Gov. Wolf’s budget: industry leaders applaud workforce investments, blast gas tax

Gov. Tom Wolf’s executive budget for 2020-2021 fiscal year calls for increases to the state’s workforce development effort and corporate tax cuts designed to make the state’s business climate more competitive.

But the $36 billion spending plan, a 6% spending increase from the previous year, would also advance reform measures that would impact businesses with proposed increases to the minimum wage, closing the “Delaware-loophole” and a severance tax on natural gas pipelines.

The public-private compromises reflected by the proposed spending plan left industry leaders hot and cold about the budget and the overall economic climate it speaks to in the coming fiscal years. Business advocates in the General Assembly say they will use the next several weeks to negotiate a better deal for business interests before the July 1 start of the next fiscal year.

“I wish the governor fought as hard for meaningful school property tax elimination like he has for a tax on our natural gas,” state Sen. Kristin Phillips-Hill, R-York, said in a statement that encapsulated the split in vision reflected in the budget. “I will continue to fight for the people who pay our bills to ensure we are not jeopardizing our long-term financial stability by overspending with no accountability.”

Investment in workforce

Lack of qualified workers remains the top concern of the businesses in Pennsylvania. An annual economic survey of employers by the Pennsylvania Chamber Foundation in 2019 found that 22% listed it as their top concern, an increase from 14% in 2018.

“It’s frustrating to imagine that someone might lose out on their opportunity to get ahead because of something as ordinary as bureaucratic red tape or a simple lack of bus routes,” Wolf said in his budget address to the General Assembly this week. “Frustrating – and also stupid if we care about our economy.”

The Wolf administration’s executive budget reflects that the governor listened to stakeholders in the private sector on this front, with $14.8 million reserved for investments in trade schools, STEM programs and worker training.  Programs like WEDnetPA and the Manufacturing PA join industry and post-secondary institutions to streamline students from college into the workforce.

According to Wolf, WEDnetPA helped some 20,000 companies train more than a million workers during the last two decades. It would receive $10 million under Wolf’s budget.

Wolf also proposed $29 million for the Manufacturing PA fund, a $17 million increase from the previous fiscal year.

“We’re pleased to continue our work with the governor’s Keystone Economic Development and Workforce Command Center and legislative leadership to raise awareness of the concerns and needs of the business community in the state’s evolving jobs market and identify innovative solutions to addressing the jobs skills gap and removing barriers to work,” said Gene Barr, president of the Pennsylvania Chamber of Commerce and Industry.

Corporate taxes

Wolf’s spending plan calls for a reduction of the corporate net income tax rate and the implementation of a combined reporting requirement to improve the business climate and make it more competitive with surrounding states.  Under Wolf’s proposal, the corporate net income tax rate would decrease in the next five years: 8.99% on Jan. 1, 2021 and 5.99% on Jan. 1, 2025.

“We encourage lawmakers to move forward with substantial state tax reform – starting with a reduction to the CNI [corporate net income] rate – that is based on the principles of competitiveness, fairness, predictability and simplicity,” Barr said.

Natural gas pipeline tax

Advocates for natural gas companies were not pleased with the governor’s severance tax on unconventional natural gas extraction. Revenue from this proposed tax on natural gas would amount to a $4.5 billion fund for the Restore Pennsylvania initiative’s diverse pipeline of infrastructure projects, which state officials would aid business expansion with stable infrastructure.

This marks the second year of Wolf’s “Restore Pennsylvania” initiative to help communities across the state with broadband, disaster recovery and preparedness and road construction and business sites. The funding is slated to come from a tax on natural gas wells.

Dan Weaver, president and executive director of the Pennsylvania Independent Oil and Gas Association, called Wolf’s proposed natural gas tax a penalty for one of the state’s most lucrative assets in the Marcellus Shale gas field.  The destructive impact of a severance tax on natural gas drillers would be exacerbated by low commodity prices, punishing an industry that has played a significant part in the state’s economic rebound in the last decade through the Impact Tax, he said.

“Restoring Pennsylvania is what natural gas developers have been doing here for the past decade,” Weaver said, re-appropriating the name of the governor’s program that would be financed through by revenue from the tax. “The Impact Tax, which no other segment of Pennsylvania’s economy pays and no other gas-producing state has, is restoring public assets and funding development projects in communities in all 67 of the state’s counties.”