Strong Revenue Collections Set Positive Tone for 2019-20 Budget Negotiations

From PA Chamber of Business & Industry

The 2018-19 fiscal year is rapidly coming to a close. With four weeks to go before the June 30 Constitutional budget deadline, legislative leaders and the Wolf administration continue to emphasize finding common ground on the spending plan for the upcoming fiscal year, with both sides of the aisle expressing optimism that a final agreement will be reached on or before the constitutional deadline of June 30.

Compared to previous years, current budget negotiations have been relatively smooth, mostly due to several months of larger than anticipated revenue collections. In a revenue update briefing at the end of May, the state’s Independent Fiscal Office estimated that the Commonwealth will collect more than $860 million in revenue above what was originally projected. This increase in revenue is largely thanks to the corporate tax and sales tax, both of which have performed well throughout the year. (It’s important to note that much of the unexpected revenue has already been spent via a $500 supplemental appropriation request from Gov. Wolf to cover Medicaid costs and $200 million related to a proposed fund transfer that has been denied by the courts).

This positive fiscal news is being touted by both the governor and legislative leaders. The parties at the negotiating table seem to be in agreement that any additional revenue should go to the state’s Rainy Day Fund to help Pennsylvania withstand any future economic downturns. This pragmatic approach falls in line with warnings from the IFO that while the state is projected to see further growth in real GDP, jobs and private sector profits in the coming year, the Commonwealth is unlikely to see significant revenue surpluses as was the case this year. The PA Chamber is advocating for elected officials to enact pro-growth policies that will help to build upon this positive momentum and put the Commonwealth on a firmer fiscal footing. We are strongly urging lawmakers to take a page out of the federal government’s handbook and bring some much needed reforms and clarity to the state’s Tax Code, as well as supporting changes to the Commonwealth’s regulatory and legal climates. As elected officials discuss the state’s long-term fiscal outlook, we are reminding them that a thriving private sector is the driving force of a strong economy.

We are also continuing to monitor proposals that would impose a mandated wage hike on employers. We have cautioned lawmakers that numerous studies have found that such policies lead to a negative impact on jobs and that small businesses face the biggest hurdles when complying with government mandated wage increases. According to a recent IFO analysis, increasing the minimum wage to $12 an hour – as has been pushed by Gov. Wolf and certain elected officials – could lead to the loss of 34,000 jobs throughout the state.

With legislators scheduled to return to session this week, the timing is perfect for the 2019 Chamber Day at the Capitol, which took place June 4. We are proud to have joined our partners at the Pennsylvania Association of Chamber Professionals to host this annual event, which featured a dynamic day of thoughtful discussion with more than 90 state and local chamber representatives from around the Commonwealth. The program featured several panel discussions focusing on a wide range of topics, including workforce development; transportation and infrastructure in the Commonwealth; and community revitalization; as well as a budget update from the four appropriations chairs and a keynote lunch address by state Treasurer Joe Torsella.