Nick DiFrancesco (ND): You are closing in on nearly a decade of service as chairman of the Banking and Insurance Committee. During our last interview in June of 2011, we talked about the national banking crisis and how our state banks were a bit more resilient than those from other states. While economic challenges did not impact our state charters, the subsequent regulatory environment appears to be having a dramatic impact. Are you concerned about the current M&A environment and what it may mean to rural Pennsylvania?
Senator Don White (DW): This is something that hits close to home for me. My district encompasses many rural areas of Pennsylvania and I have several community banks headquartered within a few blocks of my district office. Community banks provide a valuable service to my constituents and small businesses all across the district. While I understand the goal of consolidating community banks is to create stronger, more efficient banks, my concern is that the increase in mergers and acquisitions could lead to far less borrowing opportunities for small businesses, which are vital to the local economies of my district.
ND: As chairman you provided critical leadership to the effort to modernize Pennsylvania’s banking code. Looking forward, what are the key policy objectives you would like to accomplish over the next three years?
DW: An issue of increasing importance has been taxing parity between credit unions and banks. This has become especially significant in light of the issues surrounding the bank shares tax. Frankly, I find it to be unfair that credit unions, which currently operate very much like banks, are not subject to the same taxes as other financial institutions.
Another issue I have supported for many years is establishing some type of short-term lending program in Pennsylvania. There have been several attempts during my time as Chairman of the Banking and Insurance Committee, but it always gets branded “payday lending” and never gets off the ground. I believe that there is truly a need and a legitimate market for a reasonable short term lending product that prohibits predatory lending practices that does not trap consumers in never ending cycle of debt. It may be the only chance some Pennsylvanians have to obtain and build credit.
ND: It is mid-October and Pennsylvania is still without a budget. What are your biggest concerns about the impasse? What needs to happen to bring the two sides together?
DW: My biggest concerns are the schools, human services and college students that are being caught in the middle of this debate. These groups are being held hostage, while the Governor demands higher taxes. The Legislature has passed a balanced budget as well as an emergency funding stop-gap budget to restore funding to these vital groups. However, Governor Wolf vetoed them both.
ND: The Governor is proposing increases in the bank shares tax, the personal income tax and our states natural gas severance tax. His public reason is to funnel more money to education. What concerns do you have regarding the Governor’s proposal?
DW: I was the prime sponsor of the goodwill exemption for the bank shares tax several years ago and it is important to me that it remains intact in any bank shares tax proposal moving forward. I believe that the Governor’s proposal is a punitive measure on banks statewide and will have a profoundly negative impact on the banks in my district.
I am disappointed in the Governor’s decision to target natural gas companies, which have become a major economic driver for the state. The Governor has touted this tax as a way to fund education, but I believe any benefits will be offset by the increased cost families and employers face to heat their homes and businesses. Furthermore, it is important to note that the natural gas industry has paid over $600 million in impact fees since 2013 and the majority of that revenue returns to areas that are affected by the drilling, where the money belongs. Governor Wolf’s plan, on the other hand, would send the money to Harrisburg.
Finally, Governor Wolf has proposed a plan to increase the personal income tax, sales and use tax (and add new taxable items) in exchange for property tax reductions and more funding for education. This would translate into $12 billion in increased taxes over the next two fiscal years – about $1000 for every man, woman and child in the Commonwealth. I have no doubt these massive increases would take money away from working families by shifting a higher burden to other taxes, cutting take-home pay and costing citizens more when they shop. In the end, people will pay more in taxes with no real protection against future tax increases.
ND: Looking beyond the budget process and the Banking and Insurance Committee, what are the biggest policy priorities of the Senate (Liquor Privatization, Pension Reform, etc)?
DW: The pension reform issue is one of great importance to me. It has been researched and debated over several years through many hearings in the General Assembly. While there are differing opinions on how to address pension reform, the crux of the issue remains the same. The pension systems for Pennsylvania public school and state employees (PSERS and SERS) are unsustainable in the current form. This year alone, we face nearly a $1 billion increase in our pension contribution—of which school districts must directly pay $271 million.
Pennsylvania’s pension obligation payments are the driving forces behind the massive tax increases Governor Wolf has proposed for the 2015-16 state budget and continuous increase in property taxes enacted by school districts. Every dollar spent on pensions is a dollar that cannot be spent by school districts or the Commonwealth to hire employees, pay reasonable salaries and benefits to workers—or to ensure essential government services are provided. As a result, I believe when it comes to the limited resources of our schools and state government, this truly is an ‘either or proposition,’ and that fact must be recognized.
Senate Bill 1, which passed the General Assembly with my support, was the first major step in stabilizing and sustaining the costs of the pension systems. Without restructuring the current system these costs will continue to grow every year, further increasing the already substantial burden on taxpayers. Instead, this bill provided public employees with new choices in benefits by making the enhancements from Act 9 (in 2001) an option going forward. Most importantly, it did not reduce in any manner or make changes to benefits already earned by existing state employees or retirees. Senate Bill 1 did move future school and state employees—as well as lawmakers and judges—to a 401(k)-type retirement plan. Moving elected officials and judges to a 401(k)-type system is also included in legislation I introduced and supported in the past, as I believe it is important to set an example for future public employees.
ND: With regards to competing in the global economy would you say Pennsylvania is on the right or wrong track? Why?
DW: Pennsylvania has an incredible resource in the natural gas that is right under our feet. We must continue to find newer, more efficient ways to get this gas to market unfettered by burdensome governmental regulations. There is no reason Pennsylvania, with its abundance of natural resources, should not be a leader in energy in the global economy.
ND: When it comes to attracting and retaining the best and brightest of the millennial generation would you say Pennsylvania is on the right or wrong track? Why?
DW: Attracting young people to stay in Pennsylvania is one of the major reasons I first ran for office 15 years ago. After my daughter graduated college, she decided to pursue of career in the medical field. I was very proud of her and asked that upon graduating from medical school if she would consider coming back to Indiana County. When her response was, “Why would I want to do that?” I realized things needed to change. Pennsylvania has some of the best colleges and universities in the country that attract people from all over the world. We must do better to incentivize these young, capable individuals to stay in this commonwealth.
ND: You have been a passionate advocate for small business for more than a decade. While much of this interview is focused on our challenges, let’s end with what you find great about our Commonwealth. What is it that you love most about Pennsylvania?
DW: The people. Their natural work ethic and down to earth personality is what I love most. I also love this great Commonwealth’s natural resources. As an avid sportsman, I enjoy Pennsylvania’s rivers, lakes and mountains and appreciate their natural beauty.
This article can be found featured in the November 2015 issue of Transactions. Not a subscriber? Visit the Transactions page on this website or call PACB at 717-231-7447 to start receiving the magazine.