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Provisions in Obama’s jobs bill could be costly for PA

By   /   October 7, 2011  /   2 Comments

Could cost PA millions in dollars after federal funding expires
By Eric Boehm | PA Independent
HARRISBURG — President Barack Obama’s new jobs bill would pump about $3.4 billion into Pennsylvania, but the money comes with some expensive strings attached for taxpayers.

Obama is pressing Congress hard to pass the proposed American Jobs Act, which he is touting as a $450 billion jump start for the U.S. economy that many fear is sitting on the edge of a second recession in three years. 
Targeted at the state level, the money would be used to hire public sector workers, improve infrastructure, build schools and benefit communities, but business groups and economists say another round of government stimulus is not the answer.
And accepting the federal money could cost the state budget in the long term, thanks to provisions in the bill requiring states to maintain jobs created by the federal funds even after the funding expires.
During a news conference Thursday, Obama said the bill would grow the economy by as much as 2 percent, which would equate to nearly 2 million new jobs. Many of those jobs would be in the public sector, where unemployment has climbed in recent months as states cut budgets and laid off workers to make ends meet.
“We know the biggest problem we’ve had in unemployment in recent months is not with the private sector, it’s with the public sector,” Obama said. “Why wouldn’t you want those teachers back in the classroom?”
To that end, the president’s plan includes $35 billion nationwide for states to hire teachers and first responders, with more than $1.1 billion of that total aimed at Pennsylvania. The spending is part of the Obama administration’s goal to put people to work in the public sector.
But if the bill makes it through Congress and Pennsylvania accepts the federal funding, the state will be required to keep those jobs in place for two years after the federal funding expires.
The White House said the plan has no unfunded mandates, but sections 204-209 of the bill include provisions requiring states to “meet the requirements” of the law for an additional two years after federal funding expires.
According to an analysis by the Carolina Journal, an online watchdog news service, Pennsylvania would receive more than $80,000 per public sector job created or saved by the new jobs bill. That’s above the national average of $72,000 per job and well above the average salary for a teacher in Pennsylvania, which was about $60,000 last year, the most recent data available.
Since the federal funding would cover only about a year and four months of salaries for the average teacher, the state would be expected to pick up the tab for the remaining time, costing an estimated $100,000 per teacher. 
Antony Davies, an economics professor at Duquesne University in Pittsburgh, said the federal government attaches such requirements to funding when it wants to direct state policy.
“We’re reaching the point here where the states are going to have to take responsibility for themselves, because the federal government isn’t going to be able to carry them,” Davies said.
A recent study released by two economists at West Virginia University concluded that every dollar in federal aid given to states from 1995 to 2008 caused an ongoing legacy cost of 42 cents in state taxpayer funds.
Davies said Pennsylvania should expect the same results from the newest round of federal stimulus.
The American Federation of Teachers, or AFT, a national union with a chapter in Pennsylvania that represents 36,000 teachers in the state, is urging passage of the bill.
“We have seen a loss of 300,000 education jobs since 2008 as well as long-delayed school repairs and modernization projects,” said AFT president Randi Weingarten. “We can't equip our kids for the knowledge economy, if we continue to slash education budgets.”
Kevin Shivers, president of the Pennsylvania chapter of the National Federation of Independent Businesses, which represents small business owners, said stimulus aimed at the public sector will only make it harder for the private sector to create jobs.
“To simply saddle taxpayers and job creators in Pennsylvania with short-sighted spending, that’s not stimulus,” Shivers said. “We should be reducing the size and scope of the federal government and reducing the tax and regulatory burden on America’s job creators.”
Aside from the money for public-sector workers in the jobs bill, Pennsylvania stands to receive about $1.3 billion for transportation infrastructure, $900 million for school improvements, $20 million for community construction projects and $113 million for job training at state community colleges.
Obama proposed to pay for the jobs bill by eliminating tax deductions and exemptions for individuals earning more than $200,000 and families earning more than $250,000. The plan also would cut payroll taxes in half for employers temporarily.
But the one-year extension of payroll cuts would do little to inspire companies to hire, since businesses do that on based on long term expenses, Davies said.
Davies equated the government-business relationship to a football game in which businesses are the players and government acts as the referee, ensuring a fair playing field and penalizing those who cheat without directly being involved in the game. 
“If the referee stays on the sideline, things are OK. But when the referee picks up the ball and starts running with it, you’re going to have chaos,” Davies said. “Government isn’t built to run with the ball.”
Pennsylvania Democratic Party chairman Jim Burns said the plan would create jobs and help get the economy back on track.
The American Jobs Act “will encourage businesses to hire more workers and help families to keep more money in their pockets,” Burns said in a statement. “The proposal includes bipartisan ideas that have long received support from both parties.”