private

Fix the pensions! Save the jobs! Why Pennsylvania and Philly try to privatize the public things

Public vs. private: How are we better off?

The PGW deal is dead in the ground. The fight over liquor privatization rages on in Harrisburg. And remember that time they wanted to sell off the state lottery system?

Privatizing state-run services to outside corporations can bring in a fast influx of cash for ailing governments and can remove thousands of employees from future pension programs to save money down the road. But it’s a fix of the quickest sort: The cash brought in from selling them off runs dry, and less public support means, ultimately, less accountability and much less transparency.

Here’s some of the services in Philadelphia and Pennsylvania that *could* be sold off to private companies, and what that might mean for the government and for you.

Liquor

The fight

Pennsylvania’s “blue laws,” which require that wine and liquor must be sold in state stores and beer at beer distributors, have been in effect since right around the post-Prohibition era. Now, in 2015, our state’s leaders are fighting over how best to go about this “I-want-to-buy-Two-Buck-Chuck-at-Trader-Joe’s” conundrum.

Meanwhile, Pennsylvania remains one of two states in the union (Our company? Utah!) to have such stringent control over the state’s liquor system. Of the rest: 16 states have a little bit of control over the liquor system (not as much as us and those progressives out in Utah) and the other 32 states are like “nah, thanks, we’ll stay away.”

The status

Even when the state legislature was Republican-controlled and a Republican was in the governor’s office, Pennsylvania leaders still couldn’t figure out a way to compromise on the privatization of the state’s liquor system.

Now, Democrat Tom Wolf is in charge and says he’ll veto any privatization bills sent to his desk, even though the House has now passed a privatization bill… twice. Why? Democrats contend the state needs the money brought in annually from the Liquor Control Board and are in favor of “liquor modernization” which could allow for direct wine shipments, longer state store hours and beer in or near grocery stores.

Lawmakers are working on ways to compromise. Republican leaders know that they’re not going to get this done without the support of Wolf, so they’re planning to send through bills in a piecemeal fashion instead of one, big liquor privatization bill.

Pros for selling

– PA could bring in a $1 billion by selling the state’s liquor licenses if they privatized, meaning it could make a huge cut into its budget deficit and state pension problems.

– Wine, booze and beer right there in the grocery store in the same building as the pizza and the chicken salad and the cheeseburgers. (Even though some grocery stores are now able to sell six-packs of beer if they have a special license to do so.)

– More state stores and places where you can buy wine and liquor. AKA the convenience factor.

– The majority of Pennsylvanians want this, according to polls.

– Less state-funded pension payouts to state employees over the years once the privatization takes hold.

Cons for selling

– Loss of about 5,000 (mostly union) state jobs across Pennsylvania, including 2,300 full-time jobs.

– The Liquor Control Board brings in $500 million annually in profit that is transferred directly to the state treasury.

– Public health concerns like increased alcoholism and alcohol-related deaths. (Which, cigarettes, guys.)

Philadelphia Gas Works

The fight

Politicians and business owners have dreams of Philadelphia becoming the next great energy hub. But part of the reason why that hasn’t already been realized is infrastructure, and the infrastructure that surrounds Philadelphia’s natural gas is some of the worst in the country — yep, it could kinda blow up at any time because it’s so old.

Officials wanted to fix that and bring in cash to the city at the same time, so Mayor Michael Nutter proposed selling off the city-run Philadelphia Gas Works to a private corporation. It would provide a one-time infusion of cash, get a bunch of people off the city’s pension plans in the future and would — maybe most importantly — greatly expedite the process of replacing the city’s aging natural gas pipes.

The Connecticut-based UIL Holdings offered a cool $2 billion to buy PGW, and that money would have gone to the city’s ailing pension fund that supports 65,000 workers and somewhere in the neighborhood of $5 BILLION in the hole.

Now, the state is pressuring PGW to fix the pipes itself since the city couldn’t get a deal done. The PUC is threatening asking the city to forgo the $18 million annual fee it now receives from PGW “to reduce the impact on ratepayers of an upgraded main-replacement program,” according to the Inquirer.

The status

Dead. City Council killed it mostly because they felt like Mayor Nutter didn’t include them enough in talks and negotiations with UIL Holdings. PGW remains America’s largest municipally-run utility.

Pros for selling

– If profits were used to pay off underfunded pension liabilities, it could provide for massive reductions in the city’s pension obligations — somewhere ranging from $272 million to $622 million.

– Get more employees off the city’s pension system in the future. PGW employs upwards of 1,600 people, and more than 1,100 are union jobs.

– It would no longer be the nation’s largest municipally-owned utility and the city would no longer have to fund natural gas sales to more than half a million customers. Currently, PGW is one of only four city-run gas companies among the nation’s 30 largest cities.

Cons for selling

– $18 million in annual revenue from the Philadelphia Gas Works is currently paid to the city. That number would drop to somewhere around $300,000 if sold off to a private company, and most of that would be paid through property taxes.

– No promised savings for PGW customers.

– Those 1,600 employees would be required to be offered jobs right off the bat, but over time, it’s likely the size and scale of the employment force would shrink.

– Less accountability and less transparency from private corporations not held to the same standards as city-run utilities.

The Lottery

The fight

Back when our old friend Tommy Corbett was still in charge of the great state of Pennsylvania, the Republican wanted to sell off the state’s lottery system to a company based in Great Britain so that the state could get out of the business of gambling and make a bunch of cash off the sale.

In exchange for $34 billion over two decades, Pennsylvania would sell off the state-run lottery system to a company called Camelot Global Services — the only bidder on the huge project proposal. Corbett’s administration said the sale would provide a reliable revenue stream for the state which continues to use the lottery to support older Pennsylvanians. And this state isn’t getting any younger.

The status

Corbett’s plan was dropped by early 2014 after unions and some lawmakers came out in full force against the plan. Attorney General Kathleen Kane said the sale was against the Constitution of the state, and others expressed concerns that Camelot would take money off the top that would have originally gone to Pennsylvania. The deal is dead, likely until another Republican steps into the Governor’s office and wants to get it done again.

Pros for selling

– Reliable revenue stream coming from lottery sales that will remain consistent over the years.

– State gets out of the business of controlling gambling in this way (well, except for that casino thing).

– States bring in $68 billion a year nationally in lottery sales, which can be seen as a regressive tax.

Cons for selling

– The lottery generates somewhere around $3.7 billion in sales in each fiscal year, with more than $1 billion of that going to tax rebates and other services for older Pennsylvanians.

– New Jersey privatized its lottery system, and it didn’t go so hot: According to the AP in April, “a lottery once ranked among the nation’s top performers is now lagging for the second straight year, trailing its state income targets by $64 million seven months into the current fiscal year. Meanwhile, the company running it has spent hundreds of thousands of dollars to hire lobbyists and a public relations firm with close ties to the governor.”

The Turnpike

The fight

Back in 2006, then-Gov. Ed Rendell wanted to privatize the state’s Turnpike system to bring in money to boost Pennsylvania’s transportation budget in order to improve roads, bridges and other infrastructure. At the time, the goal was to essentially lease out the authority to an outside company while the state could still control toll increases and maintenance schedules.

The status

The deal was dead after not too long. Rendell was really the only major official truly pushing for leasing out the Turnpike, and the Commission itself launched campaigns against the Governor’s proposal. With no sign of being passed in the legislature, by late 2007, Rendell let it go.

Pros for selling

– Privatization of the Turnpike could end years worth of public corruption and “pay-to-play” activity that took place for years under the Pennsylvania Turnpike Commission. Also, as an aside, boy did the Turnpike employees like the email porn. Yeesh.

– It would provide for an influx of cash from the company that won a bid into the state budget.

Cons for selling

– The Turnpike is worth $26.5 billion if public but only $14.8 billion if privatized, according to an independent 2009 study.

– More than 1,000 jobs would transferred from the public entity to being controlled by private corporations.

– The majority of Pennsylvanians were, at the time of the privatization talks, against leasing off the Turnpike. 

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