Chamber Minute

July 2017

Hi, I’m Gene Barr, president of the Pennsylvania Chamber.

Welcome to this month’s Pennsylvania Chamber Minute.

Governor Tom Wolf let a nearly $32 billion budget become law without his signature on July 10. But legislative leaders and the administration continue to debate on how to pay for it, which means reaching consensus on how to close a $1.5 billion deficit and come up with $700 million in new revenues for the Fiscal Year that started July 1. Democrats are calling for tax increases as the best way to balance the budget, including a severance tax that the Pennsylvania Chamber is leading a coalition in the fight against. Meanwhile, Republicans are looking to raise new revenues through a combination of borrowing, gaming expansion and allowing beer distributors to sell wine and spirits.

The question over the constitutionality of enacting a budget without having the revenue to pay for it has been up for debate - the governor did the same thing last year; and the year before, a historic nine-month budget impasse marked his administration’s first year in office. So, the main question on everyone’s minds has now shifted to - why does this keep happening in the first place? The answer is largely tied to cost-drivers. A new study by the Mercatus Center at George Mason University ranked the Commonwealth a dismal 45th among the states in terms of its fiscal condition – a significant drop over last year, and largely attributed to Pennsylvania’s key budgetary obligations, like pensions and healthcare benefits. While we applauded the enactment of Act 5, which took a major step toward right-sizing the state’s out-of-control pension systems, there remains an up to $74 billion unfunded liability that the new law doesn’t work toward paying down. Also, while there remain several unanswered questions about the future of our nation’s healthcare system, the reality is that rising costs associated with Medicaid expansion under the Affordable Care Act are unsustainable – and we’re glad to see Senator Toomey focusing on that question of sustainability.

These fiscal challenges face us at the same time that Pennsylvania is experiencing a host of other economic problems. Lower than expected revenue returns was a recurring theme last year, and has been for several years since. Our job growth has lagged well behind the nation, with U.S. News and World Report placing us 39th among the states in terms of overall economy. And our shrinking population and rising senior demographic is also cause for concern, as not enough residents of working age are staying in the Commonwealth to keep the economy churning. That is why our organization is working with lawmakers to improve our regulatory and tax climate and attract investment while at the same time, advocating for legislation to address the cost-drivers that, if left unattended, could have disastrous consequences for Pennsylvania’s economic future.

Thanks for spending a minute of your time with the Pennsylvania Chamber, the Statewide Voice of Business.