat funding for education in the four years after FY 2024–25.

It is not uncommon for the out years in a governor’s budget proposal to project flat funding of many budget lines combined with a mixture of conjecture and fantasy about possible future initiatives and revenues. So, we are not concerned about what we don’t see in the future projections of education funding. We trust in the Governor’s endorsement of the BEFC report and the bold rhetoric in his speech today about the necessity of providing an adequate education to all the children of Pennsylvania. But, as we will show below, excluding future increases in education funding from the long-term budget outlook could create a misleading picture of the fiscal status of the Commonwealth and the eventual need for new recurring revenues to both balance the budget and fund education fully and fairly.

Higher Education

The Executive Budget calls for major changes in the way higher education is governed and funded in Pennsylvania. We can’t speak to the details of this proposal here as some of them are not clear and the impact of others requires more careful consideration than we can provide today.

The good news is that Governor Shapiro recognizes that our state has been disinvesting in higher education for thirty years with the result that tuition at PASSHE and community colleges are among the highest in the country, even relative to median income. Because of the high tuition, there has been a drastic decline in enrollment, far greater than is caused by the decline in the number of high school graduates. Pennsylvania has tens of thousands of open jobs that require higher education. Even worse, many Pennsylvanians leave the state to attend less expensive colleges in other states and, too often, they do not return.

To deal with these issues the Governor proposes both structural changes and new funding. He calls for consolidating the PASSHE and Community College systems under one board and administration. We will consider this proposal in greater detail later in the year, but we do think there are two points in its favor. First, it is vital to the success of higher education in Pennsylvania that students graduating from community colleges have a smooth path to finishing a four-degree at a state university. Combining the operations of the two systems may well make those transitions easier. And second, we believe that in the last forty years colleges and universities have spent too much on administration and too little on faculty members and vital support services. Consolidating the two systems would reduce the administrative overhead of both systems.

Recognizing the need for new funding to reduce tuition, the Governor proposes an additional $127 million in funding for the combined PASSHE-Community College system and $31 million for the state-related universities: Lincoln University, Temple University, The University of Pittsburgh, and Pennsylvania State University. Total higher education funding would rise from $1.54 billion to $1.7 billion. He also calls for changing the way the state-related universities are funded to remove the requirement that such funding receive a vote of two-thirds of the House and Senate. This important step is needed to reduce micromanagement of these universities by the General Assembly.

The consolidation and new funding proposals this year, and one promised for 2025–26, would allow the state to ensure that any student whose family income is less than the median family income in the state would be able to attend a community college or state system university for no more than $1,000 in tuition and fees per semester. Students attending state-related universities would see a $1,000 increase in their Pennsylvania Higher Education Assistance Agency (PHEAA) grant, bringing it to $6,750 per year. This bold plan promises to make a college education far more affordable, especially for families with low and moderate incomes, enabling our community college / state university systems to once again be the engines of economic opportunity they were in the past and thereby providing the education and training needed to drive our economy forward in the future.

Building a Strong Economy

Governor Shapiro has long recognized the importance of state support for economic development beyond that which is provided by a strong education system. He has created a new economic development strategy that promises not only to attract new businesses to the state but also help existing businesses expand. He proposes a total of $600 million in new and expanded investments to enhance the Department of Community and Economic Development work in this area.

This new investment would be distributed among a number of different programs, including

  • $500 million for the PA SITES program, which provides funds for on-site development for priority industries, including agriculture and manufacturing. It would be paid for by a taxable bond issue.
  • $20 million in new funding to leverage Pennsylvania’s research and development assets.
  • $3.5 million to create the Pennsylvania economic competitiveness challenge to encourage the creation of regional development strategies.
  • $25 million for the new Main Street Matters program that would build on the work of the Keystone Communities and Main Street and Elm Street programs that have helped local governments create vibrant downtowns.
  • $21.5 million in funding for tourism and business marketing.
  • $2 million in funding to support internships.
  • $10 million in new funding for the Department of Environmental Protection to hire new staff and improve IT systems to expedite permitting approvals.
  • $10.3 million in funding for agricultural innovation.
  • $5.6 million for the dairy industry.

While it is included in a separate category in the Governor’s budget, we want to note that the new investments in career and technical education discussed above are critical to any successful economic development strategy. We continue to believe that the best way forward to a strong future economy is to invest in people. Businesses come and go. But a well-educated and trained workforce is a major attraction to new businesses and those seeking to expand their operations in our state.

Minimum Wage

Raising the minimum wage is long overdue. At a time when every state around us is moving quickly to a $15 minimum wage, Pennsylvania’s minimum wage is not only a moral embarrassment but also a barrier to economic growth. The minimum wage has not been increased for 14 years. Many Pennsylvanians seek work in neighboring states to earn higher wages. And they spend some of what they earn in those states as well, depriving Pennsylvania businesses of their patronage. Indeed, low wages hold back economic growth and hurt local businesses all over the Commonwealth. So, we are glad to see Governor Shapiro again propose an increase in the minimum wage to $15 on January 1, 2025. It is imperative that the Senate follow the House in embracing this proposal. We would also like to see the General Assembly end the tipped minimum wage, allow local governments to set a minimum wage higher than the state level, and create an automatic cost-of-living increase in the minimum wage.

According to data from the Keystone Research Center, raising the minimum wage to $15 per hour would increase the wages of 1.34 million Pennsylvanians. More than 21% of Pennsylvanians would see their wage go up. This would lead to an increase in consumer spending of $5 billion dollars, giving our economy a strong push upwards. A majority of the people who would see their wages go up are women and full-time workers—and over a quarter of minimum wage workers have a child. About 21% of them live in cities, and 25% live in rural areas. An increase in the minimum wage to $15 would add $56 million to state revenues and would reduce state expenditures for Medical Assistance and other safety net programs by roughly 20–30 millions of dollars.

Public Transportation

Another important component of a successful economic development strategy, and especially one that seeks to expand opportunities for low- and moderate-wage workers, is public transportation. Public transportation is not just critical in our largest cities. Many smaller cities, and even some more rural counties, have public transportation systems that make it possible for workers to get to their jobs. Thus, we welcome the Governor’s advocacy for adding 1.75% of sales tax revenue to the Public Transportation Trust Fund, which would provide $283 million dollars for operating subsidies for transportation agencies across the state.

Child Care

Child care remains a critical priority for all parents with young children and yet is often not easy to afford. And child care jobs have historically paid too little to ensure that our most precious resource, our children, are well cared for. Governor Shapiro’s budget leverages a small state investment to secure $62 million in new federal funding that would increase reimbursement rates for child care providers taking part in the Child Care Works program, raising their pay to the 75th percentile of the current market costs of child care services.

Housing

Affordable housing is in increasingly short supply as the 2008 financial crisis and the pandemic recession slowed housing development. Governor Shapiro proposes two initiatives to make affordable housing more accessible. First, he calls for additional funding for the Pennsylvania Housing Affordability and Rehabilitation Enhancement Fund (PHARE), which helps people become homeowners, helps Pennsylvanians stay in their homes, and provides funding for local communities seeking to remove blight.

The Governor also proposes an additional $50 million for the whole home repairs program which provides funds for low-income Pennsylvanians  to repair and upgrade  their homes.

While these are important initiatives, we fear that they do not do enough to address a growing crisis—and not just in low-income communities. In the near future, we will be proposing additional ideas to deal with this crisis, such as expanding the Property Tax Relief and Rent Rebate program to low-income Pennsylvanians under the age of 65.

Revenues: Short-Term

The Governor’s budget is funded by a combination of recurring revenues and a drawdown of $3.2 billion of the more than $14 billion in the state surplus, which includes both the General Fund surplus and the Rainy Day Fund. Drawing down this surplus is entirely appropriate. The surplus came from our tax dollars and should be spent to benefit the people of our state. Those funds should not be left sitting in a bank account in Harrisburg.

The Governor also proposes two new sources of revenue: legalizing adult-use cannabis and new skill games. Legalizing adult-use cannabis is long overdue, both because it raises revenue and because it ensures that no one goes to jail for violating a law that is unevenly enforced and widely disregarded. The Governor proposes that some of the funds raised from a tax on cannabis use be returned to communities that have been disproportionately harmed by the enforcement of our cannabis laws. The tax on cannabis sales would not raise new revenues in the next budget year but promises to do so in the future. Indeed, we believe that the Governor’s long-term estimates of the revenue that can be raised are extremely conservative.

The Governor also proposes an expansion of video skill-based gaming that would generate $150 million in revenue in 2024–25, mostly through the sale of licenses to those who plan to offer these new gaming opportunities.

We do not support this gaming initiative. Gambling has repeatedly been shown to raise less revenue than expected. Even worse, it is a regressive way to raise state revenue. People with lower incomes tend to lose a larger share of their income than those with high incomes. We should be seeking revenue from people who gamble on stock and bond prices.

Revenues: Long-Term

Finally, we come to the long-term implications of Governor Shapiro’s budget plan. As we pointed out above, the Executive Budget does not provide any details about education spending beyond the next fiscal year. However, the Governor has indicated that his proposal for next year is, as the BEFC recommended, the first step in a longer term, seven-year project.

Even after drawing down $3.2 billion from the $13 billion dollar surplus, a large surplus would remain. And, even after leaving aside a significant amount in the Rainy Day Fund, the surplus would be large enough to support the second and third years of the full seven-year program. But after that, new and recurring revenues would be needed to complete the full program and meet our constitutional and moral responsibility to adequately and equitably fund K-12 education.

The Pennsylvania Policy Center will soon provide a detailed analysis of the cost of enacting the BEFC proposal over the next seven years and make some recommendations about how to fund it. Here we will simply say that the Governor’s long-term education program can be funded without taking a dime from the wages of any Pennsylvanian. All we have to do is enact what we call the Fair Share Tax Plan, which cuts taxes on earned income, wages, and interest, while raising taxes on unearned income—that is on income from wealth. Currently, the bottom 20% of families in Pennsylvania pay 15% of their income in state and local taxes, and the middle 20% pay 11.4% of their income in state and local taxes. This is all while the richest 1% of Pennsylvanians pay on 6% of their income in state and local taxes. We can fully and fairly fund K-12 and higher education in Pennsylvania just by asking the richest Pennsylvanians to pay the same share of taxes paid by the poorest Pennsylvanians.

[1] We are using the GSP projections in the Governor’s Executive Budget 2024–25, p. A1–23. These projections are slightly higher than those of the IFO, but we believe that both projections are quite conservative.

38 Statewide Orgs Call on PA Congress Members to Pass Bipartisan Child Tax Credit

By Press Release

FOR IMMEDIATE RELEASE 

 January 29, 2024

Contact: Kirstin Snow, snow@pennpolicy.org

Nearly Forty Statewide Organizations Call on PA Congressional Delegation to Pass Bipartisan Child Tax Credit 

Harrisburg, PA — Today a diverse, ad hoc coalition of 38 organizations in Pennsylvania sent a letter to the state’s congressional delegation, urging Senator Bob Casey, Senator John Fetterman, and Pennsylvania’s 17 US representatives to support and champion a bipartisan bill that would cut childhood poverty by expanding the Child Tax Credit (CTC). The Tax Relief for American Families & Workers Act (House Resolution 7024) would expand the CTC and benefit 19 million children in low-income families — 1 in 5 children under age 17 — including more than half a million (506,000) in Pennsylvania. The bill was advanced by the House Ways and Means Committee earlier this month in a 40–3 vote and could come to the House floor this week. 

 The Pennsylvania Policy Center (PPC), one of the groups that signed the letter, found in its analysis of the legislation that the expansion of the CTC would lift 400,000 children nationwide out of poverty in the first year, including 16,000 in Pennsylvania. Another 3 million kids across the county would be made less poor — 120,000 of them in Pennsylvania. At present, 19 million children in the country receive less than the full credit because of the current “refundability cap,” which limits benefits to families with incomes below $40,000. In a January 19th statement, PPC reported that the proposed legislation lifts the cap from the current limit of $1,600 per child to $1,800 per child for tax year 2023 and $1,900 per child in tax year 2024, lifting the cap entirely in 2025 so that the maximum credit of $2,000 will be available to all families.” 

Organizations that signed the letter include the United Way of Pennsylvania, regional and local food banks, Latino advocacy organizations, and progressive activists’ groups. The letter notes that the temporary expansion of the CTC in 2021 under the American Rescue Plan was much larger than what is proposed in HR 7024, stating that “we fervently hope that a similar program will be enacted in the future … [but the] current legislation, which is rightly targeted to benefit the lowest-income families, is a necessary and promising first step in that direction.” 

  

LIST OF SIGNERS:
AccessMatters
Action Together Northeastern Pennsylvania
Americans for Democratic Action Southeastern Pennsylvania
CASA / CASA in Action
Ceiba
Children First
Coalition for Low Income Pennsylvanians
Community Legal Services
The Council of Southeast Pennsylvania
Cumberland County Food System Alliance
Food Helpers/DBA Gr. Washington County Food Bank
The Food Trust
Greater Philadelphia Coalition Against Hunger
Helping Harvest Fresh Food Bank
The HUB for Progress
Hunger-Free Pennsylvania
Indiana County Community Action Program, Inc.
Just Harvest
Lycoming County Progressives
Make the Road Pennsylvania
Manna on Main Street
Mercer County Food Bank
National Council of Jewish Women – Pennsylvania
New Pennsylvania Project
NextGen America
One Pennsylvania
Partnership for Better Health
Pennsylvania Policy Center
Philabundance
Philly Neighborhood Networks
Pittsburgh Food Policy Council
Project SHARE of Carlisle
School Nutrition Association of Pennsylvania
Share Food Program
Shippensburg Produce Outreach, Inc
United Way of Pennsylvania
Westmoreland Food Bank 

  

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Statement on Federal Child Tax Credit Expansion – Pennsylvania Policy Center 

A post from Pennsylvania Policy Center on Pennsylvania Policy Center provided by: https://pennpolicy.org 

 

Statement on Federal Child Tax Credit Expansion

By Blog Post, Press Statements

STATEMENT on Child Tax Credit Expansion – Marc Stier, Executive Director, Pennsylvania Policy Center

The House Ways and Means Committee today voted in favor of bipartisan tax legislation that includes an expansion of the child tax credit along with the restoration of some expired business tax credits. The legislation is the product of negotiations between the chair of the House Ways and Means Committee, Jason Smith (R-MO) and the chair of the Senate Finance Committee, Ron Wyden (D-OR).

This legislation would benefit 19 million children in low-income families, or 1 in 5 of children under 17, including 506,000 children in Pennsylvania. It would especially help Black, Latino, and Asian children, whose parents are overrepresented in low-paying jobs due to structural barriers to opportunity.

In the first year, the expansion of the child tax credit would lift 400,000 children nationwide—and roughly 16,000 kids in Pennsylvania—out of poverty. Additionally, another 3 million kids nationwide, and 120,000 in Pennsylvania, will be made less poor.

The child tax credit gives families a refundable credit of 15% of their earnings above $2,500—which means that the family receives a cash benefit if they have no federal tax liability.  The law makes three important changes in the child tax credit that provides additional benefits to low-income families.

At present, 19 million children in the country receive less than the full credit because of the current “refundability cap” that limits benefits to families with incomes below $40,000. This legislation lifts the cap from the current limit of $1,600 per child to $1,800 per child for tax year 2023 and $1,900 per child in tax year 2024. In 2025, the cap would be lifted entirely and the maximum credit of $2,000 will be available to all families.

In addition, under current law, many low-income families with two or three children receive the same credit as a family with one child at the same earning level. The legislation would allow a credit for each child in a family as is now the case for higher-income families. So, for example, a single parent with two children who earns $13,000 working part time as home health aide currently receives a refundable tax credit of $1575, which is 15% of their earnings above the $2,500. Under the new law, the family would receive $1,575 per child or a total of $3,150.

Finally, the proposed legislation adopts a lookback provision that allows families whose earnings decline in a year to use the prior year’s income to calculate their tax credit. This would help families who experience a temporary drop in their income from also suffering a drop in their child tax credit. This is especially important because of the volatile nature of the low-income job market.

A number of business tax credits are restored as part of the compromise legislation. While we at the Pennsylvania Policy Center have some doubts about the usefulness of these provisions, we welcome this compromise because the benefits to low-income children are so important.

The expansion of the child tax credit under the American Rescue Plan was much larger than under this proposal—and we fervently hope that a similar program will be enacted in the future. Democrats recently put forward a slightly bigger program that would have increased the tax credit for low-income families even more, by ending the exemption of the first $2500 in earnings in the calculation of the credit, and by raising the 15% phase-in rate. But this current legislation, which is rightly targeted to benefit the lowest income families, is a necessary and promising first step in that direction.

The entire program is, rightly, paid for by making administrative and enforcement changes to the Employee Retention Credit, a provision added to the tax code during COVID that has been abused.

Statement in response to the Basic Education Funding Commission Report

By Blog Post, Policy Statement

The adoption of the Basic Education Funding Commission Report yesterday is a major step forward in meeting our constitutional and moral responsibility to fund education fully and fairly in Pennsylvania.

The first step in this process was a Court decision by a Republican judge holding that our current system of funding education is not constitutional.

Yesterday, the state took a second step. We are grateful that a majority of the Commission, including the Governor and the members of the General Assembly, provided a detailed and specific plan to meet the constitutional and moral requirement of adequately and equitably funding our schools—a plan we believe is fair.

The plan comes very close to meeting our expectations. It sets a plausible and defensible standard for evaluating the adequacy of funding in every school district. By that standard, we need $5.4 billion per year in new funding to close the adequacy gap in a majority of the state’s five hundred school districts. The plan calls for a minimum of $200 million per year in additional basic education funds to account for inflation, which will flow through a slightly revised and improved fair funding formula And it calls for $900 million in funding to reduce the tax burden in school districts that have been taxing themselves heavily due to insufficient funding for education from the state.

The $6.3 billion in new, yearly funding will be phased in over seven years. While this is a bit slower than we had hoped, the delay is understandable. Given Pennsylvania’s severe shortage in teachers, it is not clear that school districts could spend much more in the initial years of the plan than the almost $800 million in new funding the proposal. Giving school districts a long-term plan with assured funding will enable them, and the institutions in the state that train teachers, the time to recruit a new generation of educators for our kids.

While not every member of the Commission supported this proposal, the Republican  members did accept the court ruling “that the evidence presented in the case showed that resources — whether monetary or otherwise — were not adequate to meet the needs of the students.” The minority Republican report also identified best practices for education that we fully support but that cannot be put in place without new funding. And the minority report rightly said that it is up to the General Assembly to meet those needs.

So, the next steps are for the Governor to present, and the General Assembly to accept, a budget proposal that will implement the first year of this bold program.

We believe that a majority of Senate and House members will eventually do that because their districts’ families, as well as the areas’ businesses, recognize that adequately and equitably funding education is critical to providing opportunity for their kids and a strong economy for their communities.

We are grateful that Governor Shapiro and members of the General Assembly are leading the way to a better future for our kids and our Commonwealth.  As advocates for education, we will spend the upcoming months collaborating with them to amplify the voices of Pennsylvania’s kids, families, and businesses in support of implementing the plan that was proposed yesterday. We believe that those voices will ultimately carry the day and that this year we will put in place a path to full and fair funding of K-12 education in PA.  We encourage everyone listening today to join us.

Press Release: Taxes in Pennsylvania Are Upside-Down

By Press Release

FOR IMMEDIATE RELEASE: January 10, 2024

 Contact: Kirstin Snow at Penn Policy Center snow@pennpolicy.org or Jon Whiten at ITEP jon@itep.org.

RELEASE: Pennsylvania’s Tax System Exacerbates Inequality, In-Depth National Study Finds

State Has the 4th-most Regressive Tax Code in the Nation

Harrisburg, PA — Pennsylvania’s tax system is upside-down, with the wealthy paying a far lower share of their income to taxes than low- and middle-income families. That’s according to the latest edition of the Institute on Taxation and Economic Policy’s Who Pays?, the only distributional analysis of tax systems in all 50 states and the District of Columbia.

In sharing the data, Marc Stier said, “The new report from our national partner, the Institute on Taxation and Economic Policy, shows that Pennsylvania has one of the most upside-down state and local tax systems in the country. We should be ashamed to live in a state with the highest rate of taxation for the bottom 20% of families arranged by income and in which those families’ taxes are more than twice the rate of the top 1%’s.”

In his response to the data, Senator Art Haywood (D-Montgomery and Philadelphia) said, “It is clear that the tax dollars of everyday Pennsylvanians are being vacuumed up to the richest. In the last decade, seven billion dollars have been vacuumed up to the richest in Pennsylvanians. We can change our taxation system so that everyday, hard-working people are no longer left behind.”

Also addressing the new report, Representative Chris Rabb (D-Philadelphia) said, “In a state where the bottom 60% percent of income earners on average pay at or nearly double the tax rate of what the richest Pennsylvanians pay, it’s time ALL residents pay their fair share.

“The Fair Share Tax Plan bill — HB 1773 — will correct the long-standing injustice of this #taxpolicy by increasing the tax on passive income from things like net profits, dividends, net gains derived from rents, royalties, patents and copyrights and net gains derived through estates and trust.

“As a result, HB 1773 will generate an additional $6 billion in revenues all while lowering or maintaining the tax rate for the vast majority of Pennsylvanians.”

The report’s key findings for Pennsylvania (See presentation from the event here.):

  • The lowest-income 20 percent of taxpayers face a state and local tax rate that is 152 percent higher than the top 1 percent of households. The average effective state and local tax rate is 15.1 percent for the lowest-income 20 percent of individuals and families, 11.4 percent for the middle 20 percent, and 6 percent for the top 1 percent.
  • Pennsylvania has the 4th-most regressive tax system in the nation.
  • Pennsylvania is one of 41 states that tax the top 1 percent less than every other income group, and it is one of 34 states that taxes its poorest residents at a higher rate than any other group.

Nationally, tax systems in 44 states exacerbate inequality by making incomes more unequal after collecting state and local taxes, while systems in six states plus D.C. reduce inequality, the report finds. On average, across the country, the lowest-income 20 percent of taxpayers face a state and local tax rate nearly 60 percent higher than the top 1 percent of households. The nationwide average effective state and local tax rate is 11.3 percent for the lowest-income 20 percent of individuals and families, 10.5 percent for the middle 20 percent, and 7.2 percent for the top 1 percent.

“When you ask people what they think a fair tax code looks like, almost nobody says we should have the richest pay the least. And yet when we look around the country, the vast majority of states have tax systems that do just that,” says Carl Davis, ITEP’s research director. “There’s an alarming gap here between what the public wants and what state lawmakers have delivered.”

PA-specific polling data on taxing corporations and the ultra-wealthy can be found here.

Recent policy changes have exacerbated or lessened regressivity in state tax systems, depending on the choices made by lawmakers.

About the report:

Who Pays? is the only distributional analysis of tax systems in all 50 states and the District of Columbia. The comprehensive 7th edition of the report assesses the progressivity and regressivity of state tax systems by measuring effective state and local tax rates paid by all income groups. No two state tax systems are the same; this report provides detailed analyses of the features of every state tax code. It includes state-by-state profiles that provide baseline data to help lawmakers and the public understand how current tax policies affect taxpayers at all income levels. More than 99 percent of all state and local taxes, measured by their revenue contribution, are included in the analysis.

About ITEP:

ITEP is a non-profit, non-partisan tax policy organization. We conduct rigorous analyses of tax and economic proposals and provide data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect people at various levels of income and wealth, and people of different races and ethnicities.

About Pennsylvania Policy Center:

 Through its research and policy development, the Pennsylvania Policy Center creates the tools political officials, opinion leaders, grassroots organizations, and the people of Pennsylvania need to expand our vibrant democracy, secure our freedom, and seek economic justice in Pennsylvania. Our work draws on a close connection to Pennsylvanians in every corner of the state, who tell us the problems they face, and robust and credible public policy research and analysis that identifies the sources of these problems and proposes solutions. These tools enable Pennsylvanians in and out of government to make their voices heard and create public policies that reflect their ideals and serve their interests.

Pennsylvania Policy Center is the state affiliate of the Center for Budget and Policy Priorities.

 

 

ITEP Report: Tax Fairness in Pennsylvania

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Every few years, the Institute on Taxation and Economic Policy releases its survey of taxes in the states, “Who Pays?” Click here to read the seventh edition, released on January 9, 2024. 

A summary of the data for Pennsylvania is found below.

This year’s report continues to tell the same story that we have seen for decades. Taxes in Pennsylvania are among the most upside-down in the entire country.

The report shows that

  • The lowest-income 20 percent of taxpayers face a state and local tax rate that is 152 percent higher than the top 1 percent of households. The average effective state and local tax rate is 15.1 percent for the lowest-income 20 percent of individuals and families, 11.4 percent for the middle 20 percent, and 6 percent for the top 1 percent.
  • Pennsylvania has the highest tax rate on low-income families in the entire country at 15.1%.
  • Pennsylvania has the 4th-most regressive tax system in the nation.
  • Pennsylvania is one of 42 states that tax the top 1 percent less than every other income group, and it’s one of 35 states that taxes its poorest residents at a higher rate than any other group.

A tax system that places a much higher burden on those with low incomes than those with high incomes undermines the common good in three ways.

First, it is unfair. The tax burden is far greater when people’s incomes are lower. People with low and moderate incomes use all their income to pay for necessities. People with high incomes use far more of their income for luxuries or for savings.

Second, people and corporations with high incomes typically are able to earn those incomes in part because of government spending on education; research and development; transportation; and other infrastructure. Higher tax rates are a way for them to “give back” to the community for the benefits they receive.
And, third, progressive taxation is necessary for equality of opportunity—that is to allow those with low and moderate incomes to make the best use of their talents and abilities, not just for themselves but for the community as a whole.

It’s time for the state of Pennsylvania to adopt common sense solutions to repair our unfair tax system, including the fair share tax system, which would replace our flat income tax; corporate tax reform; and a severance tax on natural gas drilling. We will be updating these three proposals in the next few months.

Click here to print or read ITEP’s Pennsylvania report full-screen.

[pdf-embedder url=”https://pennpolicy.org/wp-content/uploads/2024/01/itep-whopays7-Pennsylvania.pdf”]

Pennsylvania Voters Believe Wealthy Individuals and Profitable Corporations Are Not Paying Their Fair Share

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Income and wealth are highly concentrated at the top in Pennsylvania, a situation that has worsened greatly in recent decades. Pennsylvania voters rightly believe that corporations and wealthy individuals aren’t paying their fair share to fund the government services and infrastructure we all depend on.

In November and December of 2022, Data for Progress conducted a survey of registered voters nationally to gauge voter support towards state action to ensure that profitable corporations and the wealthy are paying their fair share of taxes. The national survey was then used to estimate opinion at the state level for Pennsylvania, using a machine learning model trained on nationally representative survey responses linked to a commercial voter file.

There is no question that Pennsylvania’s voters are supportive of statewide policies that require those at the top to pay their fair share. Voters are looking to Pennsylvania’s elected leaders to hold corporations accountable and create a system of equity in transparency in how much they actually pay in taxes. Pennsylvanians want public services, and especially fairly and fully funded schools, to be funded throughout the state and believe that wealthy Pennsylvanians should be paying their fair share to provide them.

Statewide Results: Percentage of Pennsylvania voters who agree with the following statements:

Profitable corporations and wealthy individuals are not paying enough in state taxes ……………82%
State lawmakers should do more to hold accountable corporations who avoid paying taxes. Corporate profits have skyrocketed and taxpayers need transparency about how much profit corporations make and whether they pay their fair share of taxes………………………………………………………84%

 

Click here for estimates of registered voter support for profitable corporations and wealthy individuals paying more in taxes by state House district.

Click here for estimates of registered voter support for profitable corporations and wealthy individuals paying more in taxes by state Senate district.  

Click here for estimates of registered voter support for profitable corporations and wealthy individuals paying more in taxes by US House District.

Survey Results: Support for Higher Taxes on Profitable Corporations and Wealthy Individuals by PA Senate District

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In November and December of 2022, Data for Progress conducted a survey of registered voters nationally to gauge voter support towards state action to hold profitable corporations and the wealthy accountable to pay their fair share of taxes. The national survey was then used to estimate opinion at the state level for Pennsylvania using a machine learning model trained on nationally representative survey responses linked to a commercial voter file. In addition, estimates were made of public support in each state House and Senate district.

Click here for state-wide results.

Perhaps surprisingly, the differences between Senate districts held by Democratic and Republican legislators are not all that great. Registered voters in both Democratic and Republican districts overwhelmingly support increasing taxes on profitable corporations and wealthy individuals.

The highest support percentage in Democratic districts was 92%, the lowest was 82%. The average support percentage in Democratic districts was 86%. The highest support percentage in Republican districts was 84%, the lowest was 75%. The average support percentage in Republican districts was 80%.

Support for Higher Taxes on Profitable Corporations and Wealthy Individuals by Senate District

wdt_ID DISTRICT Senator Support % Party
1 1 Nikil Saval 91% D
2 2 Christine Tartaglione 88% D
3 3 Sharif Street 89% D
4 4 Art Haywood 89% D
5 5 James Dillon 85% D
6 6 Frank Farry 81% R
7 7 Vincent Hughes 90% D
8 8 Anthony Williams 89% D
9 9 John Kane 83% D
10 10 Steven Santarsiero 83% D
DISTRICT Senator Support % Party

Survey Results: Levels of Support for Higher Taxes on Profitable Corporations and Wealthy Individuals by PA House District

By Blog Post

In November and December of 2022, Data for Progress conducted a national survey of registered voters to gauge voter support towards state action to hold profitable corporations and the wealthy accountable to pay their fair share of taxes. The national survey was then used to estimate opinion at the state level for Pennsylvania using a machine learning model trained on nationally representative survey responses linked to a commercial voter file. In addition, estimates were made of public support in each state House and Senate district.

Click here for state-wide results.

Perhaps surprisingly, the differences between PA House districts held by Democratic and Republican legislators are not all that great. Registered voters in both Democratic and Republican districts overwhelmingly support tax increases on profitable corporations and wealthy individuals.

The highest support percentage in Democratic districts was 92%, the lowest was 81%. The average support percentage in Democratic districts was 86%. The highest support percentage in Republican districts was 84%, and the lowest was 71%. The average support percentage in Republican districts was 78%.

Support for Higher Taxes on Profitable Corporations and Wealthy Individuals by House District

wdt_ID House District Represenative Support % Party
1 1 Patrick Harkins 87% D
2 2 Robert Merski 84% D
3 3 Ryan Bizzarro 83% D
4 4 Jacob Banta 81% R
5 5 Barry Jozwiak 77% R
6 6 Brad Roae 77% R
7 7 Parke Wentling 83% R
8 8 Aaron Bernstine 75% R
9 9 Marla Brown 80% R
10 10 Amen Brown 90% D
House District Represenative Support % Party

Survey Results: Support for Higher Taxes on Profitable Corporations and Wealthy Individuals by PA Congressional District

By Blog Post

In November and December of 2022, Data for Progress conducted a survey of registered voters nationally to gauge voter support towards state action to hold profitable corporations and the wealthy accountable to pay their fair share of taxes. The national survey was then used to estimate opinion at the state level for Pennsylvania using a machine learning model trained on nationally representative survey responses linked to a commercial voter file. In addition, estimates were made of public support in each Pennsylvanian Congressional districts as well as state House and Senate districts

Click here for state-wide results.

Here we report data for two questions.

Taxing Wealthy Individuals & Profitable Corporations

When thinking about taxes in your state which fund public services, which of the following statements comes closest to your view, even if neither is exactly right?

Percent Agee: Profitable corporations and wealthy individuals are not paying enough in state taxes.

Corporate Tax Transparency

When thinking about state lawmakers requiring corporations to disclose their profits and how much they pay in taxes in your state, which of the following comes closest to your view, even if neither is exactly right?

Percent agree: Lawmakers should do more to hold corporations who avoid paying taxes accountable. Corporate profits have skyrocketed and taxpayers need transparency about how much profit corporations make and whether they pay their fair share of taxes.

The Results

Perhaps surprisingly, the differences between Pennsylvania Congressional  districts held by Democratic and Republican legislators are not all that great. Registered voters in both Democratic and Republican districts overwhelmingly support increasing taxes on profitable corporations and wealthy individuals.

The highest support percentage  districts for asking  profitable corporations and the wealthy individuals to pay more was 91%,  lowest was 80%. Support in Democratic districts ranged from 84% to 91%. Support in Republican districts ranged from 80% to 85%.

The highest support percentage  districts for requiring corporate transparency was 93%, the lowest was 80%,  Support in Democratic districts ranged from 84% to 93%. Support in Republican districts ranged from 80% to 85%.

Support for Taxing the Ultra-rich and Wealthy Corporations

wdt_ID PA Congressional District Member of Congress Party Corporations and Wealthy Should Pay More Support: More Corporate Transparency
1 1 Brian Fitzpatrick R 84% 83%
2 2 Brendan Boyle D 89% 88%
3 3 Dwight Evans D 93% 91%
4 4 Madeleine Dean D 86% 83%
5 5 Mary Gay Scanlon D 87% 84%
6 6 Chrissy Houlahan D 85% 83%
7 7 Susan Wild D 84% 82%
8 8 Matt Cartwright D 85% 83%
9 9 Daniel Meuser R 80% 76%
10 10 Scott Perry R 82% 79%
PA Congressional District Member of Congress Party Corporations and Wealthy Should Pay More Support: More Corporate Transparency

 

We Can’t Fix Education By Shuffling The Deck

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In February 2023, Judge Renée Cohn Jubelirer called for a new funding system in Pennsylvania to fulfill the state’s obligation to provide a thorough and efficient education for its children. But, opponents of increased education funding cite the state’s high per-student spending, compared to other states, as a reason not to increase our total spending on K-12 schools.

The comparison to other states’ spending per student is misleading in multiple ways.

To begin with, it does not consider variations in the cost of living and education expenses. Pennsylvania’s education spending per student is below the average of the 11 New England and other Mid-Atlantic states that are closest to Pennsylvania with regard to the costs of education.

In addition, overall levels of funding skirt the core issue in Judge Jubelirer’s decision—that in Pennsylvania, school funding is highly inequitable from one school district to another. The evidence presented to Judge Jubelirer, and confirmed by multiple research studies, shows that

  • the state’s share of K-12 education spending is among the lowest in the country.
  • Pennsylvania school districts thus must rely on funds raised by local taxes.
  • the state’s few, relatively wealthy school districts can provide far more funding for schools, even at low and moderate local tax rates, than the many relatively less wealthy school districts can provide with high local tax rates.
  • as a result, school funding in relatively less wealthy school-districts, which disproportionately teach students from low-income families, as well as Black and brown students, are drastically underfunded and provide an inadequate education.

The high level of spending in a few districts pushes up our state average, but the majority of our kids are still left behind.

Finally, national funding comparisons are irrelevant because the goal required by the constitution is not to provide an education that meets national achievement averages—which are not high—but an education that enables every child to receive a “comprehensive, effective, and contemporary system of public education.” Studies comparing education in the United States to that in other advanced countries cast doubt on of students’ achievement levels in the United States. We should demand our kids get an education in Pennsylvania that is as good as the best in the world—not as good as the average level found in the United States today.

Some legislators suggest reallocating funds from well-funded districts to meet this goal—but this approach is both impractical and impolitic. It is impractical because the funds that push some school wealthy districts to the top are not state funds but their own locally raised revenues. And it is impolitic because no General Assembly majority can be formed that eliminates all state funding to wealthier school districts or that shifts the revenues those districts raise locally to other districts.

So how do we rectify this problem? The Basic Education Funding Commission must

  • use the spending of high-achieving schools as a model to estimate how much each school district should spend per student—also known as adequacy targets—adjusting spending levels for various kinds of students that, on average, may cost more to adequately educate than other students. These adequacy targets must be comprehensive in including the costs of pre-K, special education, and mandated state costs.
  • set a goal for new state funding that increases the state share of K-12 expenses to ensure that every underfunded district receives the resources needed to provide an adequate education that meets state standards.
  • create realistic expectations about what level of funding local school districts must provide and mechanisms to encourage school boards to meet them.
  • develop a comprehensive plan that the General Assembly can implement over five years to provide every school district with the funding it needs to meet the all-inclusive adequacy targets.

Education, Democracy, and Economic Growth

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A year ago, Judge Renée Cohn Jubelirer ruled that Pennsylvania violates its constitutional obligation to create a “thorough and efficient” system of school funding. In response, legislative leaders and Governor Shapiro have charged the Basic Education Funding Commission with providing a blueprint for General Assembly action that would meet our constitutional obligation.

As the Basic Education Funding Commission moves from fact-finding to the decision-making phase of its work, this is a good time to recognize that we all have a stake in its deliberations. The best way to do that is to review the reasons that Pennsylvania’s Constitution has an education provision at all. Why, in other words, did those who wrote our Constitution believe that K-12 education is so important?

The ultimate source of the provisions of the Pennsylvania Constitution that underlies Judge Jubelirer’s decision are the ideas of great statesmen of the past who recognized that the health of our democracy and economy ultimately rests on a “thorough and efficient” system of K-12 education. And the leader in the effort to create a public school system in Pennsylvania was Thaddeus Stevens. Before he was called the “great liberator,” for authoring constitutional amendments ending slavery as a member of the US House of Representatives, Thaddeus Stevens was known as the “great educator.” As a member of the Pennsylvania House of Representatives he was a champion of public education. His famous 1835 speech opposing repeal of the common school law he had previous help create sets out the fundamental reasons that K-12 education is so important. Stevens said, “If an elective republic is to endure for any great length of time every elector must have sufficient information, not only to accumulate wealth and take care of his pecuniary concerns, but to direct wisely the Legislature, the Ambassadors, and the Executive of the nation.” The themes of democracy and prosperity are found elsewhere in his speech and in the public statements of those who added the education clause to the Pennsylvania Constitution in 1874 and revised it in 1968.

If the importance of K-12 education was just based on 19th-century ideas, we might pause at investing more state funds in our schools. However, the educational ideals of Stevens and the founders of our Constitution are supported by two decades of research showing that better K-12 education contributes to the vigor of both our democracy and economy.

A recent comprehensive report that summarizes a great deal of research shows that quality civic education leads to greater knowledge about the way our democracy works, stronger skills in critical thinking and collaborative action, greater respect for democratic norms and the rights of others, a greater sense of trust in one another and our political system, and higher rates of participation in public life.

The evidence for the positive impact of good public education on our economy is even broader.

Cross-national comparisons show that both additional years of schooling and higher quality schooling, as measured by standardized tests, leads to a higher productivity workforce and thus higher per capita gross domestic product. The increase in education levels since the 19th century has been estimated to account for between one-fifth and one-third of economic growth in the United States.

Cross-state research confirms these findings. High-wage, and thus high-prosperity, states are those with a well-educated workforce. And school achievement levels are highly correlated—and are likely the cause of—faster economic growth in the states.

Sadly, partly because of our failure to adequately fund K-12 education (but also because we underfund workforce training and higher education), Pennsylvania falls at about the middle of the 50 states in GDP per capita. This is a sad decline from our early 20th century position as one of the economic engines, not just of the United States but the world. But new investment in K-12 education could reverse this decline. The best evidence we have suggests that if academic achievement in Pennsylvania matched that of the highest-ranked state in the country, Minnesota, in two generations our state’s GDP per capita would be roughly 225% higherthan it would be with our current levels of academic achievement.

The great leaders who founded our public education system were prescient. The path they set us on is largely responsible for our preserving our democracy and enhancing our prosperity and democracy. We who reaped the benefits of their decisions must emulate them now. We must ensure that the education we provide our children and grandchildren protects our democracy and creates an economy even more prosperous than today.

Education Funding and Education Achievement

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A year ago, Judge Renée Cohn Jubelirer ruled that Pennsylvania violates its constitutional obligation to create a “thorough and efficient” system of school funding. In response, legislative leaders and Governor Shapiro have charged the Basic Education Funding Commission with providing a blueprint for General Assembly action that would meet our constitutional obligation.

In developing that blueprint, the General Assembly can learn from what other states have done. Seen from a national perspective, Judge Jubelirer’s decision is not an outlier. In response to similar court decisions, about half of states have added substantial state funding of K-12 education in the last thirty years. In almost every case, the judicial decisions, like that of Judge Jubelirer, focused on the inequity in school funding created by over-reliance on locally raised revenues to pay for schools.

Because Pennsylvania is a latecomer to school funding reform, a generation of our children has been denied a good education. And as a result, we have all suffered a terrible loss. But the delay gives us the benefit of learning from the large body of research on education and school funding that was stimulated by reform efforts in other states. That research shows us how effective new funding for underfunded schools in Pennsylvania can be in lifting student achievement and in their later-life success.

There was a time when scholars doubted that levels of school funding made much difference to educational outcomes. The famous Coleman Report of 1966 held that the economic well-being and education of parents made far more difference to education than school funding.

But with new statistic techniques, revaluations of the report and its successor have cast doubt on that conclusion.

And the natural experiments created by court-ordered school funding to underfunded school districts—which are disproportionately attended by students from low-income and Black and brown families—have shown that new school funding makes a huge difference both to educational achievement and the later-life success of students.

One of the best new studies, by Jackson, Johnson, and Persico, found that increasing spending by 10% benefits all children and especially those from low-income families for whom

  • the probability of high school graduation increases by roughly 10 percentage points.
  • adult hourly wages go up by 13%.
  • later-life family income goes up by 17.1%.
  • the likelihood of being married and never divorced increases by 10 percentage points.
  • the annual incidence of adult poverty declines by 6.1 percentage points.

Studies of new education funding in the states of Kansas, Massachusetts, Michigan, Vermont, and other states provide additional evidence that new funding makes a difference to student performance while raising outcomes especially for students from low-income families.

And another study that aggregated the result from  over 30 similar studies provides striking evidence that new funding to schools can make a significant difference in student outcomes regarding test scores, graduation rates, and college attendance. Students from all backgrounds benefit—Black, brown, and white and from low-income, moderate-income, and high-income families. But students from lower-income families benefit more. Higher levels of education spending can partly overcome the inequality generated by our economy and create real equality of opportunity for our children.

This new research has been so impressive that Eric A. Hanushek—a leading academic expert who has cast doubt on the idea that new funding will lead to better education and was the lead expert for the defense in the Pennsylvania school funding lawsuit—recently acknowledged that the preponderance of recent evidence shows that school funding does make an important difference to educational outcomes.

Hanushek points out—and we agree—that money must be spent wisely. But the same research that shows that new funding makes a difference also shows that underfunded schools spend that new money exactly how we would think they should—on recruiting and retaining better teachers, reducing class sizes, and making pre-K programs universal.

In responding to Judge Jubelirer’s ruling, Governor Shapiro and the Pennsylvania General Assembly don’t have to reinvent the wheel or take a shot in the dark. They must follow the path laid down by other states and substantially boost state funding, which would allow every school district in Pennsylvania to provide an education that meets the requirement of our constitution. We have every reason to believe that doing so will lead to better graduation rates, student achievement, higher wages and, in time, a stronger economy.

Why Pennsylvanians Should Reject Vouchers

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Why Pennsylvania Should Reject Vouchers

Susan Spicka, Education Voters PA
Diana Polson, Keystone Research Center
Marc Stier, Pennsylvania Policy Center

Here we quickly summarize three major reasons why the General Assembly should not adopt a new voucher program.

  1. Voucher-funded schools do not offer educational choice for families and students. They use public dollars to support schools that engage in discrimination against many families and students.

Voucher programs do not create educational “choice” for many families and students. Instead, voucher programs create the illusion of “choice” because private and religious voucher schools can—and do—engage in discrimination and refuse to enroll students, even if their family is eligible for a voucher. We have seen this in the tax-credit voucher programs already in place in Pennsylvania. In 2022–2023, the Pennsylvania legislature authorized the diversion of $340 million tax dollars out of the state treasury and into private and religious voucher schools through the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs. Private and religious voucher schools that receive tax dollars through these programs engage in blatant and explicit discrimination against students because of their religious beliefs, academics, disability, LGBTQ+ status, because they are pregnant, have children or have had an abortion, and morePennsylvania’s EITC and OSTC.[1] (See Ed Voters report: https://bit.ly/voucherdiscriminate.)

Many voucher-supported schools have not served children well. There is high turnover in the schools, whether because the education they provide is unsatisfactory or because schools push student out. In Indiana, Louisiana, and Wisconsin, roughly 20% of students leave voucher programs every year. In Florida, 30% of students do not return to a voucher-supported private school. And many schools that have been created to receive vouchers soon close. More than 40% of the private schools receiving vouchers in Wisconsin have failed or closed since the program began.

  1. Vouchers do not provide choice to students because they mainly go to students who already attend private school.

Partly because private schools that receive vouchers are allowed to discriminate in choosing students, the vast majority of students who receive vouchers are already attending private school. In Arizona, 80% of students who received vouchers never attended public schools; the number was 89% in New Hampshire; 75% in Wisconsin; and 70% in Florida.

  1. Every public dollar funding tuition at a private school leaves fewer dollars available to be spent in the state budget, undermining the Commonwealth’s ability to fully and fairly fund public schools, which educate all students.

The recent Commonwealth Court ruling found that Pennsylvania’s grossly inadequate and inequitable system for funding public education is unconstitutional. Allocating state tax dollars to fund private and religious voucher schools does not help the state to meet its constitutional requirements. Instead, directing public dollars into voucher schools that are free to discriminate against children makes compliance with the court ruling harder to achieve.

States that started small voucher programs—such as Arizona, Florida, and Iowa—have seen them grow in to near-universal programs.[2] And that growth has been accompanied by a diversion of state support from public schools. Meanwhile, as some students move to private schools, state support for public schools declines even though school districts’ fixed costs for administration and building maintenance are unchanged.

That is exactly what we have seen in Pennsylvania’s experience, over the last decade, with the ETIC and OSTC tax-credit vouchers, including this year. Every year, increase funding for public schools in our state—which have barely covered the cost of inflation and state mandates—have come at the political cost of adding funds for the tax credit-vouchers. A new voucher program would deepen the problem and lead to further diversion from public schools to private schools, making it impossible for the state to meet its constitutional and moral obligation to ensure that every student in Pennsylvania receives an adequate and equitable education.

  1. Research fails to show that vouchers improve student achievement; recent studies show they are harmful.

Voucher experiments have been going on, mostly in small cities,[3] over the last several decades—long enough for there to be a body of research on the impact vouchers have on student achievement. A review (2011) of earlier research into voucher programs found that there was little difference in achievement levels between voucher students and public school students, and with only occasional positive effects of vouchers on student achievement.[4] It’s important to know that these early studies were mainly of relatively small city-based programs.

Recent research on larger voucher programs in Indiana, Louisiana, Ohio, and Washington D.C., has found more negative achievement outcomes in voucher programs. Studies in these locales found voucher programs have a negative or neutral impact on student achievement.[5] Very concerning effects were documented in the Louisiana study; researchers found  losses in math of nearly 0.5 standard deviation, which is more than double some estimates of the effects of the pandemic on learning loss. These findings have been found to persist over time as well.[6]

Research on Ohio’s EdChoice program showed students in voucher programs fared worse on state exams than their peers who remained in public schools. An evaluation of Washington D.C.’s voucher program also found that in their first year with a voucher, students had worse achievement in math than students who applied for the program but did not receive a voucher.[7] A similar trend was found in research on the Indiana Choice Scholarship Program—students in voucher programs experienced an achievement loss in math compared to public school students.[8] Research on vouchers has shown that the larger the program the worse the results tend to be for students in voucher programs.[9]

[1] See Education Voters’s comprehensive report on discrimination in tax-credit supported voucher schools in Pennsylvania, https://edvoterspa.org/wp-content/uploads/2023/12/EDVO_VOUCHER_REPORT_Dec2023.pdf.

[2] A good overview of these and other programs and their effect on public schools, with additional citations, is Iris Hinh and Whitney Tucker, State Lawmakers are Draining Public Revenues with School Vouchers. Center on Budget and Policy Priorities, June 12, 2023, https://www.cbpp.org/blog/state-lawmakers-are-draining-public-revenues-with-school-vouchers.

[3] Joshua Cohen, “Apples to outcomes?” Revisiting the achievement v. attainment differences in school voucher studies,” Brookings, September 1, 2022, https://www.brookings.edu/articles/apples-to-outcomes-revisiting-the-achievement-v-attainment-differences-in-school-voucher-studies/.

[4] Alexandra Usher and Nancy Kober, “Keeping Informed about School Vouchers: A Review of Major Developments and Research,” Center on Education Policy, 2011, https://web.archive.org/web/20120104011514/http://www.cep-dc.org/displayDocument.cfm?DocumentID=369. A Keystone Research Center study 13 years earlier reached similar conclusions: see also Alex Molnar, “Smaller Classes, Not Vouchers, Increase Student Achievement,” Keystone Research Center, 1998, https://eric.ed.gov/?id=ED448225. 

[5] Jonathan N. Mills, Anna J. Egalite, Patrick J. Wolf, “How Has the Louisiana Scholarship Program Affected Students? A Comprehensive Summary of Effects after Two Years,” Education Research Alliance for New Orleans, February 22, 2016, https://educationresearchalliancenola.org/files/publications/ERA-Policy-Brief-Public-Private-School-Choice-160218.pdf; R. Joseph Waddington and Mark Berends, “Impact of Indiana Choice Scholarship Program: Achievement Effects for Students in Upper Elementary and Middle School,” Journal of Policy Analysis and Management, Vol. 37, Issue 4, 783-808; David Figlio and Krzysztof Karbownik, “Evaluation of Ohio’s EdChoice Scholarship Program: Selection, Competition, and Performance Effects,” Thomas Fordham Institute, July 2016, https://files.eric.ed.gov/fulltext/ED575666.pdf.

[6] For more information see Joshua Cohen’s piece, “‘Apples to outcomes?’ Revisiting the achievement v. attainment differences in school voucher studies,” Brookings, September 1, 2022,  https://www.brookings.edu/articles/apples-to-outcomes-revisiting-the-achievement-v-attainment-differences-in-school-voucher-studies/. Also see: Matt Barnum, “Do voucher students’ scores bounce back after initial declines? New research says no,” Chalkbeat, April 23, 2019, https://www.chalkbeat.org/2019/4/23/21055489/do-voucher-students-scores-bounce-back-after-initial-declines-new-research-says-no/.

[7] Reading results were not statistically significant. Mark Dynarski, Ning Rui, Ann Webber, Babette Gutmann, Meredith Bachman, “Evaluation of the DC Opportunity Scholarship Program,” National Center for Education Evaluation and Regional Assistance, June 2017,  https://ies.ed.gov/ncee/pubs/20174022/pdf/20174022.pdf.

[8] Joseph Waddington and Mark Berends, “Impact of Indiana Choice Scholarship Program: Achievement Effects for Students in Upper Elementary and Middle School,” Journal of Policy Analysis and Management, Vol. 37, Issue 4, 2018, 783-808.

[9] Joshua Cohen, “Research on school vouchers suggests concern ahead for education savings accounts,” Brookings, August 15, 2023, https://www.brookings.edu/articles/research-on-school-vouchers-suggests-concerns-ahead-for-education-savings-accounts/.

Statement on Completion of PA State Budget

By Blog Post, Press Statements

Six months after the general appropriation bill was passed by the Pennsylvania House and Senate and signed by Governor Shapiro, the House, and Senate today took the necessary step to complete the state budget by passing the Fiscal and School Code bills. These code bills are necessary for two reasons. First, some of the previously appropriated funds cannot be spent without the programmatic instructions found in the code bills. Second, some elements of what we think of as the budget consists of tax credits that cannot be included in the General Appropriation bill.

Like any bill that must pass a House controlled by Democrats and a Senate controlled by Republicans, the School and Fiscal Code bills contain many compromises.

From our point of view, it is unfortunate that the School Code includes an additional $150 million in funding demanded by the Senate for our existing tax-credit-based school voucher programs, the Education Improvement Tax Credit, and the Opportunity Scholarship Tax Credit. But while we believe these programs are a problematic use of the tax dollars that should go to our public schools, the program has been tweaked a bit to reduce the amount of overhead that the organizations that pass funds to private schools can keep: from 20% to 10%. Some minor  accountability measures have been added to the program but it appears that the full suite of accountability measures that House Democrats have proposed—which would finally allow us to understand who, if anyone actually benefits from these programs—were not included. Schools that received tax-credit vouchers  will continue to be able to discriminate based on religion, disability, LGBTQ+ status of students of their parents, academic performance and on the basis of whether a student is pregnant or has had an abortion.

We are also distressed that the $100 million in Level Up funding for our most severely underfunded schools was not included in the Education Code.

On the other hand, there are some important programs—detailed below and championed mostly by Democrats the Senate and Housethat will benefit students in our public schools and community colleges, as well as working people who are caring for children or seniors.

We detail these good programs below. But what this compromise should show us is that those who say there is no tension between vouchers and public school funding are mistaken. Over the last ten years or more, Republicans have continued to hold public school funding and other programs hostage to continued funding of our existing school voucher program.

Much of the language in the School and Fiscal Code bills deals with housekeeping matters that are not subject to much controversy. However, a few important decisions have been made after a long discussion between the parties.

SCHOOL CODE (HB 301)

Educator Pipeline Support Grant Program. This program provides grants of $10,000 to student teachers or $15,000 if the student teachers work in a school with high turnover. This is an important program that will help address our teacher shortage.

Libraries. The School Code authorizes an additional $70.47 million in subsidies to public libraries across the state.

Student Teacher Flexibility. This provision will allow retired teachers to be hired as substitutes without losing their pensions. This is another program that will help address our teacher shortage.

Mental Health. The School Code transfers $100 million appropriated for COVID relief to the School Safety and Security Fund. Ninety million dollars in funds will be distributed to school districts, career and technical schools, charter and cyber charter schools, and intermediate units to enhance student mental health treatment.

Environmental Repairs Program. The Environmental Repairs Program will provide grants to school districts, career and technical schools, charter and cyber charter schools, and intermediate units for the abatement or remediation of environmental hazards in school buildings including the abatement or remediation of lead.

FISCAL CODE (HB 1300)

Some of the important elements in the Fiscal Code have been moved from the Tax Code, including the Child and Dependent Care Tax Credit.

Child and Dependent Care Tax Credit. This part of the fiscal code enhances a program that was initiated in last year’s budget, a state tax credit for the costs of caring for children and other dependents (such as seniors) when such care is necessary for taxpayers to hold a job. The language in the Fiscal Code increases the amount of tax credit that Pennsylvanians can take. The current child care tax credit is increased from 30% to 100% of the federal child care and dependent tax credit.  The size of the child care tax credit is based on income. The largest  biggest tax credit would now be $2,100, up from  $630, under current state law for  families making with an income  $43,000 who spend  $6,000 or more on  care for two children.

Public School Facility Improvement Grant Program. This program will be established in the Commonwealth Financing Authority to provide grants to school districts and career and technical education centers for upgrading facilities. The $100 million in the General Appropriation bill for Level Up will be transferred to this program.

Environmental Repairs Program. The Fiscal Code transfers $75 million in unallocated appropriated funds to the Environmental Repairs Program established in the School Code.

Indigent Defense. The Fiscal Code establishes an indigent advisory committee within the Pennsylvania Commission on Crime and Delinquency. This will allow the $7.5 million in the General Appropriations bill to be spent on indigent defense. Pennsylvania has long been one of the few states that does not provide state funds to protect the constitutional right to an attorney.

WHAT REMAINS UNDONE

Earlier this week, our new advocacy campaign Pennsylvanians Together held an event with Santa Claus pointing to 13 pieces of legislation that the House had passed but that had not passed, or even been considered, by the Senate. You can find that list here.

Unfortunately, of the great pieces of legislation on that list, only the Child and Dependent Care Tax Credit is found in the bills that have, or will be, passed today. So, still stalled are important pieces of legislation that would raise the minimum wage to $15, cut taxes for working families, provide additional funding for the Whole-Home Repairs Program, reform the Corporate Net Income Tax, provide a shield for abortion providers and those from other states coming to Pennsylvania seeking an abortion, open a window for survivors of sexual abuse to sue their abusers, enact two gun safety laws, protect public workers from dangerous work conditions, allow workers who are not working due to labor-management disputes to receive unemployment insurance, create a cost of living increase for retired teachers and public servants, and extend Pennsylvania’s anti-discrimination law to LGBTQ+ people.

Pennsylvanians Together Releases Holiday Wish List!

By Blog Post, Press Statement

As we enter the holiday season, our thoughts are turned to all the ways the government of our state could be better serving the people of Pennsylvania, especially those who are struggling in one way or another.

The Democrats in the General Assembly, at times with the support of some Republicans, have embraced (and passed in the House) 13 important pieces of legislation that would provide greater opportunity and a helping hand to working people in every corner of the state, as well as protect all Pennsylvanians from various kinds of abuses.

Despite this, the Republican-controlled Senate has blocked these critical legislative initiatives.

So, we’ve put the following bills on our holiday wish list!

$15 Minimum Wage: (HB 1500, sponsored by Reps. Dawkins and Kim. Senate champion: Senator Tartaglione)

Working Families Tax Cut Working Families Tax Cut includes a PA Earned Income Tax Credit and expanded Tax Forgiveness program to reduce taxes on low-income Pennsylvanians (HB 1272, sponsored by Rep. Sappey);

New K-12 School Funding and Cyber Charter Reform: Level Up funding to underfunded schools (HB 611 and HB 301, sponsored by Reps. Schlossberg and Harris. Senate champions: Senators Hughes and Miller); Cyber Charter Reform (HB 1422, sponsored by Rep. Ciresi)

Additional Funding for Whole-Home Repairs Program: Provides help for low- and moderate-income Pennsylvanians to repair their homes (HB 1300, sponsored by Rep. Harris. Senate champion: Senator Saval)

Corporate Tax Reform: Closes the Delaware and Cayman Islands loopholes, which allow large multi-national corporations to avoid paying taxes in PA (HB 1219, sponsored by Reps. Samuelson and Fiedler. Senate champions: Senators Tartaglione and Haywood)

Abortion Shield Law: Protects abortion providers and those coming from outside of the state to seek abortions in PA (HB 1786, sponsored by Rep. Daley. Senate champions: Senators Schwank and Cappelletti)

Justice for Survivors: Opens a window for survivors of sexual abuse to sue their abusers (HB 2, sponsored by Rep. Rozzi. Senate champion: Senator Muth)

Gun Safety: Background Checks (HB 714, sponsored by Rep. Warren) and a Red Flag Law (HB 2018, sponsored by Rep. O’Mara) to keep guns away from people who shouldn’t have them

Protections for Public Workers: Extension of Occupational Safety and Health Act to protect public sector workers from dangerous work conditions (HB 299, sponsored by Rep. Harkins. Senate champion: Senator Kane)

Protections for Striking Workers: Allows workers affected by a labor–management dispute to collect unemployment benefits after a one-week waiting period (HB 1481, sponsored by Rep. Steele. Senate champion: Senator Costa)

Retirement Security for Teachers and Public Servants: (HB 1416, sponsored by Reps. Malagari and Deasy. Senate champion: Senator Muth)

Fairness Act: Extends Pennsylvania’s anti-discrimination law to LGBTQ+ people (HB 300, sponsored by Reps. Kenyatta and Frankel. Senate champion: Senator Santarsiero)

 

PRESS STATEMENT: PA Will Lose $3.1 Billion to Corporate Tax Cuts by 2028

By Blog Post, Press Statement

November 30, 2023

FOR IMMEDIATE RELEASE

Contact: Kirstin Snow, Communications Director, Pennsylvania Policy Center, snow@pennpolicy.org; Ellie Blachman, Center on Budget and Policy Priorities, (202) 325-8718, eblachman@cbpp.org

 

New report: Pennsylvania will lose $3.1 billion to corporate tax cuts by 2028

Pennsylvania is part of historic, nationwide tax-cutting wave that jeopardizes investments in communities and our ability to meet the challenges of the future.

 

Harrisburg, PA — In recent years, policymakers in Harrisburg joined their counterparts in more than half the states across the country on a historic revenue-reduction spree that shifted public funds away from public investments and toward tax cuts that primarily benefit wealthy households and corporations.

Those corporate income tax cuts have already cost Pennsylvania $127 million in revenues and will cost an additional estimated $3 billion by 2028, according to a new report by the Center on Budget and Policy Priorities (CBPP). Those tax cuts—including the corporate tax rate reduction passed in Pennsylvania in 2022—will grow more expensive over time, with more revenue lost each year that could have been used to fully and fairly fund education and address the housing crisis.

“Pennsylvania is struggling to address a court-mandated requirement that we adequately and equitably fund K-12 education, but policymakers have cut the corporate tax revenue we need to tackle those problems head-on. And now Republicans want to accelerate those cuts,” said Marc Stier, executive director of the Pennsylvania Policy Center. Stier added, “By contrast, Democrats in the House have passed a strong plan to close the loopholes that allow wealthy multi-national corporations to escape paying any taxes. They show that we have choices when it comes to our tax code. We don’t have to tilt the system toward the wealthy. We can ensure that everyone pays their fair share and that we have the tools we need for our people and communities to succeed.”

Twenty-six states have enacted cuts to personal or corporate income taxes, or both, over the past three years. And 13 of those states have cut taxes multiple times during that period.

The cuts will shrink revenues by roughly $29 billion annually by 2028, according to CBPP. Cumulatively, they will have cost states roughly $124 billion by that time. The costs will continue to grow if policymakers do not reverse course.

“The recent surge of state personal and corporate income tax cuts is historically large in size and scope,” said Wesley Tharpe, senior advisor for state tax policy at CBPP and author of the new report. “State revenues aren’t just a number on a spreadsheet, they are critical resources that support families, communities, and our economy. Tax cuts on this scale will seriously hamper states’ ability to adequately fund current services or meet future challenges.”

The report notes that while 26 states have cut tax rates in the past three years, others have chosen a different path.

For example, Washington state established a new tax on capital gains received by the wealthiest 0.2 percent of taxpayers, which is expected to raise at least $500 million in new annual revenue for childcare, school improvements, and construction. Massachusetts approved a millionaire’s tax that will raise $2 billion annually for public education and transportation.

“As we look ahead to the new year, policymakers should prioritize meeting the demands of both the present and the future, not tax cuts for those at the top,” Stier said.

 

Making Our Votes Count for the Issues We Care About

By Blog Post

Voting access. Abortion access. Climate change. Public education. Redistricting.

Pennsylvanians continue to focus on critical issues that matter to our quality of life. In 2023, we showed up to elect school boards, local municipal officials, and county commissioners AND to elect judges to our local and state courts. We both voted by mail and went to the polls on Election Day, showing that we want to participate in our democracy in ways that work for us. In fact, voter turnout was higher than in 2021! A couple of key reasons: abortion access continues to be a hot topic, and people are responding to threats to voting rights and seeing, more than ever, the roles that courts play in other critical issues such as protecting our right to a “thorough and efficient” education, which was affirmed in a landmark school funding decision this year. [You can read more about our work on school funding here, including our memo on how education contributes to democracy.]

Many people do not realize that elections happen in years when there is not a high profile presidential or federal election. Pennsylvania Policy Center worked to make sure we mobilized our existing supporters and reached out to new people to remind them about the high stakes involved related to issues they care about. We partnered with Pennsylvanians for Modern Courts to provide critical information about local and state judicial elections to more than two dozen community leaders to support them in communicating with their supporters. We contacted voters directly, promoted the issues on social media, ran online ad campaigns, and collaborated with our allies and partners in Pennsylvanians Together, a statewide coalition of grassroots resistance groups, reaching more than 75,000 people with high-impact content about critical policy issues and civic participation.

Our work continues in 2024 — we will continue to make sure that our voices are represented as we advocate about all the issues that are important to us and will be making sure that we show up for democracy, for our rights and freedoms, and for each other!