Pennsylvania continues to lose ground in the economic competitiveness race, raising the stakes even higher for the outcome of the upcoming debate over the 2010-11 state budget.

According to the 2010 ALEC-Laffer State Economic Competitiveness Index, Pennsylvania ranked 46 th for economic performance (no change from 2009) and 43 rd for economic outlook (a one position drop from last year). Since 2008, the Commonwealth has dropped seven positions in the economic outlook category.

The annual study examines 15 policy variables that have a proven impact on the migration of capital – both investment and human – into and out of states. The state rankings are an equally weighted combination of these variables, and each of the factors is influenced directly by state lawmakers through the legislative process.

Pennsylvania ranked near the back of the pack in most of the 15 variables. The state received its lowest marks for its top marginal corporate income tax rate; recently legislated tax changes; debt service as a share of tax revenue; and for not being a right-to-work state.

The PA Chamber is asking state lawmakers to make economic growth and job creation a priority in the upcoming state budget debate. Chamber members are urging lawmakers to reduce government spending; resist placing additional tax burdens on job creators; and make sure that cost-control measures are part of the solutions to the fiscal challenges facing the Commonwealth. Specifically, the looming public pension crisis and the solvency concerns facing the state’s UC Trust Fund (which is broke and operating with billions of dollars borrowed from the federal government) are two areas in which elected officials must do more than merely throw money at the problems.

The authors of the competitiveness index stressed the importance of controlled government spending in the study’s conclusion: “When government expenditures grow beyond the private sector’s ability to pay for them, economic growth suffers. Put simply, growth in government crowds out growth in the private sector. Nationwide, the burdens from total federal, state and local government expenditures have risen by more than 5 percent of GDP within the past two years – an extraordinarily high growth rate. These increased government expenditures will reduce private-sector growth and increase overall unemployment throughout the United States.”

“The competitiveness study should be an eye-opener for policymakers,” said Gene Barr, PA Chamber vice president of government and public affairs. “It demonstrates that Pennsylvania has a long way to go not only in terms of realizing full economic recovery from the recession, but in improving its competitive standing among the states.”

PA Chamber members recognize the tremendous challenges ahead in the effort to restore the Commonwealth to fiscal and economic health. They are prepared to roll up their collective sleeves and work with state lawmakers to do what is needed to move Pennsylvania forward and ensure a prosperous private sector.

2010 ALEC-LAFFER State Economic Competitiveness Index 10 best states:
Utah, Colorado, Arizona, South Dakota, Florida, Wyoming, Idaho, Virginia, Georgia and Tennessee

2010 ALEC-LAFFER State Economic Competitiveness Index 10 worst states:
Oregon, Ohio, Pennsylvania, Maine, Rhode Island, California, Illinois, New Jersey, Vermont and New York

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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state’s largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of Business.