Friday, June 24, 2005

Inquirer: Republicans Eying PGW

The Philadelphia Inquirer has an important scoop this morning. Republicans in Harrisburg are planning to put forth a bill that would put the Philadelphia Gas Works under state control. PGW is a debt-ridden city agency that has been the center of controversy in recent years. The state would issue a bond to pay off the $1 billion in debt PGW has accumulated. Then, the agency would be privatized.

I'll let Councilman David Cohen and Michael Nutter debate the bill.
City Councilman Michael A. Nutter, chairman of the transportation and utility committee, said he "eagerly awaits" details of the proposal.

"Clearly there needs to be a solution to PGW's financial and operational crisis," Nutter said. "I would like to see how a new gas entity would be structured to address service to low- and middle-income users and seniors, how it can be cost-competitive and reduce overall utility costs."

Nutter said city officials have been discussing a sale of PGW for a decade but knew that, with its debt load, it would be unattractive to a private utility.

But Councilman David Cohen said he was concerned that a bottom-line-oriented private utility would be quicker to turn off heat for those who couldn't afford it.

"This would destroy the very purpose of PGW as a public service," he said. "It would be much better if they devised a system of healthy payments to Philadelphia so that more of its citizens could get heat."
I think PGW has been lax in previous years with debt collection and certainly could have been better about making customers pay their bills. At the same time, this is a public utility. I am deeply concerned that a essential service like heat could be turned over to a complain for private profit. The goal of an institution like the Philadelphia Gas Works shouldn't be to turn a profit. The purpose of this utility is to provide heat and power to all of our citizens. That won't be the goal of any company that decides to buy PGW. They'll be interested in making a few bucks and I think that shouldn't be mixed with such essential services.

Of course, that doesn't even begin to address the question of what happens to the PGW employees. They are currently city workers and almost all unionized. They enjoy decent pay, healthcare and other benefits. privatization would jeopardize all of that. Does the de-unionization of city workers impact everyone? You bet. High union density in an economy is one of the best indicators for high wages and benefits across numerous industries. Period.


At 11:08 AM, Blogger Friedman said...

"High union density in an economy is one of the best indicators for high wages and benefits across numerous industries. Period." Ben - do you have any studies or evidence to back this claim up? Many economies of right-to-work states are booming with high-paying jobs.

At 11:19 AM, Blogger Ben Waxman said...

Huh? What right-to-work states have good jobs with high wages? Alabama? Arkansas? Maybe a few of the Sunbelt states like Arizona are experiacing some economic growth...but overall, real wages have drasticly declined in the last 30 years. This has been clearly connected to the decline in the unionization of the workforce.

Check out European living terms of avg. life span, healthcare, quality of life, etc vs the US. They are kicking our asses and it's mostly due to the high percentage of unionization among the workforce.

At 11:40 AM, Blogger Friedman said...

Ben - "huh" right back at you. I was wondering if you had any emprical evidence to support your assertion.

At 11:52 AM, Blogger Friedman said...

Some info from the Dept. of Labor:

The 21 Right to Work states have had lower unemployment rates than the non-Right to Work states in every year but four since 1978.

Since 1977, the Right to Work states have created non-farm jobs at a pace twice that of the non-Right to Work states.

In the heavily-unionized construction industry, Right to Work states have created jobs at a rate almost one-third greater than the non-Right to Work states since 1977.

In the manufacturing sector, the Right to Work states have gained over 800,000 jobs since 1977 while the compulsory unionism states lost almost 2 million jobs.

At 1:09 PM, Blogger Pat Evans/Butcher/Wicks said...

Friedman, it would be interesting to see you cover some these topics on your own blog, as you could go into more depth than you mange in your frequent YPP comments.

A short reply to the points raised by Friedman above:

Citing examples of quantitative job growth (i.e. the number of jobs created in so-called right-to-work states as opposed to those with higher union density) is misleading as a more important indicator of relative economic strength is found in the quality (wages, benefits, longevity) of jobs. Qualitatively, jobs in states where workers have the right to form unions (as opposed to so-called, oxymoronic right-to-work states where legislatures have banned the rights of workers to form unions) have a better paid and more stable workforce. In fact, according to the US Bureau of Labor Statistics in 2001, the average worker in a “right to work” state earns about $5,333 less a year than workers in other states.

Steve Herzenberg, a Pennsylvania-based economist trained at MIT and Director of the Keystone Research Center in Harrisburg is an excellent source for more information on this topic. You can view his website at or view this review of his book, “New Rules for a New Economy” here:
The DC-based Economic Policy Institute also says that: “Strong unions set a pay standard that nonunion employers follow. For example, a high school graduate whose workplace is not unionized but whose industry is 25% unionized is paid 5% more than similar workers in less unionized industries. The impact of unions on total nonunion wages is almost as large as the impact on total union wages.” You can read more here:
However, Ben’s original point was to ask if John Perzel and his Republican cronies should be allowed to take over the Philadelphia Gas Works which employs thousands of workers.
Remember, Perzel already has a significant role in the control of the Pennsylvania Convention Center (which is central to the city’s gigantic hospitality industry) board, outright control of the Philadelphia Parking Authority, mega-influence over the School Reform Commission which is the City’s third-largest employer (led by a board of 3 Dems and 3 Republicans in a city where 75% of registered voters are Democrats).
Not only would a Republican take-over of the PGW mean a huge threat to the job quality for PGW workers, but it means that the state’s most powerful Republican would have an even larger leadership in a city that is supposed to be majority Democratic.
Remember this is the same Perzel who can’t understand why the School District’s 2/3 majority African-American student body might benefit from an African AND African-American history class.
Clearly, we must stop the PGW takeover and we must stop Perzel from broadening his base of power in any way that we can.

At 1:45 PM, Blogger Friedman said...

Income in Right-to-Work States:

Since 1977, personal income in Right to Work states has grown almost 25% faster in the Right to Work states than in the non-Right to Work states.

Hourly earnings of manufacturing employees increased 13.5% more in the Right to Work states from 1977-1996 than in the non-Right to Work states.

The typical urban family in a Right to Work states has $2,852 more in after-tax purchasing power than the same family would in a non-Right to Work state.

At 1:56 PM, Blogger Pat Evans/Butcher/Wicks said...

Friedman, a source or cite would be helpful. Also, citing personal income is not useful for comparing WAGES from state to state.

However, more importantly, since making Pennsylvania a so-called right-to-work state is not even on the table right now, what do other readers think of Republican plans to takeover another city agency and increase their political power in Philadelphia?

At 8:31 PM, Blogger Friedman said...

Ray - a cite for everything you post would be great as well. I got the stuff from the Dept. of Labor. I don't see a significant difference between wages and personal income, what do you mean. I'm not that familiar with labor law, but I think that right-to-work states don't ban unions, they just allow employees who work for union shops to opt out of the union, something they're typically not allowed to do in non right-to-work states. And back to Waxman's original point, I am more concerned that quasi-governmental agencies operating in Philadelphia deliver services effectively and efficiently than which political party runs them. I'm not sure about the Parking Authority yet, but the "republican controlled" School District is developing a reputation as one of the most innovative and progressive districts in the nation, and things seem to be running better at the convention cetner as well. Hey, I'm a Democrat and always hope that our team does well, but in the end I'm more concerned about the well-being of the City and its long-term prosperity.

At 11:09 PM, Blogger Dan_Is_a_Troll said...

I tend to agree with Friedman. Those disagreeing need to travel more. Philadelphis is middle class and our standard of living is way below that of living standards for the middle class in a red state like Arkansas or Alabama. They get more for less. The only difference is location. That's what we pay for here in Philadelphia.

It doesn't always have to be Democrat vs Republican, and if you know anything about Philadelphia politics it's usually Democrat vs. Democrat. What matters is the best policy, like Friedman said essentially.

Maybe we should discuss the history of PGW to solve the problem. From the City, "In 1972, Rizzo arranged to take over the privately managed PGW, despite the fact that for the previous 75 years the American Gas Association had held it up as a model, with some of the lowest rates in the country and almost no debt or delinquent accounts. Justified on the grounds that the city would save money by eliminating management fees, the takeover in reality offered irresistible patronage opportunities. Rizzo turned the outfit into an arm of his political operation, putting 32 ex-cops on the payroll among many other political hires. Since then, according to the Inquirer, PGW has continued to "provide . . . jobs for the well-connected, pinstripe patronage for campaign contributors, special handling for influential customers, across-the-board discounts for the elderly—regardless of need—and costly bill-paying assistance for the poor." Debt and delinquent accounts have ballooned. Prices—and complaints—have risen to the highest in the region. When economic journalist Andy Cassell recently confronted a top PGW official with the accusation of running a patronage pit, he "bristled indignantly; only a third of the gas-works employees," he protested, "were straight patronage hires."

To pay the fat and happy municipal workforce, mayors kept rejiggering the fiscal calendar and rattling the tin cup in Washington, making Philadelphia increasingly dependent on federal money. But the principal method of financing expenditures was to increase taxes."

At 9:51 AM, Blogger Dumplingeater said...

Dan (is a troll), in case you might still read this thread.

Your comment is useful to the debate. The history of PGW helps to explain why we have what we have. But are you saying that you feel that privatization is the answer? Surely, there are many horror stories about privately run utlities. Why isn't the answer to have a better run public utility?


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