Media Tags: Government Affairs

State budget negotiations remained stalled in Harrisburg last week as the House and Senate stand in recess and are not scheduled to reconvene until September. On the other hand, Senate President Pro Tempore Kim Ward (R-Westmoreland) offered a glimmer of hope, telling ABC 27 news on Friday, “I’m sure at some point in August we’ll be able to get the general appropriations signed…”

Of course, the House and Senate must still reach an agreement on various code bills that are passed in conjunction with the budget and dictate how funding is allocated. Additionally, other budget-related bills (like funding for state-related universities) remain unresolved at this time.

Further complicating the resolution to this year’s budget standoff is the resignation of Democratic State Rep. Sara Innamorato (D-Pittsburgh), who announced Wednesday that she would step down to focus on her campaign for Allegheny County Executive.

Innamorato’s departure leaves the partisan makeup of the House in a 101-101 tie, ostensibly stripping House Democrats of their status as the majority party. However, the rules package adopted in March included a provision enabling the caucus to retain its majority powers in the event of a vacancy until a special election has been conducted. A special election for Innamorato’s seat has been scheduled for Tuesday, Sept. 19, one week before the House returns to legislative session.

In a press conference on Thursday, House Republican Appropriations Chairman Seth Grove (R-York) said that Innamorato’s resignation, paired with the ongoing budgetary gridlock, means that any substantial movement on the budget agreement will likely be delayed until at least October.

Need a refresher on what was included in this year’s budget bill? Click here to read the PA Chamber’s 2023-24 State Budget Rundown.

Last Thursday, PA Chamber Vice President of Government Affairs Alex Halper testified during a hearing of the Pennsylvania House Finance Committee, urging lawmakers to enact crucial business tax reforms. Halper’s testimony shed light on Pennsylvania’s significant challenges in competing with other states to attract and retain employers, emphasizing the need for pro-growth reforms to reverse this trend. 

Set against the backdrop of ongoing state budget negotiations, Halper cited a recent report from the U.S. Department of Labor ranking Pennsylvania as the fifth worst state in the country in terms of net firm migration. Halper touched on employers moving out of the state and said these factors indicate a bleak economic future for Pennsylvania unless immediate action is taken to improve the state’s business climate, including tax policy: “This is a disturbing trend that has long-term implications and must be addressed,” he testified. 

During the hearing, Halper shared the business community’s perspective on two proposals, House Bill 1482 and House Bill 1483, aimed at accelerating the corporate net income (CNI) tax rate reduction and increasing the cap on net operating loss (NOL) deductions, respectively. 

Halper commended the bipartisan efforts that led to significant tax reform in Act 53 last year. “These measures will make our state more competitive, incentivizing investment and job growth, and create additional economic opportunities in the Keystone State,” he said.  

Halper reported that nine other states have passed further reductions in their corporate tax rates since 2021 and counseled lawmakers to consider these developments in determinations about accelerating the phasedown of Pennsylvania’s CNI rate. “We are in perpetual competition with other states, who we know are moving forward on pro-business reforms as well.” Halper also emphasized Governor Josh Shapiro’s stated support for accelerating the reduction of Pennsylvania’s CNI rate faster than Act 53’s plan. 

Halper also addressed House Bill 1483, emphasizing the need to rectify Pennsylvania’s treatment of net operating loss deductions or, as he described, a “harmful tax on business start-ups.” He noted, “Pennsylvania is an extreme outlier when it comes to the treatment of net operating losses. We are currently one of only two states that cap NOL deductions below the federal limit of 80 percent of taxable income.”  

Halper highlighted the impact on start-up firms and businesses in cyclical industries, stating, “Fixing this flaw will promote future growth, provide more stability as businesses make long-term investment and hiring decisions, and make Pennsylvania more attractive to employers and entrepreneurs.” 

While these tax reform measures are being discussed amidst ongoing state budget negotiations, their fate in the final agreement remains to be determined. Halper’s testimony emphasized their significance for Pennsylvania’s economic future, urging lawmakers to build on bipartisan efforts and prioritize pro-growth initiatives. He highlighted the wide-reaching benefits of these reforms, such as incentivizing investment, stimulating job growth, and improving Pennsylvania’s overall competitiveness. 

As budget negotiations continue, the Pennsylvania Chamber of Business and Industry remains committed to advocating for their inclusion in the final agreement. These twin measures would significantly enhance Pennsylvania’s tax climate, make the Commonwealth more attractive for businesses, and better position the state for long-term economic growth. 

Halper’s full written testimony is available here. 

The Pennsylvania House and Senate return to legislative session this week. The PA Chamber is monitoring the following legislation with the potential to impact the state’s business community.

Senate Bill 346 (Net Operating Losses)

Would improve Pennsylvania’s treatment of Net Operating Losses (NOLs) by increasing the current 40 percent cap on NOL deductions to 50 percent in 2024, 60 percent in 2025, 70 percent in 2026 and 80 percent in 2027.

House Bill 1500 (Minimum Wage Increase)

Would increase Pennsylvania’s minimum wage incrementally to $15 by 2026, require annual increases thereafter, and set the tipped wage rate at 60 percent of the regular minimum wage.

House Resolution 131 (Legislative Report on Severance Tax Revenues)

Obligates the Legislative Budget and Finance Committee to develop a report examining purported lost revenues to Pennsylvania owing to a lack of a severance tax.

House Bill 1394 (PA Human Relations Act Expansion)

Also known as the CROWN Act, this legislation seeks to expand the definition of “race” in the PA Human Relations Act to include “traits historically associated with race, including hair texture and protective hairstyles.”

Senate Bill 22 (Social Media Access for Minors)

Would require parental consent for children under 16 to use social media and parental notification should any child under 16 open an account. The bill also provides for a private right of action against social media platforms for alleged harms.

Senate Bill 198 (Improving Environmental Permit Appeals)

Would streamline the permit appeals process by limiting appeals, at DEP’s discretion, to only the issues contained in DEP’s record of decision, including issues raised during public comment.

Senate Bill 199 (Confirmation of EHB Renominations)

Would require judges being reappointed to the Environmental Hearing Board, the appeals court for the Department of Environmental Protection, to be confirmed by the Senate.

Senate Bill 286 (Clarity on Spill Reporting Obligations)

Would provide much-needed and long-sought clarity with respect to when a spill is reportable to the Department of Environmental Protection. The legislation directs DEP to initiate a rulemaking establishing reportable limits.

Senate Bill TBD (Carbon Capture Deployment)

This legislation provides a pathway to the increased deployment of carbon capture technology in Pennsylvania by establishing a regulatory framework for its use. The bill will clarify ownership of the subsurface geology where the CO2 will be stored or disposed of, establishes liability obligations for CCUS projects, and authorizes a fee for the purposes of administering the state’s oversight of these projects.