w w w. c a p i ta l - wat c h .

c o m

CapitalWatch
VOL. 3 NO. 11 NOVEMBER 2010 CAMPAIGN 2010: AN ANALYSIS—PAGES 8-9

inside
Corbett defeats Onorato,
switching governorship
Gov. Rendell says
Marcellus Shale tax
‘clearly is dead’

back to GOP
PAGE 4

No free lumch
PAGE 6
Tax credits: the end
of the road?
PAGE 7
Editorial: Kick,
ball, change
PAGE 10
Voters want a
tipping point
PAGE 12
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In his victory speech,
Republican Governor-elect Tom
Corbett promised to work with
lawmakers from both parties in
order to tackle the state’s looming
fiscal challenges.
“Throughout this campaign,
many of you have heard me
talk about the challenges, the
challenges that Pennsylvania faces
– with our economy, with our
budget and with the pensions,”
Corbett told the packed ballroom
at the Omni William Penn hotel
in Pittsburgh.
“But we have look at those
challenges as opportunities.”
Corbett’s remarks came at the
end of a 14-month campaign,
during which he consistently
led his opponent, Democratic
Allegheny County Executive Dan
Onorato, in polls and fundraising.
The candidates sparred through
some increasingly negative ads
toward the end of that race, but
Corbett was able to maintain high
favorability ratings.
With more than 99 percent of
the votes tallied, unofficial results
from the Department of State
showed Corbett with 54.5 percent,
or 2,136,683 votes, to Onorato’s
According to those late-night
Pennsylvanians who cast a ballot
for governor, or slightly more than
46 percent of registered voters.
The Associated Press called the
race at 10:15 p.m., with about 74
percent of the vote tallied. Those
returns showed Onorato, who serves
as Allegheny County executive,
trailing by 143,000 votes.
Onorato delivered his
concession speech around 10:45
p.m., shortly after he called
Corbett to congratulate him.
Friends and family surround governor elect Tom Corbett on election night.
“It’s been a heck of a campaign,”
Onorato told his supporters at
the International Brotherhood of
Electrical Workers union hall here.
“I got into this race to talk about
the ideas, I got into this race to talk
about moving this state forward,”
he continued. “We came up short
today, but our voice was heard.
“I got to see how beautiful the
state is, how diverse the state is, I
got to see what makes it so great.
Obviously I wish the outcome
was different, but the voters spoke
and I respect that.”
Onorato will be returning to his
job as county executive: “We have a
lot to do yet in Allegheny County.”
Corbett said he and Onorato
“discussed the importance of
coming together and unifying
the people of Pennsylvania
around a single purpose: making
Pennsylvania great again.”
“I understand that with this
election, I am the governor for all
of Pennsylvania – not Republican,
not Democrat, but for all of
Pennsylvania,” he said.
He also repeated his campaign
message that he wants to make
Pennsylvania “the standard of
excellence” for job creation, and
to compete more aggressively
with other states economically.
Corbett’s win continues the state’s
64-year trend of the governorship
swapping between Democrats and
Republicans every eight years. The
two men had been vying for more
than a year to succeed Democratic
Gov. Ed Rendell in that office.
When he spoke to reporters after
his speech, Corbett said he had not
received a call from Rendell yet,
but is hopeful that there will be
a “smooth transition” among the
outgoing administration, incoming
administration and the Republican-
controlled Legislature.
A timeline for that transition
is still being crafted. Corbett
said he has “no time frame set
for” selecting cabinet officers
and other transition pieces, but
reiterated that his first selection
will be the budget secretary.
He declined to elaborate on who
may be under consideration for
those posts, but said he “would not
be surprised” if Democrats were
among those cabinet members.
Corbett’s administration will be
tasked releasing their first budget
in late February of next year, and
said his transition team will begin
meeting with the Legislature and
the governor’s office shortly.
Corbett said his running mate,
Lieutenant Governor-elect Jim
Cawley, will be “a full partner”
in the administration: “The
lieutenant governor has a number
of statutory roles to fill, but I have
some ideas of other ones. I want to
keep you guessing for awhile.”
According to the unofficial
Department of State tallies,
Onorato topped Corbett in four
counties: Montgomery, 51.7
percent; Delaware, 52.7 percent;
Lackawanna, 55 percent; and
Philadelphia, 82.9 percent.
The remaining southeastern
collar-counties went to Corbett:
Chester County, with 55.9 percent,
and Bucks with 55.4 percent.
In Philadelphia, where turnout on
the governor’s race appears to have
been around 38.8 percent, Onorato
received more than 342,000 votes to
Corbett’s almost 71,000. CW

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NOVEMBER 2010 CAPITAL WATCH
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Toomey wins U.S. Senate contest,
GOP captures majority in state
congressional delegation
Republican congressional candidates in
Pennsylvania on Tuesday helped the GOP
regain the majority in the U.S. House
and trim the Democrats’ majority in the
U.S. Senate.
At the top of the ballot, in the U.S.
Senate race, former Congressman Pat
Toomey, the Republican candidate, won a
very close race against U.S. Rep. Joe Sestak,
D-Delaware. In addition to putting one
of Pennsylvania’s two U.S. Senate seats
back in the “R” column, unofficial and
incomplete election results had Republicans
capturing the majority in Pennsylvania’s
congressional delegation, flipping five seats
that had been held by Democrats.
In the race to fill the Delaware County
seat vacated by Sestak, Republican Pat
Meehan defeated Democrat Bryan Lentz.
The vote tally for 7th Congressional
District seat were for 133,146, or 55
percent, for Meehan and 105,214, or 43.9
percent, for Lentz. Third-party candidate
James Schneller received 2,635 votes, or
1.1 percent.
Also in the southeast, incumbent
Democrat Patrick Murphy appears to
have been ousted from Bucks County’s 8th
Congressional District by GOP challenger
Mike Fitzpatrick, the incumbent Murphy
defeated in 2006. Fitzpatrick garnered
126,404 votes, or 53.7 percent, to Murphy’s
109,157 votes, or 46.3 percent.
In the northeast, the third time was the
charm for Republican Hazleton Mayor Lou
Barletta. After losses in 2002 and 2008,
Barletta defeated Democratic incumbent
Paul Kanjorski for the 11th Congressional
District seat with 100,108 votes, or 54.5
percent, to 83,422 votes, or 45.5 percent.
Also in the northeast, Rep. Chris Carney
lost his bid for a third term in the 10th
Congressional District seat to Republican
Tom Marino. Despite being dogged by his
ties with convicted felons Louis DeNaples
and Jay Kilheeney, and various other
campaign gaffes, Marino received 209,603
votes, or 55.1 percent of the vote, compared
to Carney’s 89,170 votes, or 44.9 percent.
Carney won that high-GOP-performance
seat in 2006 after then-GOP-incumbent
Don Sherwood was accused by a former
girlfriend of attacking her.
Rep. Kathy Dahlkemper was a freshman
news 3
Pat Toomey
Democrat that fell victim to the GOP wave
that swept over Pennsylvania. By a vote
of 209,367 (55.4 percent) to 88,53 (44.6
percent), Dahlkemper lost to Republican
Mike Kelly in the contest for the 3rd
Congressional District, which stretches
from the shores of Lake Erie through
struggling mill towns such as Sharon,
New Castle and Butler, and into
Armstrong County. Kelly owns a car
dealership in Butler.
But the Republican wave didn’t carry all
the GOP’s candidates to victory.
Rep. Mark Critz, D-Cambria, has once
again defeated Republican Tim Burns for
the 12th Congressional District seat in
what turned out to be a fairly close race,
considering the margin by which Critz
beat Burns a few months ago during a
special election.
With 91,776 votes, or 50.8 percent of the
vote, Critz beat Burns, who received 88,799
votes, or 49.2 percent.
However, Critz defeated Burns by eight
points in a May special election to fill the
seat of the late Rep. Jack Murtha, who had
held the seat for Democrats for more than
three decades, in a race where both parties
spent heavily to win.
And state Sen. Dave Argall, R-Schuylkill,
was unable to defeat incumbent
Democrat Tim Holden for the 17th
Congressional District that covers parts of
Schuylkill, Berks, Lebanon, Dauphin and
Perry counties.
Holden got 117168 votes, or 55.6 percent
of the vote, compared to Argall’s 93,518
votes, or 44.4 percent. Holden rang up that
win even though he barely campaigned the
last two weeks of the campaign, before and
after his mother died.
Others who won on Tuesday – all
incumbents, with the congressional
districts they represent in parentheses -
were: Rep. Bob Brady, D-Philadelphia (1);
Rep. Chaka Fattah, D-Philadelphia (2); Rep.
Jason Altmire, D-Allegheny (4); Rep. Glenn
Thompson, R-Centre (5); Rep. Jim Gerlach,
R-Chester (6); Rep. Bill Shuster, R-Blair
(9); Rep. Allyson Schwartz, D-Philadelphia
(13); Rep. Mike Doyle, D-Allegheny (14);
Rep. Charlie Dent, R-Lehigh (15) and Rep.
Joe Pitts, R-Chester (16). CW
4 news
Gov. Rendell says Marcellus Shale tax
‘clearly is dead’
A proposed tax on natural gas extraction
in Pennsylvania “clearly is dead” for the year,
Gov. Ed Rendell said Oct. 21, suspending at
least temporarily what has been the state
Capitol’s most hotly contested debate in
recent months.
“Their clear
unwillingness to change
their previous proposal
or to resolve differences
with the House
Democrats and with my
administration makes
it obvious that they have
killed the severance
tax in this legislative
session.”
The Democratic governor issued a news
release that blamed legislative Republicans
for what he described as their refusal to
Rep. Metcalfe bashes Gov. Rendell for
hiring anti-terrorism group
A state Representative turned a small
Capitol rally into a governor-bashing when
he called Gov. Ed Rendell a tyrant who
was complicit in hiring a firm to monitor
activities of anti-government groups over
the past year.
Rep. Daryl Metcalfe, R-Cranberry, said
the governor’s failure to discipline staffers
who authorized the contract showed that
he “knew full well” that the Institute of
Terrorism Research and Response would
be tracking activists groups.
“I have questions. I want
them answered and I
won’t rest until they’re
answered ”
Rendell denied that.
He declined to comment except to say
“I consider it a compliment for Daryl
Metcalfe to rail against me.”
About a dozen people attended the Capitol
rally, which aimed at drawing attention to a
controversial one-year $103,000 contract that
has now lapsed. The anti-terrorism research
negotiate in good faith.
“Their clear unwillingness to change
their previous proposal or to resolve
differences with the House Democrats and
with my administration makes it obvious
that they have killed the severance tax in
this legislative session,” Rendell said.
He said the failure to enact a tax on
drilling in the Marcellus Shale formation
will harm the environment, make it harder
for local governments to deal with the
impact of drilling and cause the state
government financial problems.
Pennsylvania is the only state with significant
natural gas production that does not tax it.
The governor had tried to jump-start
talks by seeking written counterproposals
from House and Senate leaders of both
parties. He said the response by Republican
leaders did not produce a reasonable
compromise on the tax rate, one of many
aspects of the idea that has been disputed.
Spokesman Erik Arneson said Senate
Republicans were surprised by Rendell’s
decision to end negotiations and said they
are willing to continue talks.
Issues such as tax revenue distribution,
zoning and limits on where gas companies
may drill in coal regions “cannot logically
be separated from the issue of imposing a
reasonable severance tax,” Arneson said.
House Republican Leader Sam Smith,
group’s work now is being done internally
and no longer includes e-mailed warnings of
“threats” posed by activist groups.
Metcalfe said the governor’s office
had to know that peaceful groups were
being monitored, but Rendell and his staff
adamantly deny that.
“That’s ridiculous. Nothing could
be further from the truth,” said Steve
Crawford, Rendell’s aide.
The terror alerts even included
organizations that the governor met with
and supported, including Good Schools PA.
Once the governor became aware of
the contract, he created a task force and
answered every question asked during
two public Senate committee hearings,
Crawford said.
Rendell initially refused to fire Homeland
Security Director James Powers, but after
public calls for his resignation, Powers quit.
Rendell has said that he first became
aware of the contract from media reports
after an environmental activist was
inadvertently sent a bulletin that named
her group as a threat.
Rally organizer Scott Davis said the
resignation and the governor’s public
release of the terrorism bulletins does not
put his concerns to rest.
“It is far from over and [our questions] are
NOVEMBER 2010 CAPITAL WATCH
R-Jefferson, said Rendell was positioning
the issue for electoral advantage and said his
caucus members had consistently advocated
for an approach designed to foster drilling
as an engine for economic development.
“When he starts saying it’s the House
Republicans’ fault that nothing happened,
that goes beyond the pale,” Smith said.
Rendell said GOP leaders of both
chambers in the General Assembly “clearly
desire to put costs of natural gas drilling on
the backs of Pennsylvania taxpayers, rather
than on the large multinational oil and gas Gov. Ed Rendell blames legislative
corporations who stand to reap enormous
wealth from our state’s resources.”
Republicans for their refusal to negotiate
a tax on natural gas extraction in
Rendell’s pronouncement means the
topic almost certainly will not be addressed
Pennsylvania.
before next year, when a new governor tax discussions.
takes office. The Republican candidate, “He’s pleased,” Harley said. “At this point we
Attorney General Tom Corbett, opposes shouldn’t be putting any additional tax on this
a Marcellus Shale tax and all other new or industry when it’s just getting a foothold.”
increased taxes. The Democratic candidate, Drilling crews have been flocking since
Allegheny County Executive Dan
Onorato, has said he favors a gas-drilling
late 2008 to the Marcellus Shale, a rock
bed the size of Greece that lies about 6,000
tax and would earmark its revenues for
environmental protection.
feet beneath New York, Pennsylvania,
West Virginia and Ohio, with money from
The Onorato campaign said the talks’ companies around the world financing the
collapse puts a higher premium on the next exploration. Geologists say it could become
governor’s leadership skills, and argued that the nation’s most productive natural
he has a record of working with both parties. gas field, capable of supplying the entire
Corbett campaign spokesman Kevin country’s needs for up to two decades by
Harley welcomed the apparent end of gas- some estimates. CW
far from answered,” said Davis, who wants to
know how the contract came about.
The Pennsylvania Emergency Management
Agency has refused to provide copies of
e-mail messages regarding the hiring of
the Institute of Terrorism Research and
Response, a group with ties to Philadelphia
and Jerusalem. “I have questions. I want
them answered and I won’t rest until they’re
answered,” Davis said.
Davis is head of PA Revolution, an
activist group named in the terror reports.
A pro-gun rally organized last year
by Metcalfe, meanwhile, was named in a
bulletin as a “moderate threat.”
The terrorism research institute labeled
events “moderate” if there is an indication
that “hostile elements” have the ability to
take action against a target and that “an
attack or action is likely to be a priority and
might well be mounted.”
Rep. Daryl Metcalfe says Gov. Ed Rendell
Metcalfe said his group and others “knew full well” that the Institute of
listed in the security bulletins held only Terrorism Research and Response would
peaceful rallies, protests and meetings. To be tracking activists groups.
characterize them as threats “makes you
think of government gone bad,” he said. mayor of Philadelphia, he once grabbed
Metcalfe said that depiction is offensive. a reporter by the throat, and as governor
“This really draws a picture that somebody he once said lawmakers should be gassed,
is getting ready to attack,” he said. Metcalfe said.
He contrasted his group’s activities with “Now you tell me who should be on a
actions and comments of the governor. As terror bulletin,” he said. CW
 November2010
NOVEMBER 2010 CAPITAL
CAPITAL WATCH
WATCH
Kathy L. Pape
President
Pennsylvania American Water
Kathy L. Pape joined American Water in July
20007 as president of Pennsylvania American Water,
the largest regulated water utility in the common-
wealth, providing quality water and wastewater
services to approximately 2.2 million people in 390
communities. In this role, Pape leads customer,
regulatory and local government relations, drives
operational and financial result and is the principal
external contact for American Water in Pennsylvania.
In April 2008, Governor Rendell appointed Pape
to the Sustainable Water Infrastructure Task Force.
Pape is among 30 task force members from across
the state who the Governor selected to address the
funding shortfall and related concerns associated with
Pennsylvania’s aging and deteriorated water infra-
structure.
Prior to rejoining American Water, Pape served
as senior vice president, treasurer and rate counsel
for Aqua America, Inc., with responsibility for all
financing activities, billing, rates and regulatory filings,
budgeting and long-range planning. In this capacity,
Pape led the company's effort to manage numerous,
successful rate cases resulting from the company’s
growth from a one-state system to 13 states with
hundreds of systems. She also reduced the com-
pany's long-term debt costs, saving money for the
company and ratepayers.
From 1994 to 1999, Pape was employed by
American Water as regional counsel and manager of
finance, where her responsibilities included rates and
regulatory affairs, finance, budgeting and customer
service for 10 states.
Pape has also worked as vice president and
corporate counsel for General Waterworks Manage-
ment and Service Company, as an assistant counsel
to the Pennsylvania Public Utility Commission and as
an assistant consumer advocate for the Pennsylvania
Office of Consumer Advocate.
Pape has more than 30 years’ experience in the
utility industry and is a nationally recognized expert
on the water and wastewater industries.
Active in her community, Pape dedicated 15
years of service to Whitpain Township as a member
and chair of its Planning Commission and as a mem-
ber of its Zoning Hearing Board. She also serves on
the Finance Council of the Archdiocese of Philadel-
phia and the Board of Trustees of Gwynedd Mercy
Academy. She is chair of the Pennsylvania Chapter
of the National Association of Water Companies,
serves on the boards of the Pennsylvania Chamber
of Business and Industry and the Pennsylvania Busi-
ness Council and is a on the Water Research Advi-
sory Committee of the National Regulatory Research
Institute Advisory Committee on Water.
Pape holds a B.A. from Edinboro University, a
J.D. from Dickinson School of Law and a LL.M. in
Taxation from Villanova University School of Law.
advertorial
Policy Roundtable Spotlight
The PBC Policy Roundtable, like its national counterpart in Washington, is a forum in which CEOs meet on a peer-to-peer basis to formulate public
policy proposals to the most pressing issues of competitiveness. The Policy Roundtable provides senior managers the opportunity to interact
extensively with policymakers, policy experts, media, and other stakeholders; participate in policy evaluation; decide upon long-term public policy
strategy; and guide policy education/advocacy efforts. Corporate Chairpersons, CEOs, COOs, CFOs, and Presidents are invited to become members
of the PBC Policy Roundtable. For more, see: www.pabusinesscouncil.org.
CW: What are your major products?
KP: Pennsylvania American Water is
the largest investor-owned water utility
in the commonwealth, providing water
and wastewater services to approxi-
mately 2.2 million people in 390 com-
munities. We have more than 1,000
dedicated employees who are responsi-
ble for providing high-quality, reliable
water service around the clock to our
customers. Our primary mission is to be
the local, trusted water service provider
dedicated to delivering innovative solu-
tions, environmental stewardship and
infrastructure investment.
CW: When did you join the firm? Un-
der what circumstances?
KP: I rejoined American Water in July
2007 as president of Pennsylvania
American Water. From 2001 through
2007, American Water experienced a
difficult period after an acquisition was
announced and regulatory approvals
were required. The planned divestiture
and the process to obtain regulatory ap-
provals to divest consumed everyone’s
focus, resulting in so much inward focus
that the customer was largely forgotten.
Since rejoining the company, I have
worked hard to turn that around.
CW: What are your goals for the firm?
KP: My goals, both short and long term,
are customer-focused. Although we are a
regulated public utility with a defined
service area, our goal is to provide cus-
tomers with such a positive experience
that they would choose Pennsylvania
American Water as their water company.
We want to be a part of the 390 local
communities that we serve. Our employ-
ees volunteer their time for numerous
community activities and organizations,
including stream cleanups, homeless
shelters, classroom presentations and
United Way Day of Caring events. In
addition, we offer:
College scholarships for high school
seniors in our service area pursuing
courses of study such as engineering,
chemistry and environmental science.
Firefighting Support Grants to help
fire departments purchase equipment.
Environmental Grants to support com-
munity-based watershed protection and
improvement projects.
“Protect Our Watershed” art contest
for fifth-grade students to reinforce the
importance of environmental
stewardship.
Pennsylvania American Water has en-
hanced our customer assistance program
for low-income families, providing
grants and service charge discounts to
qualifying customers. Our H2O (Help to
Others) Program is administered by Dol-
lar Energy Fund. In 2009, we provided
approximately $285,000 to assist nearly
1,000 customers.
Our long-term goals are to continue our
focus on infrastructure replacement to
enhance the quality of life and economic
development in our communities. We
are also committed to educating our
customers to better understand what it
takes to convert raw water at the source
of supply to drinking water at their tap.
In addition, our company and our indus-
try need to attract and develop the next
generation of qualified personnel to op-
erate and maintain our water systems.
Many of our seasoned professionals are
eligible to retire within the next five
years, so we must continue to attract and
train talented workers to ensure the long-
term quality, reliability and security of
our drinking water.
CW: What would you do to improve
PA’s competitive business climate?
KP: We make significant investments to
maintain and upgrade our water and
wastewater systems to ensure that they
operate efficiently and meet all regula-
tory standards. In fact, we invested ap-
proximately $182 million in 2009 for
capital improvements to our treatment
facilities, water storage tanks, pumping
stations, water main, fire hydrants and
metering equipment. This investment
includes regular replacement of aging
pipe within our 9,800-mile network of
water and sewer main across the state.
Pennsylvania American Water is regu-
lated by the Public Utility Commission,
which we believe is the country’s pre-
mier utility commission in terms of bal-
ancing customer needs with utility needs
and maintaining safe and reliable service
at reasonable rates. The PUC has imple-
mented many best practices for utilities
and customers. Most notably, the PUC
led PA to enact Distribution System
Improvement Charge (DSIC) legislation
in 1996, which provides for a return on
pipe hydrant and meter replacements
each quarter. The DSIC provides en-
hanced cash flow and earnings for the
water utility while smoothing rate in-
creases on customers. Water utilities can
not earn more than the last allowed rate
of return when they impose the infra-
structure surcharge. Legislation has been
proposed since 2008 to expand this
charge to wastewater systems, which
would help mitigate the impact on cus-
tomers while addressing required capital
investments for PA’s wastewater infra-
structure.
NEWS 5
news 5
The state’s tax structure could also be
improved. Currently, 4.35 percent of
each customer’s bill relates solely to
capital stock tax, corporate net income
tax and the Public Utility Realty Tax.
We can make PA’s business environ-
ment more favorable to job creation –
and help control our customer’s water
costs – by reducing government
spending and streamlining our corpo-
rate tax structure.
CW: Are there other public policy
changes your firm is advocating?
KP: We'd like to see action on the
recommendations developed by the
Governor’s Sustainable Water Infra-
structure Task Force, on which I
served in 2008, including:
Better asset management and envi-
ronmental management systems, espe-
cially for small utilities to use more
innovative, cost-effective technolo-
gies.
Full-cost pricing that recognizes the
full cost of providing water and waste-
water service over the long term, so
that utilities implement price struc-
tures that effectively recover costs.
Water efficiency programs and im-
proved consumer education to help
conserve our water resources while
increasing public awareness of the
value of water.
Adoption of watershed management
principles into utility planning, so that
decision-makers consider watershed-
based, cost-effective alternatives as
well as traditional investment choices.
Regionalization to take advantage
of economies of scale, increased effi-
ciencies and greater access to capital
and technical expertise.
CW: What are your election hopes ?
KP: I am hoping to see a real effort to
restore economic prosperity, jobs and
a solid future for PA as the top priori-
ties for the Governor and Legislature.
Upgrading every facet of PA's infra-
structure would make PA the most
desirable state in which to locate both
manufacturing and technology busi-
nesses. Education and advanced train-
ing programs are also necessary to
prepare our young people for the new
economy -- and to keep them here. To
accomplish this vision, we are going
to need a very high level of coopera-
tion among the public and private
sectors. I think business leaders all
across PA want to see a new coopera-
tive spirit emerge as we close this first
decade of the 21st century.
6 news
Energy companies make big donations
to Sen. Scarnati
State Sen. Joe Scarnati won’t be running
for re-election until 2012, but that hasn’t
stopped him from racking up the second
highest total of campaign contributions
from the oil and gas industry.
According to a compilation by Common
Cause/Pennsylvania at marcellusmoney.
org, and reported in the Pittsburgh
Post-Gazette, Senate President Pro Tem
Scarnati has taken in $117,575 from energy
companies, including many that are drilling
for natural gas in the deep underground
areas of Marcellus Shale in Pennsylvania.
Of that total, $8,000 came from a company
called East Resources Inc. of Warrendale,
in six donations made at various times from
2002 to 2009.
But in addition to the $117,575, Scarnati,
of Jefferson County, also got a $25,000
donation from Terrence and Kim Pegula
of Boca Raton, Fla., on Aug. 17, according
to a Scarnati campaign report to the
Pennsylvania Department of State that
is available online. Pegula is listed as
president/chief operating officer of East
Resources, although the firm was sold in
May to Shell Oil Co.
Republicans control the Senate, and
as the top Republican, Scarnati is a key
negotiator in the stalled talks over whether
Pennsylvania will put a severance tax on
the large amount of natural gas being
pumped from Marcellus Shale.
Common Cause official Alex Kaplan said
that the $25,000 check from Pegula came
in mid-August, when talks about a gas tax
were in progress. Such a large donation
from “a natural gas CEO to an influential
senator, when he’s not up for re-election, is
a stark attempt to buy influence during a
crucial time for a severance tax,” contended
Kaplan.
Asked if the gas industry contributions
have influenced Scarnati’s policy-making,
legal counsel Drew Crompton had a short
answer: no. In mid-August, he said, “We
were knee-deep in a working group to
establish a reasonable tax.”
He said that East Resources is the
largest gas driller in Tioga County,
part of Scarnati’s senate district, and it’s
been a while since a new industry brought
a lot of good jobs to that rural, northern-
tier county.
“Sen. Scarnati cares about jobs in places
where they haven’t had good economic
news in years,” Crompton said. “He won’t
vote any particular way just because
someone gives him $25,000.”
He said his boss doesn’t want a Marcellus
Shale tax rate that’s too high because it
could hurt the growth of jobs.
Democratic Gov. Ed Rendell wants
legislators to enact a gas severance tax in
order to raise at least $100 million to help
protect the environment and municipal
roads from drilling-related damage and
bolster the state budget. Talks in October
among state officials have so far failed to
produce an agreement on a revised shale
tax, and the Senate doesn’t plan to return
to work before the session ends Nov. 30.
According to his campaign report,
Scarnati had $554,724 in contributions on
hand as of Sept. 13, even though he doesn’t
have to run for re-election to another
four-year term until 2012. Scarnati is No.
2 on the energy industry contribution
list, with Republican gubernatorial
candidate Tom Corbett getting more than
$700,000 so far.
Right now Scarnati is both the Senate
leader and the state’s lieutenant governor,
due to the death of Lt. Gov. Catherine
NOVEMBER 2010 CAPITAL WATCH
State Sen. Joe Scarnati has racked up
the second highest total of campaign
contributions from the oil and gas industry.
Baker Knoll in 2008. But he will go back
to being just a senator in January, when a
new governor and lieutenant governor are
sworn into office. CW
No free lunch
About 100 employees
of the Public Utilities
Commission recently
enjoyed a hot, catered
lunch featuring chicken,
pasta, salads and dessert.
The lunch was provided
by the state’s largest electric-and-gas company,
which is regulated by the PUC.
But after inquiries by The Patriot-News,
the commission says the public is going to
foot the $3,000 bill.
Critics said it isn’t appropriate for the
agency to have ever accepted such a gift
from Philadelphia Electric Co., commonly
referred to as PECO.
“I think it’s disturbing the PUC would
even approve something like this in the first
place,” said Barry Kauffman, the executive
director of Common Cause Pennsylvania in
a Patriot-News story.
“Clearly, the goal of this for PECO is
to establish good will with government
officials who will make decisions
about ratepayers’ lives as it affects their
utility bills,” Kauffman said. “I think
it would be more appropriate for the utility
commission to ban these activities.”
PECO organized the meal Oct. 14 for the
commission’s Bureau of Consumer Services.
It was designed to celebrate the agency’s
elimination of its backlog of consumer disputes
with utilities. About one-fifth of those disputes
involved PECO.
The bureau’s job is to investigate consumers’
informal complaints about utilities, mediate
disputes and monitor utilities’ compliance
with state regulations.
The number of complaints in the bureau’s
files that were six months old or older stood
at more than 13,500 in March, according to
Jennifer Kocher, a PUC spokeswoman. CW
NOVEMBER 2010 CAPITAL WATCH opinion 7
sponsored by pcua

Credit Unions Continue Growth

P ennsylvania credit unions posted improved financial
performance in the second quarter as net interest
margins stabilized and operating expenses fell. The
Pennsylvania Profile, Economic Summary for Second
Quarter 2010, shows Pennsylvania credit unions outpaced
national growth rates in all categories: assets; loans; total
surplus funds; total savings; and total members, for the
12-month period ending June 30, 2010, as well as the
second quarter of 2010.
Credit union membership in Pennsylvania grew 2.2
percent in the 12-month period, and 0.5 percent for the
second quarter. The national growth rate over 12 months
was 0.9 percent. In the 12-month period, Pennsylvania
credit union total assets grew 8.9 percent; loans increased
5.4 percent; and savings grew 9.3 percent.
Growth Rates (%)
14.9
Credit unions have demonstrated the ability to provide
a countercyclical solution to financial market challenges.
Few financial institutions want to exchange a higher-yield
loan for a lower-yield one. For consumers that want to
spend, credit unions are helping them do so in a more
responsible manner. Interest rates are at historically low
levels, yet banks have increased their average credit card
rate throughout the past 12 months to 14.7 percent.
Conversely, credit unions lowered their average rates to
10.9 percent over the same period.
Investments at credit unions total more than $310
billion out of $916 billion assets. Credit unions currently
have $574 billion in outstanding loans, including 13.2
million credit cards, to 45.7 million borrowers. Every time
a credit union modifies a member’s loan and reduces their
payments, it puts immediate cash into that member’s
hand month after month. The member may put that
money toward savings, use it to pay down debt, or re-
invest it in additional debt, such as a new car or a home-
remodeling project.

9.9 For information about Pennsylvania’s credit unions and

9.4 9.3
8.1 how to join one, please visit www.iBelong.org.
7.3 6.8 6.3
5.4
4.2

2006 2007 2008 2009 Jun 10

Loan Growth Savings Growth

Tax credits: the end of the road?

Recently, the Legislative Budget and
Finance Committee conducted a study, at
the request of the House and Senate, of
the state’s 18 separate tax credit programs.
The other two, the Film Tax Credit and
the Keystone Opportunity Zone program,
were done earlier by the LBFC. All of the
studies can be found here.
The report, released in October, and the
LBFC has found, among other things, that:
• Tax credit utilization is often far less
than what was authorized by law;
• Little is being done to monitor the
results of each program;
• Most tax credits do not have clearly
defined goals and objectives; and
• Tax credits do not receive the
same amount of scrutiny as general
appropriations.
Opponents of tax credits have long
argued that government should not be in
the business of picking “winners and losers”
when it comes to giving tax credits to some
industries and not to others. We have
largely found this claim to be ludicrous, as
government spending is inherently about
winners and losers at every level. Check
the school funding formula and how it
treats the state’s 500 school districts for
further clarification. That aside, the issue
of whether or not tax credits will even
survive the next few years is a good debate
to have. So let’s have one, shall we?
In 2008-2009, the state authorized
$344 million in tax credits, although not
all of them were completely utilized, as
we mentioned earlier. Due to budgetary
constraints, that number dropped to $218
million this fiscal year. In theory, every one
of these tax credits is meant to encourage
the growth of certain industry sectors, or
government programs. The Job Creation
Tax Credit? That one is obviously designed
to reward employers who add jobs. Easy
enough. The Film Tax Credit? Meant
to turn Pennsylvania in Hollywood east.
And so on.
But staring down a multi-billion budget
hole with no new taxes will require a bit of
creativity, to say the very least. And what
could be more creative than saving $218
million right off the bat by deep-sixing all
of the remaining tax credits? Doing so will
obviously be easier said than done, but the
reality is that there may be few other good
choices in 2011.
Every one of these tax credits comes with
a constituency, and those constituencies are
Democratic and Republican alike. For
instance, which lawmaker is going to
step forward and call for the elimination
of Keystone Opportunity/Keystone
Innovation Zone tax credits? Which
lawmaker is eager to campaign on a platform
of eliminating the Job Creation Tax Credit?
The Research and Development Tax Credit
is a favorite of Republicans and Democrats
alike, and in a bad economy, now might
not be the proper time to eliminate a tax
credit aimed at fostering innovation in the
state. The Agricultural Tax Credit, which
helps farmers meet certain conservation
mandates, has been a heavily-utilized
favorite since its inception in 2006. Finally,
the Educational Improvement Tax Credit
has been wildly successful and heavily
utilized since its inception, although its cap
of $75 million was tamped down last year,
as was the case with all others. House and
Senate members on both sides of the aisle
also support this program, so it is difficult
to see it going anywhere.
So where does that leave tax credits
going forward? The likely bet is that the
General Assembly takes a shot at getting
rid of the low-hanging fruit; that is, those
credits with historically low utilization
rates, like the Call Center Tax Credit
and the Employment Incentive Payment
Program. Whether or not it goes any
farther than that will depend on how
committed the next governor is to slashing
non-discretionary spending.
The horse-trading that will inevitably
begin if some of the tax credit sacred cows
are offered up for budget sacrifice will be
intense. But for Corbett or Onorato, there
may be no other choice but to try and take
them all out and start over. At their core,
tax credits are spending, plain and simple.
And since both candidates are talking about
spending reductions numbering in the
billions, tax credits and grants look awfully
similar to number-crunchers. Both of them
fall on the “debit” side of the ledger. CW
Reprinted with permission from the
Triadadvocate(www.triadstrategies.com/
triadvocate).
8 CAMPAIGN 2010 NOVEMBER 2010 CAPITAL WATCH

oooooooooooo

House GOP
comes back
with majority
“We won because we as a party, from Gov.-elect Tom
Corbett to the candidates for the House had a unified
message of fiscal responsibility and we are very
honored that the people of Pennsylvania are giving
us a chance to govern according to that promise.”

Losses by House Majority Leader Todd Eachus, D-Luzerne, and at least 13 other
Democrat-held House seats meant the House Republicans would take back the majority
in the chamber with a commanding majority.
With at least five more close races pending recounts and full counts of absentee ballots,
House Republicans appeared assured of a 111-92 majority, which could grow, when likely
recounts are completed, by three or more members.
The losses spanned the state from Reps. Barbara McIlvaine-Smith, Paul Drucker and
Tom Houghton, D-Chester, and Rick Taylor, D-Montgomery, in the east, to Reps. John
Pallone, and Jim Casorio, D-Westmoreland, in the west.
“We won because we as a party, from Gov.-elect Tom Corbett to the candidates for the
House had a unified message of fiscal responsibility and we are very honored that the
people of Pennsylvania are giving us a chance to govern according to that promise,” said
House Republican Campaign Committee Chairman Dave Reed, R-Indiana.
“Our message and our candidate for governor were in stark contrast to the record of
our opponents, and that made this victory happen,” said Reed.
The significant House GOP victory will help Corbett enact a conservative fiscal
agenda, said his campaign manager and likely chief of staff, Brian Nutt.
Nutt said those Republican gains in the House will “absolutely” assist to the Corbett
administration with their agenda, and that many of those GOP candidates shared
Corbett’s message of “reforming Harrisburg, getting rid of overspending and cutting
taxes, or holding the line on taxes.”
“All those are things that the electorate wanted. This is the people not being happy with
the last four to eight years,” Nutt said.
While the House Democratic candidate Kevin Boyle defeated former House Speaker
John Perzel, R-Philadelphia, and Margo Davidson won over Republican Maureen Carey
in Delaware County to fill the seat of already-resigned Rep. Mario Civera, R-Delaware,
those were the only two bright lights in the election for House Democrats.
“We have had a tough night but we will fight for the policies Pennsylvanians need, and
to come back to the majority,” said Rep. Mike Gerber, D-Montgomery, chairman of the
House Democratic Campaign Committee. He vowed to fight Corbett, whom he said “will
devastate education, our environment and the programs Pennsylvanians need.”
As of midnight, the following incumbent House Democrats had lost:
· Eachus to Republican Tarah Toohil;
· McIlvaine-Smith to Republican Dan Truitt
· Taylor to Republican Todd Stephens;
· Casorio to Republican George Dunbar;
· Pallone to Republican Eli Evankovich;
· Rep. Tim Seip, D-Schuylkill, to Mike Tobash;
· Rep. David Kessler, D-Berks, to David Maloney;
· Rep. John Siptroth, D-Monroe, to Rosemary Brown;
· Rep. Paul Drucker, D-Chester, to Warren Kampf;
· Rep. Tom Houghton, D-Chester, to John Lawrence;
· Rep. Jim Casorio, D-Westmoreland, to George Dunbar;
The Democrats also lost four House districts held by retiring incumbents:
· Republican Joe Hackett of Delaware County defeated Democrat Walt Waite for the
seat currently held by Rep. Bryan Lentz;
· Republican Kurt Masser of Northumberland County defeated George Zalar for the
seat of retiring Rep. Bob Belfanti;
· Republican Doyle Heffley of Carbon County defeated Justin Yaich in the seat of
retiring House Speaker Keith McCall;
· Republican Joe Emrick of Northumberland County defeated Charles Dertinger for
the seat of retiring Rep. Richard Grucela.
Both parties were also watching five more contests for Democrat-held seats which were
close and headed to recounts:
Democrats held narrow leads in:
· The seat of retiring Rep. Tony Melio, where Democrat Tina Davis led Republican
Kevin Glasson by about 221 votes, pending counts of absentees scheduled for
Wednesday at noon;
· Rep. David Levdansky, D-Allegheny, up about 200 votes over Republican Rick
Saccone, pending recounts and full counts of absentees;
· Rep. Bryan Barbin, up 40 votes on Republican Jim Rigby, pending absentees
and recount;
· Rep. Steve Santarsiero, D-Bucks, up 180 votes pending absentees and a recount, over
Republican Rob Ciervo;
· Rep. Bryan Barbin, D-Johnstown, up by 36 votes on Republican Jim Rigby,
pending recount.
Rep. Bud George, D-Clearfield, led by 677 votes over Republican Glenn Johnston,
but Republicans were still watching that race.
Republican candidates throughout the state, from Eli Evankovich in Westmoreland,
who defeated Pallone, to Todd Stephens, who defeated Taylor, said they did so because
they vowed to cut state spending and oppose higher taxes.
As for the state Senate, nothing changed - Republicans maintained their 30-20 majority
in the chamber.
Rep. Tim Solobay, D-Washington, kept in Democratic hands the state Senate seat being
vacated by retiring state Sen. Barry Stout, D-Washington.
And state Sen. Jane Orie, R-Allegheny, easily won re-election despite being indicted in
April on charges that she instructed her legislative staff to do campaign work. CW
NOVEMBER 2010 CAPITAL WATCH
CAMPAIGN 2010 9

oooooooooooo
Corbett, House and A review of Corbett’s
Senate GOP have a route to gubernatorial win
mandate: cut spending, By Laura Olson, Capitolwire

Republican Attorney General Tom

lower taxes By Peter L. DeCoursey, Capitolwire

Corbett’s gubernatorial bid was a relatively
smooth ride, first defeating his conservative
primary opponent and then successfully
portraying his general election rival as a
It is harder to imagine a clearer mandate tax-and-spend Democrat.
for the next four years of governing than When Corbett formalized his campaign
the one that emerged from this election for governor in September 2009, it was to
for Gov.-elect Tom Corbett and his GOP be a race between him and U.S. Rep. Jim
legislative colleagues. Gerlach, R-Chester. But when Gerlach
From the House to the Senate to dropped from the race in January, it
the governor’s office, two of the three remained a two-man contest, now against
branches of state government are now state Rep. Sam Rohrer, R-Berks.
stocked with folks who won office by Tom Corbett hugs his wife, Sue Corbett. Rohrer, an 18-year state lawmaker, trailed
promising to cut spending and oppose Corbett throughout the primary, but still was
new taxes. able to push him to the right on several issues. Corbett was forced to explain a comment calling
Back when Govs. Dick Thornburgh the Constitution a “living document” after Rohrer used it to brand him to conservative activists
and Tom Ridge were elected, there as too liberal and too likely to re-interpret the core document of American government.
were so many House Republicans and Corbett responded to reassure critics that he did not regard judicial innovation in
Senate Republicans who supported constitutional interpretation as correct, and the issue died away.
public school increases of more than the When Corbett said at the Republican State Committee central caucus meeting that
governor wanted, so that issue became tax hikes “would be a last resort” but would be “on the table,” Rohrer fired back that
an annual tussle. they should not be an option at all. Shortly after, Rohrer signed a no-tax pledge, a move
Republican leaders back then were that Corbett soon followed.
also more pro-spending than now. That tax pledge shifted several times as Corbett discussed his plans for reducing
And while Gov. Ed Rendell certainly the state tax burden and spending. It did include not raising fees in an interview with
ran on a platform of higher education Pittsburgh’s KDKA television station, then did not include fees, and again included
spending, rent rebates and property tax both when asked in the general election’s final debate.
cuts for seniors, and many of the other That pledge has drawn criticism from his Democratic opponent, Allegheny County
Tom Corbett things he accomplished, the Senate was Executive Dan Onorato, and observers – including Senate Majority Leader Dominic
majority GOP for his whole term. Pileggi, R-Delaware – regarding whether, given the state’s looming fiscal challenges,
And oddly, Rendell had more success passing his major agenda items in ways that he would be able to stick to it if elected.
didn’t get nuked by the courts when Republicans controlled the House. Corbett has maintained that he will do it, and that he will choose to cut budget line items
So while Rendell had a clear agenda, he never had the kind of mega-majorities and to look for other revenue options, like selling the state liquor store system, instead.
Republicans now command: the governorship, 30-20 in the Senate, at least 111-92 in He also had to explain a campaign trail comment that unemployed Pennsylvanians
the House, and probably a seat or two better than that once all the absentee ballots were choosing not to take job offers, in order to continue receiving unemployment
and recounts are done. benefits. Onorato pounced on that comment, holding days of press conferences around
Now there are sharp rocks and swift currents ahead. Neither the Senate Republicans the state before Corbett both apologized for and repeated the statement.
nor the House Republicans have ever managed to agree on a document that spent less Despite those missteps, Corbett was able to maintain a significant lead both in fundraising
than the low-$27 billions. and in public opinion polls throughout both the primary and general elections.
After Tuesday night’s Republican wins, you can safely rule out the Congress Corbett’s signature Bonusgate corruption investigation was largely absent from
extending stimulus funding for another year, so that leaves the state about $2 billion both the primary and general election campaigns, although it did appear as Corbett
down. Pensions and the need to pay back the feds at least some of the $3 billion we gave his acceptance speech on primary night.
borrowed to pay unemployment compensation will add to that total. A subpoena for account information on two Twitter users who had been critical
So at the very least, the Republicans are either going to have to pass something like of the Office of Attorney General surfaced online that evening. With one Bonusgate
the Civera amendment or Senate GOP $27 billion plan, which means cutting $1 billion defendant, Brett Cott, about to be sentenced, linking him to the critical posts could
spent this year, THEN CUT ANOTHER $1 billion or so, or agree to sell $1 billion in have shown a lack of remorse, leading to a longer sentence.
state assets in the first six months of Corbett’s governorship. Onorato quickly jumped in to criticize the subpoenas as over-reaching. The
That is why the size of Corbett’s 353,000-vote victory matters. He won 54.5 subpoenas were eventually withdrawn, and for the most part, Onorato made only
percent to 45.5 percent for Dan Onorato. He carried some Republican lawmakers past slight lurches towards critiques of Corbett’s legislative prosecutions.
Democratic incumbents to Harrisburg with him. While Corbett took flak following the first general election debate for saying
When, like Corbett, you are starting out unliked for prosecuting the Legislature - he would consider hiking the employee payroll contribution - but not employer
and he is very unliked by the leaders and most of the rank-and-file members - the size contribution - to the state unemployment compensation fund, he also was able to
of the stick you carry matters. hammer home a theme that Onorato has had to repeatedly refute.
Right now, Corbett also has the bully pulpit of the governorship. Citizens expect He closed that debate by reiterating a message from his ads and stump speech:
him to set the fiscal course for the state, so while lawmakers can suggest and strategize, “If you want another four more years of taxes, another four more years of spending,
they will be largely judged, for a year at least, on how well they work with Corbett to another four more years of Gov. Rendell, then vote for Dan Onorato.”
cut government spending and avoid taxes. Corbett’s linkage of the two men worked well, forcing Onorato to spell out in all
And I can’t remember any time when the Republicans who got elected did so with a three debates: “I am not Ed Rendell.”
clearer governing message. More moderate types like Joe Hackett in Delaware County He also put Onorato on the defensive on economic issues: Allegheny County’s
and Todd Stephens of Montgomery County got elected to cut spending and taxes. unemployment rate, a controversial tunnel project initiated by his predecessor, and the
More conservative types like Glenn Johnston in Chester County say they got elected alcoholic drink tax that he instituted to fund mass transit.
to do that too. Onorato has attempted to explain each piece of the three-part critique. But in polls
Western Pennsylvania House conservatives are going to test their new colleagues and interviews, voters have said they see Corbett as more equipped to fix the state’s
and their eastern veteran colleagues on their level of dedication to fiscal discipline. economic problems, and more likely to share their values.
But right now, cutting government is all the rage. Polls also show Corbett’s confidence and determination has resonated with voters,
And Republicans have the best opportunity in decades to do it, as they have shed as he is the only one of the fall candidates for governor and U.S. Senate to retain
many of their moderate members in recent years, and elected members who pledged positive ratings after enduring $10 million of campaign attacks.
fiscal austerity. By acting like each mistake was minor, and ignoring additional questions, Corbett
Voters are counting on them to cut into the budget, not into each other, and with has persuaded voters of the same, so far, although pollsters note that he has benefited
these kinds of majorities, they will be expected to deliver. CW by a major enthusiasm advantage of Republicans in this cycle. CW
10 EDITORIAL NOVEMBER 2010 CAPITAL WATCH

EDITORIAL

Kick, ball, change

“Kick, ball, change.” That may be the
basic instruction for a host of modern
dance steps. But it’s also been the mantra
for this year’s General Election: “Kick
out the incumbents. Have a ball blasting
“government” as “them.” And then, when
you get elected, try to change things.
The question is, will we be sitting around
at this time asking our newly-elected
reformers, ala Palin, “How’s that Kick Ball
Change thing workin’ out for yah?”
Conventional wisdom – based on the
experience of the last 40 years – suggests
that it won’t be working out very well no
matter how solemn the promises of both
candidates for Governor and virtually all
of the legislative newcomers who made it
through gauntlet of fire that we call the
electoral process. Too many things need
to be done to quickly requiring sacrifice
and compromise to allow government
newcomers to remain true to their demands
for government reform. It’s certainly what
happen to President Obama’s “change we
can believe in.” The new President was
confronted with an economy so fractured
and fragile that he needed friends of every
persuasion in Washington and he sold
out his reform hopes for the privilege of
bailing out the banks, averting another
Great Depression, saving the domestic
auto industry and tackling health care
reform early on in his first term.
He could have said, “Reform of the
process is more important than full lunch
buckets and intact bank accounts.” He
could have; but he didn’t. Along the way,
he also had to respond to partisans who
were busy trying to persuade people that
he was (a) born in Kenya, (b) was a Marxist
or a socialist and (c) was really a Muslim.
At the state level, people are pretty much
agreed that we could do with a General
Assembly that’s a lot smaller – say 30 or
40 Senators and 100 or 120 members of the
state House. They also believe the General
Assembly could accomplish all their work
with limited and not continuous sessions
– say, maybe, a budget and finance session
of 60 days in the Spring and an issues and
programs session of a similar 60 days in
the Fall. They believe the legislature could
survive with fewer staff. The general public
would also be likely to embrace initiative,
referendum and recall – all three common
powers residing in the people in states in
the Midwest and Far West. And, while
legislative leaders cling to the idea that they
need a fiscal cushion to continue operations
during budget disputes or natural disasters,
hardly any private citizen everyone believes
that the General Assembly needs reserve
accounts equal to about two thirds of a year
of full operations.
The problem is that the one body that
needs to act and that controls the potential
for any change like those outlined above
is the General Assembly itself. The deck
has been stacked in favor of the General
Assembly by the Constitution and, well,
the General Assembly.
The new Governor can ask, can urge, can
cajole, can pressure the General Assembly
to reform itself either by legislative
action, Constitutional amendment or by
convening a Constitutional Convention
but, push comes to shove, nothing can
happen without their say-so.
Which brings us to the situation facing
the state in January 2011. The state
will be $3 to $5 million in the hole,
according to who you talk to. We need to
reform and replenish our state and school transportation systems and do more to
employee pension programs. We need to rebuild our general infrastructure before it
find replacement funds for the stimulus all collapses around us. And, more.
money – or cut programs accordingly. We Oh, and by the way, the General Assembly
need to face up to skyrocketing growth in needs to launch the process of redistricting
corrections and Medicaid funding costs. the state’s 19 Congressional districts down
We need to “come to Jesus” on Marcellus to 18 in time for the 2012 elections and
Shale extraction taxes. We need to figure create the panel and the staffs that will
out how to maintain the quality of our handle legislative reapportionment.
public schools in the face of reduced federal If you were managing the General
spending and a growing revolt against Assembly, when would you schedule
the school property tax (and we need to the hearings and the bill drafting on
recognize that Pennsylvania schools on government reform? And what would
the whole, on the average, have improved you do about marshaling support for any
greatly just like we have asked them to reform legislation you would want passed?
do). We need to figure out how to fund “Kick, ball, change … kick, ball, change
our roads, bridges, highways and mass … kick.” CW

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 This is my farm.
This is my opportunity.
This is my natural gas drilling company.

– Ron Romanetti
Leaseholder

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12 OPINION
Voters want a tipping point
Slowly but surely the electorate continues
to adopt and embrace electronic voting. I
am fortunate to vote at a polling place that
is a tech nirvana of voting.
Within minutes, I check in, sign the book
and then I am standing at one of the six
digital voting booths. Happily, I tap on the
screen to make my selections and review
my final ballot before my final tap. Then, I
get my oval “I Voted” sticker and off I go.
“We deserve to be an innovative state where we can
conduct interactive voter registration drives armed
with iPads for voters to complete digital applications
that can be instantly processed.”
Five years ago, I remember our local
most hardened election critic swearing
up and down she would never trust those
machines. I dutifully listened but would
giggle to myself thinking just wait and
see. Today, she is the biggest advocate.
Completely amazed at how easy it is, she
grumbles at anyone who complains.
She had her tipping point.
Electronic voting has also made election
nights end much earlier for the poll workers
Highly recommended
b y p e o p l e w h o e a t.
briccopa.com | Downtown Harrisburg | 717.724.0222
L U N C H M O N - F R I 1 1 : 3 0 A M - 2 : 3 0 P M • D I N N E R M O N - S AT 5 : 3 0 P M - 1 0 : 0 0 P M
who have already put in a very long day.
Instead of the night ending at midnight or
later, everyone is pretty much wrapping it
up by 9 p.m.
They too have had their tipping point.
Now, it is time to complete the process
and end the madness of living in a half paper,
half digital world. All Pennsylvania polling
places should be digital and all the other
processes of voting should end their paper
ways. This includes voter registration and
absentee voting.
Everyone deserves a chance to have a
tipping point.
At some polling places, voters have to
ask permission to vote electronically. This
is not only archaic but a monumental waste
of resources.
Much to the credit of the Department
of State, they are on the right track.
They continue to improve and increase
Inspired. Cuisine.
S U N D AY 4 : 3 0 P M - 1 0 : 0 0 P M
NOVEMBER 2010 CAPITAL WATCH
By Deena C. Malley
voter registration with their PennDOT
inter-agency collaboration. They are
also working on cooperative agreements
with other public agencies to make voter
registration available. They are seeing
continual drops in registrations by mail.
They also see kiosks as a valuable way of
providing their services.
The Department of State is trying to get
us to a tipping point.
As a state, Pennsylvania still prints way
too many voter registration forms and
ballots that are never used or returned. We
have proven electronic voting can work
and it is time to move our polling places
away from paper. We need to quit printing
so many voter registration forms and
have more kiosks available in community
accessible places like grocery stores and
shopping malls.
We deserve to be an innovative state
where we can conduct interactive voter
registration drives armed with iPads for
voters to complete digital applications that
can be instantly processed. It would sure
beat lugging around all that bulky paper
and passing them out to people who put Deena C. Malley
them right into the circular file.
Since the web is here to stay, it goes an absentee ballot.
without saying all of these services, It is time for the tipping point. CW
including voting, should be able to be Deena C. Malley is a technology and
accessible online. This would greatly business consultant with more than 20 years
benefit the elderly, people with disabilities experience. Her website can be found at
and thousands of people who need to cast www.deenamalley.com.
Coming in January...
Special
Inaugural Issue
We welcome gubernatorial
congratulatory advertising.
For advertising placement and
all inquiries, contact
Jim Laverty, Publisher, at
(717) 233-0109 x122 or
jlaverty@harrisburgmagazine.com.
NOVEMBER 2010 CAPITAL WATCH
NEWS 13

Administration says Wagner’s retirement idea costly

By Jim Quirk, Capitolwire

Auditor General Jack Wagner says the
state could save up to $381 million per year if
every department had a voluntary retirement
incentive program for all employees.
Gov. Ed Rendell, however, views Wagner’s
recommendation to establish a statewide
voluntary retirement incentive program as
something that could do more harm than good.
“It could potentially wind up costing the
state more money, not less,” Rendell spokesman
Gary Tuma wrote in an e-mail message. “The
idea might work well in an office such as the
Auditor General’s, where many employees
perform similar functions, heavily weighted
toward accounting, thus allowing the office
to combine tasks and to compensate for
fewer personnel through increased use of
technology.”
Tuma wrote that administration
officials “discussed an early retirement
incentive but have not given it serious
consideration … because when applied
to the broader state workforce, it poses
some problems that severely reduce its
cost effectiveness.”
“Our lack of control over who will leave
produces several significant risks,” he wrote.
While a statewide incentive program would
cause some initial cash flow problems for
the State Employees’ Retirement System, the
pension system over time would actually pay
out less money to retirees, Wagner and SERS
spokesman Robert Gentzel said.
The American Federation of State, County
and Municipal Employees [AFSCME]
Council 13 – which represents a majority of
the state’s union employees – views Wagner’s
recommendation as a good thing. However,
David Fillman, executive director of the
Pennsylvania AFSCME, said the union would
hope that – if the state did follow through
on Wagner’s recommendation – it would
re-fill the vacated positions once the economy
turned around.
However, the Services Employees
International Union Local 668, which also
represents many state workers, does not like
the proposal.
SEIU 668 spokeswoman Leah Wright
wrote in a Tuesday e-mail that Wagner’s
recommendation would mean the state would
lose over 5,000 workers.
“This would result in a decrease in
quality public services for the people of the
commonwealth,” she wrote. “Citizens would
have to wait longer to collect unemployment
because there would be less people to process
claims, our Childline centers would not be
able to field as many complaints of potential
child abuse and these types of scenarios would
be rampant across our state. This plan would
clearly do a severe disservice to the taxpayers
of the commonwealth.”
Tuma indicated one of the problems the
program poses is “brain drain, in which the
commonwealth would lose its best employees,
who take the incentive and then go find
another job, leaving behind those least able to
secure work elsewhere.”
Wagner acknowledged that the state
would lose experienced employees earlier
than anticipated.
“You’re always concerned that you lose good
employees that bring considerable knowledge
… but the reality is you got to reduce your
costs,” he said during a Tuesday interview.
During a press conference earlier Tuesday,
Wagner said his department saved $1.5
million since July, when his office launched a
voluntary retirement incentive program for
workers in his office.
He said 50 of the 665 employees in his office,
or 7.5 percent, participated in the program. For
taking an early retirement, participants received
$1,000 for every full year they were employed
by the state, up to a maximum of $25,000.
Wagner said if the program was offered
statewide, it could produce an overall savings
to taxpayers of $381 million per year - if the
participation rate is 7 percent of the state’s
total workforce of 77,168.
He said the $381 million savings takes
into account the money the state would pay
out in incentive money.
Tuma, however, said the program could
lead to increased costs.
“Depending on who volunteers to leave,
the commonwealth could have no choice but
to fill those positions,” he wrote. “Suppose for
example, a large number of state troopers, or
probation officers, or nurses in veterans homes,
or environmental inspectors retire? For those
and many other jobs, we would have to pay the
costs of the retirement incentive plus the cost
to hire (and train) a replacement.”
Regarding the potential impact a statewide
incentive program would have on pensions,
Wagner said, “If an employee were to stay
longer, and if they have not fully maxed out
on their pension, obviously their pension
would be greater.”
“Is there a larger hit immediately on
SERS?” he said. “Yes there is. But long term,
there’s no doubt there’s a lesser obligation
on the pension plan.”
Gentzel said during an interview the
pension system was hardly impacted by
the 50 workers from Wagner’s department
who opted to participate in the voluntary
retirement program.
“But if you had it done on a large scale [like
Wagner suggests], there would be some cash
flow considerations the pension system would Jack Wagner says a voluntary retirement
have to adjust to,” Gentzel said. “I’m not saying incentive would provide greater cost
it’s a problem … but when you’re talking about savings in the long run.
50 people, there’s not much effect.”
To achieve $381 million of annual savings Wagner said requires no legislative action to
under Wagner’s recommendation, about 5,402 enact – as a potential answer to some of the
state workers would have to participate in state’s budget woes.
the program. With that in mind, “it might “All indications are that the 2011-12 state
necessitate some adjustments to deal with the budget will be more challenging to resolve than
cash flows” because SERS would have to pay this year’s,” Pileggi spokesman Erik Arneson
out more money up front, Gentzel said. wrote in an e-mail message. “In that light,
Overall, however, a statewide program would certainly anything departments can do to help
reduce its future pension liability, as long as the reduce costs would be a welcome step.”
positions were not re-filled, he said. Brett Marcy, spokesman for House Majority
Fillman said AFSCME prefers the Leader Todd Eachus, wrote in an e-mail that
voluntary retirement program to job Wagner’s “retirement incentive idea is an
furloughs and layoffs, and was supportive interesting concept.”
when Wagner wanted to launch the program “We certainly will take a look at it, as well
in his department. as any other ideas that could help us rein
Wagner said 25 percent of the workers who in costs,” he wrote. “Every option is on the
participated were management level, while the table.”
75 percent balance were union employees. Wagner has called for a moratorium on
Fillman said his only concern with the funding charter and cyber-charter schools
program is whether the positions vacated by to cut down on state spending. He said
it would get filled in the future. he plans to introduce other cost-saving
“This [program] is a good thing … [but] recommendations that, when combined with
the devil’s in the details,” he said, adding that the retirement incentive program and charter
he would be hopeful any empty positions get school moratorium, would save the state over
re-filled once the economy strengthens. $1 billion per year.
Senate Majority Leader Dominic Pileggi, He said he plans to unveil the other cost-
R-Delaware, views the program – which saving suggestions in the upcoming weeks. CW

Judge ups ex-Rep. Veon’s restitution to $1.9 million

A judge has denied post-sentence motions in former
state Rep. Mike Veon’s public corruption case and increased
the amount of restitution he owes from $100,000 to
$1.9 million.
Dauphin County Judge Richard Lewis also rejected
similar motions filed by one of Veon’s co-defendants,
his former Beaver County district aide, Annamarie
Perretta-Rosepink.
“This jury was attentive, painstaking and circumspect,”
Lewis wrote. “This court cannot conclude the jury’s
verdict shocks one’s sense of justice.”
In the 22-page memorandum order, Lewis said – among
other things – that there was ample evidence to support
the verdicts, the defendants were not singled out for
selective prosecution, the substitution of a juror during
deliberations was proper, and a trip by jurors to the state
Capitol did not merit a new trial.
Lawyers for the two defendants said they would appeal.
“I’m certainly not surprised based on everything
else that occurred in this case,” said Veon lawyer Dan
Raynak. “We’re confident that an appellate court will
look at the issues and give a fair ruling on this matter.”
Both defendants were convicted in March of conspiracy,
theft and conflict of interest. Veon is serving a six- to
14-year state prison sentence after being convicted of 14
counts. Perretta-Rosepink, who received a sentence of
three to six months on five counts, remains out on bail
pending appeal.
Her lawyer, Mike Palermo, said he had not been provided
with any new order regarding her restitution, which was
earlier set at $25,000.
Both defendants and prosecutors asked for a restitution
hearing following sentencing in June.
“As we have said from the beginning, this was a significant
diversion of taxpayer resources for campaigns and personal
use, and this restitution order from Judge Lewis holds Mike
Veon accountable for his actions,” said Nils Frederiksen, a
spokesman for the attorney general’s office.
Lewis said the restitution amount was based on evidence
at the trial and the exhibits. He ruled that Veon must repay
government money spent on bonuses given to legislative
employees for electioneering, campaign fundraising,
sending out campaign e-mails and a trip by aides to drive
his motorcycles to an event in Sturgis, S.D.
He noted that Veon had said he had limited ability
to pay restitution because he was in prison, had lost
his state pension and his home in Harrisburg was
facing foreclosure.
“While these factors are compelling, they are not issues
at present,” Lewis wrote. “Such circumstances may become
important should there be a failure to pay court-ordered
restitution in the future.”
Veon had been the whip, the No. 2 position in the House
Democratic caucus, before he lost re-election in 2006.
Veon, Perretta-Rosepink and former Veon aide Brett
Cott were convicted after about six weeks of testimony
and seven days of deliberations. A fourth defendant, former
Veon aide Steve Keefer, was acquitted.
The trial was part of the nearly four-year investigation
into the misuse of the General Assembly’s public resources.
Other state representatives of both parties and legislative
aides await trial, and prosecutors have said the investigation
continues. CW
14 OPINION NOVEMBER 2010 CAPITAL WATCH

Stay Informed, The Consequences of Cuts

By Joseph M. Capita

Subscribe Today! Much has been written about Pennsylvania’s state budget problems, caused by the
current economic conditions and their impact on revenue collection. Most people understand
that those who rely on state human-service programs are impacted negatively.
But the budget squeeze has negative consequences that reach far beyond state-
provided human services. At United Way of the Capital Region, we’re seeing dozens
of private human-service providers struggle to meet increased demands, while revenue
sources are stagnant or shrinking.
Capital Watch We’d all like to believe the tough economic times are behind us, but that’s not how we’re
seeing it. Two indicators driving our concern are unemployment and food stamp utilization.
provides me We estimate there are well over 20,000 fewer people employed now than two years ago.
Last year, many were surprised to learn application for food stamps in Cumberland,
with what I need Dauphin and Perry counties had dramatically increased. This year, affording the
necessities of life has become even more difficult for local residents.
to know about the Statewide, the number of people using food stamps is up an average of 19 percent. The
increase is 30 percent in Perry County, 22 percent in Dauphin County and a staggering 47
inner workings of percent in Cumberland County. These numbers don’t account for families who don’t use
food stamps, but need the support of food pantries. Some of these pantries are still seeing
state government a 50 percent increase in requests over the last two years.
The downturn in the economy is having a dramatic effect on the charities people rely
without having on for help. Consider the results of a recent survey we took of our agency partners:

to be there. • 73 percent said monetary donations have decreased over the last two years.
• 46 percent said their clients were forced to forgo satisfying one basic need to
afford another.
• 65 percent have seen demand for their services increase because of the economy.
• 37 percent had to lay off staff.

We’ve found many times after people lose their jobs, their first concern is meeting
their basic needs, like food and shelter. After those needs are satisfied, more serious and
complex problems can surface. Here are a few examples of what I’m talking about:

• YWCA of Greater Harrisburg reports a 13 percent increase in the number of

abused adults and a 23 percent increase in the number of abused children seeking
services.
• Domestic Violence Services of Cumberland and Perry Counties is seeing a 26
percent spike in the number of people seeking protection form abuse orders.
• The Stevens Center reports a 27 percent increase in drug and alcohol treatment
ORDER NOW BY VISITING CAPITAL-WATCH.COM services over the past two years.
717.233.0109 (x115) • CONTACT Helpline has seen suicide related calls grow an alarming 150 percent
this year.

All of the aforementioned service providers rely on state aid to fund their programs,

YES! Send me 12 Issues of Capital Watch
for this low, low price of $9.60!
Subscribe online at www.capital-watch.com using offer CW901
Name
as well as on charitable giving. It is a perfect storm of more people in need and fewer
resources available to meet those needs, at a time when government support for local
services continues to decline.
Since 2007, the Human Services Development Fund, the one source of flexible funding
counties can use for their most pressing needs, has been cut 36 percent. All indications
point to more reductions in governmental support in the years ahead.
So what are we doing to help our community? We have several valuable tools to help
people survive these tough times:

Address • Prescription Drug Discount Cards - Over the past few years, we’ve distributed
more than 20,000 cards to people in need. The result? As savings of $233,000 for
local residents.
Apt. (or Office)
• Surviving Tough Economic Times Guide - This guide lists more than 100 local
programs and services to help those in need, and gives people tips on dealing
City/State/Zip with creditors, managing a budget and coping with stress.
• Foreclosure Prevention Resource Guide – Thanks to support from the PNC
Foundation, we’ve created a Foreclosure Prevention Resource Guide, which
Telephone (Home) includes information on understanding credit scores, the foreclosure process and
a list of organizations to help people at risk of losing their home.
• Volunteer Opportunities – Many people dealing with job loss are looking to
(Office) stay engaged in the community. Our Volunteer Center helps connect people with
rewarding volunteer opportunities.
Email
At United Way of the Capital Region, we want to be the best charitable value possible. That’s
why 100 percent of the money we raise and distribute from individual donors in our community
Payment Enclosed Please Bill Me Later is directed to local programs and services. We are able to do this thanks to 13 generous corporate
supporters, who underwrite our very low administrative costs of 12 percent.
In these tough times, our community counts on United Way because of the safety net
of 80 programs and services we help fund. Far too many of our neighbors are struggling,
and they need the services United Way makes possible for shelter, food, clothing,
C/O Benchmark Group Media medications, protection and support.
Attn: David Fitzkee We hope the kind people of central PA will help us continue to be the “go-to”
3400 N 6th St organization for people in need by supporting our annual fund drive. Your gift will make
Harrisburg, PA 17110 a real difference for people in your hometown. CW
Joseph M. Capita is President and CEO of United Way of the Capital Region
NOVEMBER 2010 CAPITAL WATCH
OPINION 15

Bick City Bar & Grille: A place to call your own

by JACQUELINE GOODWIN
In the smorgasbord of eating and
drinking establishments that can be
found in Harrisburg, the newest—Brick
City Bar & Grille—is one of the easiest
places to classify: a great sports bar and a
general hanging out place that caters to all
customer types. Simply put: a place to call
your own.
Brick City Bar & Grille is the brainchild
of Steve and Jacquie Ferentinos, whose
dream was to open an eating establishment
reminiscent to the legendary places of
Steve’s native New Jersey roots.
“And we wanted to open a place which
people could call a neighborhood ‘joint’ of
their own for generations,” he says adds.
Located at 313 N. Second St., Brick City
Bar & Grille is within walking distance
of everything that’s going on downtown.
And the kitchen is open til Midnight.
Another plus for those having the late
night munchies.
The wait staff and bartenders at Brick
City give the most personable and friendly
service I’ve seen in a long time, and it doesn’t
hurt that Ferentinos’ food is awesome!
Brick City is a great place for some
quiet after-work seating for bar food. The
burgers, wraps, sandwiches and wings are
a good pairing with the beer, and with its
fully stocked bar, it’s also a place where
you can get a variety—from the higher
end microbrews to the $2 domestic 16 oz.
all day, every day. And the best news? It’s
the only place in town where you can get
Chimay Tripel White on tap.
Stop here first for “Yuengs and Wings”
($5 dozen wings and $5 pitchers of
Yuengling) before heading out on the
town. And if you’re past the prime bar-
hopping age, it’s a good place to grab a
burger and beer before heading home. It’s
also a good sports-watching spot, evident
by the eight flat screen TVs mounted on
walls throughout.
Brick City’s lunch and dinner menu
is varied, suitable for all appetites and is
affordable. On the rainy day I stopped
in for lunch I had the Grilled Cheese on
sourdough toast with a bowl of tomato
soup ($5). Yummy. Just like Mom used
to make. My guest had the Crab Cake
Sandwich ($9.50). . .jumbo lump crab on a
brioche bun and was just as pleased with
his choice.
On another day, I ordered the 12 ounce
New York Strip ($14), done to perfection,
with mashed potatoes and a side vegetable.
My guest ordered the 12 ounce Rib Eye
($15), also done to perfection.
On my next visit, I intend to order one
of the numerous hearty salads, probably
the Pittsburgh Steak Salad ($9), which
pairs marinated strips of tenderloin with
mixed greens, topped with tomatoes, onions,
shredded cheddar cheese, French fries and
chipotle ranch dressing. Or I might try the
Land & Sea Salad ($11.50), that combines
marinated strips of sirloin steak with
calamari, tomatoes, onions and crumbled
clue cheese over mixed greens and topped
with Parmesan peppercorn dressing.
Brick City also offers a variety of burgers
and wraps. The Mushroom Burger ($8)
with its plump sautéed mushrooms and
garlic-Parmesan butter and melted Swiss
looked wonderful, as did the Belly Buster
Club ($9) with its mesquite-smoked turkey
breast, brown-sugar ham, roast beef, bacon,
provolone, lettuce, tomato and mayo.
“Our lunch and dinner menu will appeal
to all, so we welcome you to get the gang
together and head to the Brick City where
you won’t leave hungry,” says Farantino.
“We serve only the best quality food and
we pile it on with serving sizes that could
feed a king.”
Brick City Bar & Grille is THE place
to be. If you want great food, friendly Spotting the bright blue brick door,
people and a place to call your own or just Brick City Bar & Grille sits right on 2nd
catchin’drink. . .this is the spot to be. Love Street, just seconds away from all the
the place, love the food. CW downtown action.
Brick City Bar & Grille
313 N. Second St., Harrisburg
Phone: 232-2522
Hours: Sun.-Wed—11 a.m.-12 midnight; Thurs.-Sat.—11 a.m.-2 a.m.
Dinner reservations recommended
Lunch specials, daily specials, take out, order to go. Free delivery to
Downtown area.
Catering available upon request.

Legislature may
delay requirement
for sprinklers in
new homes
Builders may get a temporary reprieve
from a requirement to install sprinklers in
new home construction.
The state House will consider a bill that
would delay the implementation of new
sprinkler requirements for another year.
The bill was recently passed by the Senate.
Builders and fire safety advocacy groups
have clashed over building codes that
require sprinkler systems to be installed in
all new single- and two-family homes.
Home builders say that sprinklers should be
a choice -- not a mandate -- and that sprinkler
systems will add to the cost of a new home
when builders are struggling through the
economic downturn.
Fire safety groups say that sprinklers are
a cost-effective means of saving lives.
Lou Biacchi, executive vice president
of the Pennsylvania Builders Association,
said that the PBA had asked for a delay in
the requirements because of the recession’s
impact on builders and to allow time to find
a balance on the issue.
“What we need to find is a permanent
compromise that makes sense,” he said.
Don Konkle, executive director of the
Pennsylvania Fire and Emergency Services
Institute and former fire chief for the city of
Harrisburg, said he was disappointed by the
bill’s passage in the Senate.
“We think sprinklers are the most cost-
effective way to provide life safety,” he said.
Konkle said sprinklers can put out a fire