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Analysis of Pennsylvania's revenues points to need to cut regulations, policy organization says

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Some time in the coming week, Pennsylvania lawmakers should put the finishing touches on a state budget for the fiscal year that runs from July 1, 2019, to June 30, 2020.

With the current fiscal year coming to a close, the Allegheny Institute, a Pittsburgh-based public policy organization, looked at some of the state revenue trends from the expiring current budget as a way to inform discussion of the next one.

The authors of the analysis, Executive Director Frank Gamrat and research assistant Hannah Bowser, found that the much-touted budget surplus seen this year was largely driven by unexpectedly strong sales tax and corporate tax receipts. Income tax was up from the prior year as well, but that rise had been expected and was taken into account by the budget.

At the same time, however, growth in employment has lagged behind the rest of the United States, pointing to continuing structural weakness in the Pennsylvania economy compared to the nation.

“In April 2019 the number of total nonfarm jobs (from the employer payroll survey) in Pennsylvania reached 6.062 million which is the fourth-highest monthly total since 2000 behind October (6.087 million), November (6.085 million) and December (6.075 million) of 2018,” Gamrat and Bowser wrote. “However, it represents only a 0.89 percent growth rate over the April 2018 reading (6.008 million). By contrast the growth at the national level was nearly double at 1.7 percent.”

The analysis pointed to the manufacturing sector as the main source of the discrepancy. Pennsylvania went from 862,100 manufacturing jobs in 2000, down to just 557,200 in 2010, and back up to 564,100 in April of this year. But that growth in the past nine years, at a mere 1.2 percent rate, pales in comparison to the 11.9 percent rise seen in the rest of the country.

“In April 2000 there were 17.25 million manufacturing jobs [in the U.S.] before plunging to 11.43 million in April 2010,” they wrote. “By April 2019 that number has risen to 12.78 million – 11.9 percent above the trough in the recession of 2010 and 1.6 percent higher than April 2018.”

One sector where Pennsylvania’s employment rate change does outstrip the U.S. is in social assistance jobs, Gamrat and Bowser said. That segment has seen 42.2 percent growth in Pennsylvania in the past nine years, compared to 32 percent for the national as a whole.

“While growth in any job sector is welcome these are typically not high-paying jobs that are likely to prop up the general fund revenues for any state,” the authors wrote.

Ultimately, the report’s authors laid the blame for Pennsylvania’s economic growth being weaker than it seems like it should be at the feet of state government.

“The recent strong growth to tax revenues, corporate net income, personal income and sales and use taxes, shows that the Pennsylvania economy has picked up steam,” they wrote. “However, it is growth that is likely the result of a faster paced national economy. Pennsylvania is still bogged down by anti-business policies and regulations that keep it from reaching its potential.”

The Allegheny Institute’s findings match up with recent efforts by the Pennsylvania’s chapter of Americans for Prosperity, which is throwing its weight behind the bipartisan House Bill 995. That piece of legislation, also known as the Fighting Chance Act, would initiate a review of state regulations with a goal of reducing them by 25 percent.

“We need to come together to ease the regulatory burden on Pennsylvanians, level the playing field so that everyone has the same shot at success, and create new opportunities for folks to improve their livelihoods,” AFP-PA State Director Ashley Klingensmith said in a statement this week. “The Fighting Chance Act is a key step toward unleashing Pennsylvanians’ potential and we just can’t pass it up.”

published here with permission of | June 29, 2019