Legislature Sends Another Budget to Gov.’s Desk

From PA Chamber of Business & Industry

With the looming threat of layoffs at hospitals and educational institutions as a result of the budget impasse, the General Assembly attempted yet again last week to resolve unfinished portions of the 2015-16 budget by sending Gov. Tom Wolf a budget bill that would bring total state spending for this fiscal year to $30 billion, without raising taxes. House Bill 1801 passed the House in a 128-63 vote, with 115 Republicans and 13 Democrats voting in the affirmative. The Senate passed the bill in a 31-18 vote along mostly party lines.

House Bill 1801 would result in the state spending 3 percent more than was spent in 2014-15 – about $238 million less than the budget plan that the General Assembly passed in December and Gov. Wolf line-item vetoed. The sentiment among lawmakers who voted “yes” on H.B. 1801 was generally that spending increases that were agreed-to last year can no longer be put in place, as it’s the last quarter of the fiscal year. The new plan sets education funding levels at $5.93 billion – an increase of $203 million over 2014-15 – but still about $175 million less than the governor wants. The budget plan provides for a 5 percent increase in funding for the state’s 18 public universities and the 14 community colleges.

Given that his 2016-17 budget plan relies on more hypothetical revenue from the final 2015-16 spending number, Gov. Wolf not surprisingly announced an intent to veto the legislation. Moments after the Senate passed the bill (with all Republicans and one Democrat supporting it) the governor issued a statement saying that the plan simply doesn’t spend enough: “In its current form, I will veto this budget, and I urge Republicans in the legislature to … negotiate a final budget that funds our schools and eliminates the nearly $2 billion deficit. I look forward to working with both parties in the legislature to finally end this impasse, fix our schools, and eliminate the deficit.”

However, there is a growing possibility that the legislature could have the two-thirds majority needed to override the governor’s veto this time around. According to a story in Pennlive, between 13 and 28 House Democrats crossed the aisle to vote with Republicans on Wednesday to approve the various funding bills. A veto-proof majority would require a minimum of 16 Democratic votes, and GOP leaders have said they will schedule an override vote if the governor vetoes the legislation.

Final Week of Budget Hearings Focus on Pension Debt, Proposed Tax Increases

From PA Chamber of Business & Industry

The House and Senate Appropriations Committees hosted their third and final week of budget hearings last week with the heads of state-run and state-related agencies.

House Appropriations Committee members kicked off last week by meeting with the Public School Employees Retirement Commission and the State Employees Retirement Commission. PSERS Executive Director Glen Grell said the state has finally begun making its full actuarially required payments for PSERS – the first time in 15 years that the Commonwealth is making its full payment. Grell reported that the unfunded liability for PSERS is $37.3 billion; it is $18.8 billion for SERS. This level of unfunded liability is clearly unsustainable, and is a main reason why Pennsylvania has experienced credit rating downgrades in recent years.

Revenue Secretary Eileen McNulty defended the $2.7 billion in tax increases that are included in Gov. Tom Wolf’s 2016-17 budget proposal. Specifically, she told the Senate Appropriations Committee that Pennsylvania is one of only two states that does not tax all tobacco products; and that some businesses may be able to absorb the proposed tax on property and casualty insurance without increasing rates. In terms of the proposed severance tax on natural gas, McNulty said one of the things having the biggest impact on natural gas sales is the ability to get the gas to markets. She anticipated that once pipeline capacity under construction comes online there will be significantly more growth in sales of natural gas. She added that the administration isn’t proposing to change the current impact fee, which would be deducted from the tax and would keep the effective rate of the tax lower. She explained the idea is to keep it a broad based tax that is easily calculated. She said there would not be a deduction for post-production costs. McNulty also opined that Pennsylvania previously went too far in its lowering of the Bank Shares Tax. During the hearing, Sen. Bob Mensch, R-Montgomery, argued the “deficit is outside the budget” and rejected arguments that increasing taxes is the way to balance the budget. McNulty responded some of the trends, such as increasing pension payments and aging demographics, point out the reasons why the Commonwealth needs revenue and must have a revenue structure to meet demands. She further pointed out the governor has offered a proposal that would address rising property taxes.

The defense of the administration’s $33.29 billion budget proposal continued into Thursday, when the House Appropriations Committee held its final day of hearings with the Governor’s Budget Office.

Proposed Minimum Wage Hike Discussed at Budget Hearings

From PA Chamber of Business & Industry

Among the notable budget hearings in Harrisburg last week included the House Appropriations Committee meeting with the Department of Community and Economic Development where Secretary Dennis Davin estimated no jobs would be lost if Pennsylvania raised the minimum wage to $10.10 an hour. According to a Pennsylvania Legislative Services story, Davin said in his experience meeting with companies that pay various levels of compensation, the only effect of a higher minimum wage would be to “raise people out of poverty.” Davin was also asked if any analysis was done on the impact that the proposed retroactive increase to the Personal Income Tax would have on small businesses in the coming year’s budget (Gov. Wolf wants to raise the PIT by 11 percent and make it retroactive to Jan. 1). Davin said Pennsylvania’s PIT is second lowest among those states that have one, and would rise to only the third lowest after the increase. He said he thinks it is competitive and stressed DCED’s job is to look at the whole picture. The minimum wage was a central topic in the Senate Appropriations Committee’s budget hearing with the Department of Labor and Industry. Secretary Kathy Manderino said the Department of Revenue estimates an increase to $10.10 an hour would generate $60 million in sales and income revenue and reduce the number of people in poverty. Sen. Mario Scavello, R-Monroe, doubted these statistics and said the focus should be on creating jobs, which in his region has increased the average wage. Democratic Appropriations Chairman Vince Hughes, D-Philadelphia, said every surrounding state has a higher minimum wage than Pennsylvania and has higher levels of job growth. “I would suggest that we kick start much harder the drive for raising the minimum wage in Pennsylvania,” Hughes said. “Those who are opposed to raising the minimum wage have a philosophy that just wants to keep people in poverty…we’re going to fight and I’m glad this governor has decided to stand up and fight to raise the minimum wage in Pennsylvania.” On Monday, Governor Wolf signed an executive order raising the minimum wage for employees under the governor’s jurisdiction to $10.15 an hour. The order also covers employees of organizations that negotiate state contracts or that lease property to the commonwealth. This provision will take effect when contracts or leases are solicited or bilaterally modified on or after July 1, 2016.

ChamberPack is Headed to Your Mailbox

The March edition of ChamberPack is overflowing with offers from members and information on the Chamber’s schedule of events. The bi-monthly mailing should arrive in your mailbox this week. Look for Chamber information about an opportunity for members to have exclusive savings on Hershey Park admission tickets, the upcoming Business After Hours at Service 1st Federal Credit Union, sponsorship and business registration forms for the 4th Annual Celebrate Berwick festival, and relevant forms for the Chamber Golf Outing in June. This month’s mailing also features the spring season schedule for Bloomsburg University’s Celebrity Artist Series, information about free corporate luncheons hosted by Rodman Natural Health Solutions, and services offered by Erie Insurance and Mutual of Omaha. ChamberPack is a cost-effective way to direct mail your information to hundreds of business decision makers in the area. The next mailing will be sent in May. Download the reservation form or call Eleanor at 570-784-2522 for more information or to reserve your space today!

SEDA-COG Introduces Small Business Stimulus Plan

SEDA-Council of Governments has reduced the cost of borrowing for an SBA 504 loan to further assist small businesses with the financing of their expansion needs.

SEDA-COG will cover half of the 0.5% fee on the bank loan involved in the financing package for SBA 504 loans approved by the SBA this year. For example, for a $1 million expansion project, borrowers would save $1,250. For much larger projects, the savings could be thousands of dollars.

For more information about this SBA 504 fee reduction or to learn more about the SBA 504 program for small businesses in Pennsylvania, visit www.sedacogldc.org or contact the Business Finance Department at 570-524-4491 or [email protected].

A reminder that the Chamber’s low interest loan fund now offers loans of up to $20,000. Call Fred Gaffney at the Chamber at 570-784-2522 for details.