COVID-19 Related Business Closures and RGGI Hot Topics at House Budget Hearings

Business closure orders put in place by the Wolf administration last year in response to the COVID-19 pandemic were a hot topic of discussion during the second week of House Appropriations Committee budget hearings.

During a hearing with the Department of Community and Economic Development, DCED Secretary Dennis Davin said he takes “full ownership” of the decisions made to close businesses last spring, recognizing that they were made when there was limited knowledge of what was then a novel coronavirus. According to a story in Capitolwire, Davin claimed there was “ample communication” with affected industries, but it became clearer throughout the questioning by lawmakers that the communication occurred after the closures were announced. Also discussed was feedback received from employers about the administration’s waiver process that allowed certain businesses to remain open as “life-sustaining” while others were forced to shutter. Davin said he believes that the business closure and waiver process provided businesses with the clarity they needed, and refused to acknowledge the findings of a report by then-Auditor General Eugene DePasqaule that found significant flaws with the waiver process.

Davin said his department is awaiting a final report, which will include all of the agency’s responses to the questions and concerns raised by auditors.

Davin also defended the governor’s proposals to increase the Personal Income Tax by nearly 50 percent on many Pennsylvania taxpayers and businesses, along with a $15 minimum wage increase proposal and a natural gas industry severance tax to pay for higher state spending. Davin argued that these measures will attract more businesses to the state by creating a “fairer and better” business climate – an argument that committee Chairman Stan Saylor, R-York, decried. “Raising taxes on Pennsylvanians, raising taxes on small businesses is not going to help Pennsylvania to recover,” Saylor said, citing high-tax states like California, New York and New Jersey leading to an exodus of residents. “These high taxes that are being proposed by this governor will only drive more young people out of here because there will be no businesses being created,” Saylor said.

At a hearing with the state Department of Environmental Protection, a heavy focus was placed on Pennsylvania’s potential participation in the Regional Greenhouse Gas Initiative, a market-based greenhouse gas reduction program involving 10 Northeast and Mid-Atlantic states. Last year, legislation that would have required the General Assembly to sign-off on the state joining RGGI was vetoed by the governor. The week before last, the state Independent Regulatory Review Commission issued a report recommending that the regulation be delayed for one year and subjected to legislative review, saying “We believe the committee action and concerns, the issues raised by members of the General Assembly, the legislative action from the last session of the General Assembly, the lack of consensus from three EQB advisory panels and the manner in which other states have joined RGGI clearly indicate that this regulation falls within the scope of that criterion.”

Some lawmakers expressed concerns about the impact of RGGI on the state budget. According to a Pennsylvania Legislative Services report of the hearing, Rep. Jim Struzzi, R-Indiana, asserted that the carbon tax under RGGI would amount to the loss of “thousands of jobs” and “millions if not billions” of dollars for the Commonwealth. He also referenced the IRRC report and asked if the administration still intends to proceed with Pennsylvania joining RGGI. DEP Secretary Patrick McDonnell said the agency received the IRRC letter last week and is evaluating comments for response, but added that DEP also received other comments that reached the opposite conclusion. Sec. McDonnell continued that modeling shows “RGGI is a net positive on jobs,” and claimed that “rates stay relatively the same in terms of electricity rates because of the investment back into the grid.” Rep. Struzzi disagreed and said his district would experience job loss if the state joins RGGI. Sec. McDonnell also admitted that Pennsylvania’s entry into RGGI could be delayed by legal challenges if it’s done by executive authority without legislative input.

Another interesting exchange that took place in regard to RGGI was between Rep. Clint Owlett, R-Tioga, and Sec. McDonnell. Rep. Owlett raised the prospect of what might happen if Pennsylvania enters RGGI under Gov. Wolf, but a future governor wants to leave the initiative. He pointed out that this would bring instability and an unpredictable nature to doing business in the Commonwealth, which could result in lost investment to the state. Rep. Owlett asserted that the alternative of entering into RGGI through the legislative process would create a more stable market for business development.


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