Is the new Pennsylvania budget good for business?

By David Taylor

Governor Josh Shapiro recently signed the budget measure for fiscal year 2023-24, capping a tense month of negotiation and suspense. For manufacturers, the budget is a mixed bag, but there is cause for optimism.

Important manufacturing programs received bipartisan support in the budget, including the Manufacturing Innovation Program, a collaboration of the Commonwealth’s universities and manufacturers. The measure also invests heavily in workforce training and vo-tech programs to help bolster Pennsylvania’s workforce for years to come.

Our state is home to some of the leading manufacturers in the world. In Pittsburgh, U.S. Steel sustainably produces American-made steel products that support our nation’s automotive, appliance, and home construction industries. In Nazareth, C.F. Martin & Co. crafts guitars that are played my musical legends across the world.

Our manufacturers are pillars of the Pennsylvania economy, and they rely on a pool of skilled, capable workers to ensure they can continue to serve their customers. It’s reassuring that our elected leaders recognize the importance of this issue as well.

Another constructive component of the budget is support for the Department of Environmental Protection to process permits and clear the permitting backlog that has slowed critical projects to a standstill. This builds on the executive order Governor Shapiro signed earlier this year to streamline permitting and licensing in the Commonwealth.

The benefit of cutting red tape was illustrated when construction crews in Philadelphia replaced a collapsed section of I-95 in 12 days. There is still much work to do when it comes to simplifying state permitting requirements, and manufacturers stand ready to work with Governor Shapiro and his team to enact productive changes.

While there were some encouraging aspects of the budget legislation, there were certainly drawbacks too, the most glaring of which is state government spending continuing to outpace the growth of the private economy.

The COVID-19 pandemic exhibited the wisdom of keeping your fiscal house in order for a rainy day. Instead, the ensuing federal relief dollars have been a siren song, lulling many states, including Pennsylvania, into enacting record budgets. In 2021, flush with billions in federal aid and higher-than-expected tax collections, then-Governor Tom Wolf presented a budget proposal that hiked spending 11% year-over-year.

As these budget measures get baked into the baseline, spending continues its seemingly unstoppable ascent — to the tune of more than $45 billion this year. the Independent Fiscal Office (IFO) projects that even under exceedingly optimistic conditions, our state will routinely spend more than it brings in and without new revenue or spending cuts, the state will spend through Pennsylvania’s $12 billion surplus by 2027.

Reduced competitiveness

Pennsylvania’s looming imbalance between revenues and outlays raises the specter of tax increases, which would burden manufacturers and diminish our state’s competitiveness. Governor Shapiro talks a good game about wanting to attract new manufacturing operations, such as semiconductor facilities, to Pennsylvania. Nothing will drive prospective business away from our state faster than worsening our state’s tax regime.

Much attention has been paid to Governor Shapiro’s mishandling of his own school voucher proposal. There are additional concerns, including the Governor’s push for an arbitrary minimum wage and his failure to stop Governor Wolf’s Regional Greenhouse Gas Initiative. All of these issues are still in play and manufacturers will continue to make our voices heard in an effort to thwart these counterproductive initiatives.

Governor Shapiro has made it clear he wants to be seen as a reasonable, business-aware executive. While we disagree with some of the Governor’s priorities, we also believe there is an opportunity for common ground and enact policy solutions that will help Pennsylvania’s manufacturing sector create prosperity for all.

David Taylor serves as the president & CEO of the Pennsylvania Manufacturers’ Association and is a Board member of The Susquehanna Valley Center for Public Policy.

This originally appeared in the Pittsburgh Post-Gazette on August 19, 2023.

The views expressed are those of the author and not necessarily those of The Susquehanna Valley Center for Public Policy.

Nothing contained here should be considered as an attempt to aid or hinder the passage of any legislation.