Financial Crisis

Third and State Recap: State Budget News, Payday Lending, Pensionomics, Education Funding & More

Over the past two weeks at Third and State, we blogged about the latest on the state budget and education funding, May's revenue report, and why policymakers must prioritize investments in Pennsylvania's future over new tax cuts. We also wrote about how public pensions inject millions into local economies and why payday lending, by any name, is still a debt trap.

IN CASE YOU MISSED IT:

  • On state budget and taxes, Sharon Ward blogged about the state House Republicans' 2013-14 budget plan and shared a video of her appearance this week on the Pennsylvania Cable Network where she made the case for closing tax loopholes, delaying new tax cuts, and restoring funding to schools and human services in the next budget. Kate Atkins blogged about school district and county officials from across the state who came to Harrisburg this week with a message for state lawmakers: prioritize investments in our schools, county health services, and infrastructure over new tax cuts. And Michael Wood wrote that while General Fund revenues are ahead of estimates in May, this year’s revenue surplus is unlikely to reach the $232 million forecasted back in February.
  • On public pensions, Stephen Herzenberg blogged about a Keystone Research Center report showing that pension benefits earned by retired teachers, first responders and public health workers inject millions of dollars into regional and local economies across Pennsylvania.
  • On payday lending, Mark Price wrote about Senate legislation that would legalize predatory payday loans with annual interest rates above 300%. Payday loans are described in the bill as "micro loans," but as Mark writes, payday lending, by any name, takes advantage of people in financial distress.
  • Finally, on education, we posted a video from the Pennsylvania Budget and Policy Center's May 28 webinar laying out the facts on state cuts to education in recent years.

IN OTHER NEWS:

MARK YOUR CALENDAR:

  • Time is running out. Join the Keystone Research Center and Pennsylvania Budget and Policy Center on Thursday, June 13 for our Annual Awards Dinner at the Hilton Harrisburg. Learn more and purchase tickets.
  • Join the Pennsylvania Budget and Policy Center on Tuesday, June 18 from 4 to 5 p.m. for a webinar highlighting the latest on the 2013-14 state budget. Learn more and register to participate.

By Any Name, Predatory Payday Lending Is Still a Debt Trap

Stop Payday Loans in Pa.It’s been awhile since I blogged about payday lending, so let’s recap a little bit. 

Payday loans are made in small amounts but come at an extremely high cost, typically carrying annual interest rates of 300% or higher. They are called payday loans because they generally must be paid back in full, with all interest and fees, on the borrower’s next payday. Believe it or not, payday borrowers are twice as likely to file for bankruptcy as applicants whose request for a payday loan was denied by the lender.  

Pennsylvania does not currently have thousands of payday loan storefronts as you will find in states like Florida and Utah because our state law puts a low cap on the interest and fees that payday lenders can charge. Loyal readers will remember that in the last legislative session Rep. Chris Ross of Chester County introduced — and the House passed — legislation to open the door to payday lending in Pennsylvania.  The bill died in the Senate.

Ever since, payday lenders have been lobbying state Senators to reintroduce the bill. Their efforts paid off late Friday afternoon when Senator Pat Browne introduced Senate Bill 975 and hastily scheduled a vote on the bill in the Banking and Insurance Committee today. 

Third and State This Week: General Assistance Ends, Check In on Economy & Grads Face Global Competition for Jobs

This week at Third and State, we blogged about the end of General Assistance in Pennsylvania, the state of the economy, American college graduates facing overseas competition for jobs and much more.

IN CASE YOU MISSED IT:

  • On poverty and the state budget, Sharon Ward shared a clip from her appearance on The War Room with Jennifer Granholm on Current TV discussing the impact of ending Pennsylvania's General Assistance Program. Mark Price also highlighted General Assistance's end, as did guest blogger Liz Schott of the Center on Budget and Policy Priorities.
  • On higher education, Jamar Thrasher wrote about the increased competition faced by American graduates as companies outsource jobs for lower wages and higher revenues.
  • On jobs and the economy, Mark Price shared a New York Times piece discussing the lack of good jobs and its relationship to poverty. Mark weighed in on the Federal Reserve's recent decision to take no steps to boost economic growth, despite high unemployment. And Mark delved deeper into Pennsylvania's jobs report for June.
  • And on fiscal policy, Mark Price blogged about a story on the radio program Marketplace revisiting some of the predictions made a year ago about what would happen as a result of Standard and Poor's downgrade of the U.S. credit rating.

Note: We will have more blog posts next week, but we will not have a weekly roundup on Friday, August 10. We will resume the weekly roundup blog post on Friday, August 17. In the meantime, keep us bookmarked and join the conversation!

Midday Must Reads: College Grads Compete with Outsourcing, Face Debt

Recent college graduates seeking jobs are finding more competition from across the globe. American companies are cutting costs and raising revenues by employing international workers, Nancy Folbre, a University of Massachusetts economics professor, explains at the New York Times' Economix Blog.

High CEO Pay Comes Under Fire from Shareholders

Channeling my inner Mark Price ... without the nice hair!

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

Morning Must Reads: The Inequality Governor Strikes Again

One of the factors driving the increase in inequality prior to 2000 was the growing gap between the wages of colleges graduates and everyone else.

Therefore, a straightforward policy to limit the rise in inequality would open the door to college attendance for the children of low-income adults. However, as the figure to the right illustrates, gifted but low-income children are much less likely to complete college compared to similarly gifted but high-income children. In fact, these gifted, low-income children are as likely to complete college as the least academically gifted, high-income children. 

Third and State This Week: PA Jobs Report, Revenue Outlook and Kids Denied Health Care

This week, we blogged about the state's revenue picture, Pennsylvania's December jobs report, a new report on the cost of interest rate swaps, and the termination of public health insurance for 88,000 Pennsylvania kids.

IN CASE YOU MISSED IT

  • On the state budget and the economy, Michael Wood shared his analysis of the state's revenue picture midway through the 2011-12 Fiscal Year. And Mark Price highlighted some of the key takeaways from a conference hosted this week by the Independent Fiscal Office on Pennsylvania's economic and revenue outlook.
  • On jobs and unemployment, Mark Price provided his analysis of the December Pennsylvania jobs report and what the outlook is for 2012.
  • On financial matters, Sharon Ward blogged about a new report from the Pennsylvania Budget and Policy Center documenting the hundreds of millions of dollars that interest rate swap deals negotiated with Wells Fargo, Morgan Stanley, Goldman Sachs and other banks have cost the City and School District of Philadelphia. Chris Lilienthal highlighted some of the media coverage of the report.
  • On health care, Mark Price shared a report from The Philadelphia Inquirer that Pennsylvania has terminated public health coverage for 88,000 kids since August. Mark also linked to a news report on the resignation of a Pennsylvania Department of Public Welfare adviser.

More blog posts next week. Keep us bookmarked and join the conversation!

Developing Story: Bank Swaps and Philadelphia

As Sharon Ward wrote yesterday, the Pennsylvania Budget and Policy Center put out a new report documenting the millions made by large financial institutions like Wells Fargo, Morgan Stanley and Goldman Sachs off interest rate swaps negotiated with the City and School District of Philadelphia. Those swap deals have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.

Here's a quick look at how the story is being told in the daily news clips.

Bank Swap Deals Cost Philadelphia City, School District

Large financial institutions, including many that received financial bailouts in the wake of the financial crisis, are making hundreds of millions of dollars off interest rate swaps negotiated with the City and School District of Philadelphia.

That's the key finding in a new report the Pennsylvania Budget and Policy Center out today. We found that swap deals negotiated with banks such as Wells Fargo, Morgan Stanley and Goldman Sachs have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.

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