PA’s Economic Climate Challenges Nonprofits


‘Tis the season when many Americans donate to their favorite charity.  While leaders in the nonprofit sector remain firm in their conviction that they are best suited to deal with Pennsylvania’s social and economic challenges they are concerned that public trust in charities is not as high as it should be.  Those are among the findings of the 2016 Pennsylvania Charitable Organizations Survey conducted during the month of November by the Lincoln Institute of Public Opinion Research, Inc. in cooperation with the Pennsylvania Association of Nonprofit Organizations (PANO).

Among the participating nonprofits just ten percent said that public trust in charities is “high,” while 77% rated public trust as “medium.”  Nine percent felt public trust in charities currently is “low.”  Twenty-two percent of the nonprofit executives said the level of public trust in charities has gotten better over the past few years, but 31% said it has gotten worse.

Having said that, the nonprofit leaders feel their sector is best positioned to address Pennsylvania’s social and economic challenges.  Forty-five percent identified their own sector as best suited to address those needs; 22% think state government is most effective; while 6% cite the for-profit sector.  Just three percent said the federal or municipal governments can best handle those challenges.

“Public trust,” said Anne Gingerich, Executive Director of PANO, “is critical to the sustainability of any business – nonprofit, for-profit or government.  When one nonprofit fails to live up to the highest standards it can damage the reputation of all.”  She continued: “Unfortunately these stories overshadow the hundreds of nonprofits who give selflessly to ensure that lives are changed, not just during the holidays, but all year long.”

Like their counterparts in the for-profit world, leaders in Pennsylvania’s nonprofit sector say business conditions in the state have gotten worse over the past year rather than better.  Concerns over potential new federal regulations and the growing likelihood of another extended state budget stalemate feed concerns that the commonwealth’s business climate will continue to deteriorate during the year ahead.

The survey found 15% of the nonprofit executives view business conditions in Penn’s Woods over the past year as having improved, 22% say business conditions have gotten worse.  The majority – 63% – say the state’s economy has remained about the same.  But “about the same” is not good as business confidence, whether for-profit or nonprofit, has been low for the past two years.

By comparison, a September 2016 survey of owners/chief executive officers of for-profit businesses found only five percent saying the state’s economy has improved in recent months while 50% said it had gotten worse.

Looking ahead, a third of the nonprofit leaders expect the state’s business climate to get worse while 22% predict it will get better. Forty-four percent say the Pennsylvania business climate will remain about the same during 2017.

Despite their overall pessimism about the direction of the commonwealth’s economy, employment was up at a quarter of the nonprofits, and down at 16%.  That could be explained in part by some nonprofits stepping up hiring after having cut back staff during the budget stalemate of two years ago.  However, looking ahead 22% say they expect to add employees while 14% predict staffing cuts.

Federal Regulation

Hanging over all sectors of the economy including nonprofits are U.S. Department of Labor (DOL) regulations that would increase the minimum salary requirements for “white collar” workers from $23,600 to $47,476 per year.  The effect would be a significant increase in overtime costs.  This is perhaps more significant for the nonprofit sector in that employees at many smaller nonprofits view their jobs as being community service as much as employment and often put in hours well in excess of those for which there are paid.

The 2016 Pennsylvania Charitable Organizations Survey found that the new regulations would increase payroll costs at 43% of the responding organizations as well as increase the amount of time spent tracking employee hours.  The regulations are now on hold due to a federal court ruling, but should they go into effect 30% of the nonprofits surveyed said they would have to cut staff to pay for the increased costs of complying with the regulations; 11% would have to cut services and another 16% would respond by seeking additional volunteer help.

State Issues

Pennsylvania’s nonprofit organizations were among those most significantly impacted by the lengthy state budget stalemate of two years ago.  In light of that experience, 68% would support putting into place legislation that would incentivize lawmakers to adopt a state budget in a timely manner. Sixty-eight percent (some with board approval) said they would support legislation that would progressively penalize state lawmakers for missing the state budget deadline, with penalties increasing for each day past the June 30th deadline.

PANO’s Gingerich said nonprofit support of legislation penalizing lawmakers for budget stalemates is not surprising.  “Not only clients suffer as a result of the impasse, but nonprofits themselves had to lay off staff and borrow money to continue operations.  As partners with state government in providing mandated services, nonprofits should ask to be at the budget negotiation table.”

Unlike executives in the for-profit sector, nonprofit leaders are open to supporting a wide range of tax hikes.  Thirty-seven percent said they would support an increase in the state’s Personal Income Tax (PIT), while 22% said they would not.  Another 41% offer no opinion on the question.  Likewise 43% would support imposing a new natural gas drilling tax of up to 6.5% specifically to support human services.  Thirteen percent would oppose such a tax, and 43% offered no opinion.  Similar support levels were voiced for the imposition of a new public health tax (ie: sugar tax, soda tax) of 1.5 cents per ounce dedicated to human services.  The highest level of support – 50%  – is for dedicating a portion of taxes generated by Pennsylvania’s gaming industry to support human services.

Organizational Issues

Despite their overall negative assessment of the direction of Pennsylvania’s business climate, more of the nonprofits participating in the 2016 Pennsylvania Charitable Organizations Survey said funding for this calendar year has increased than have seen decreases.  A third of the nonprofits said funding is up, a quarter reporting funding has dropped and 43% said their funding levels have remained about the same.  Looking ahead to 2017 about half of the nonprofits predict funding levels at their organization will remain static; 30% say they expect funding to increase; 20% are braced for funding to decrease.

By a two-to-one margin nonprofits have seen state funding levels decrease over the past five years.  Twenty-one percent said funding from the state had dropped during that period of time while ten percent saw an increase in state funding.  The other half of the organizations said funding from state government has remained about the same.  Likewise there has been a slight drop in federal funding.  Sixteen percent said their organization’s funding from the federal government has dropped over the past five years, 12% said federal funds have increased.  Federal funding remained about the same at the remaining 45% of organizations surveyed.

Property tax exemption challenges remain a concern at some nonprofit organizations.  Seven percent report having had their property tax exemption challenged over the past two years and 13% are concerned their municipal or county government may challenge their exemption next year.

Nonprofit organizations are not participating in lobbying activities in a major way.  Just six percent say they have someone from their organization registered as a lobbyist under the Pennsylvania Lobbying Disclosure Act. Twenty-two percent have lobbied on a public policy issue at some level of government over the past year.  Twenty-seven percent expect to lobby government at some level during the coming year.  Gingerich urged nonprofits to engage in more lobbying activities.  “Nonprofits must understand that not only can they lobby, but they are not doing their jobs if they do not.  Together, the collective voice of the nonprofit sector has powerful, yet untapped power.”

Methodology

The 2016 Pennsylvania Charitable Organizations Survey was electronically conducted during the month of November 2016.  A total of 177 nonprofit organizations responded to the survey invitation.  Complete numeric results are available at http://www.lincolninstitute.org.

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This Week on Lincoln Radio Journal: Labor Bosses Lose Big


Radio Program Schedule for the week of December 3, 2016 – December 9, 2017

This week on Lincoln Radio Journal:

  • Matthew Brouillette from the Commonwealth Partners Chamber of Entrepreneurs and Neal Lesher from the National Federation of Independent Business-PA have a Capitol Watch look at labor union losses in this year’s elections
  • Lowman Henry has a Town Hall Commentary on the latest state budget skirmish

This week on American Radio Journal:

  • Lowman Henry talks with Phil Kerpen of American Commitment about how the GOP will go about repealing and replacing the Affordable Care Act
  • Dough Sachtleben of the Club for Growth has the Real Story on the upcoming U.S. Senate race in Louisiana
  • Eric Boehm of Reason magazine talks with Collin Roth from the Wisconsin Institute for Law and Liberty about occupational licensing reforms
  • Colin Hanna of Let Freedom Ring, USA has an American Radio Journal commentary on the Trump transition process

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Your Pain Is His Gain


The epic budget battle that began two years ago with the inauguration of Governor Tom Wolf resulted in school children and nonprofits being held hostage for over nine months as legislators battled the massive tax and spending increases advocated by the new chief executive.  State employees, however, were spared economic pain.

As the budgeting process for the new fiscal year gets underway the first shots in what is shaping up to be an even more intense struggle between the Democratic governor and a legislature heavily dominated by Republicans clearly will not let state employees off the hook.  In fact, some 520 workers in the Pennsylvania Department of Labor & Industry are among the first casualties.

Just as the battles at Lexington and Concord heralded the start of America’s Revolutionary war, the skirmish over funding for Labor & Industry represents the start of what may turn into Pennsylvania’s longest fiscal fracas.  Court rulings require state employees to be paid even if there is no budget in place by the constitutionally mandated June 30th deadline.  That is one reason why little pressure was applied to the governor and lawmakers during the lengthy budget battle two years ago.

But this is different.  At issue is continuing a dedicated funding stream that finances the operations of seven unemployment compensation service centers around the state.  As the last hours of the 2015-2016 session of the General Assembly ticked away the House passed a bill reauthorizing the spending.  Senate Republicans, however, wanted more information which was not forthcoming from the Wolf Administration in a timely manner and the clock ran out.

Sensing a political opportunity Wolf immediately announced lay-offs and sent a labor union ally out to blame Senator Scott Wagner who plans to challenge the governor’s re-election.  This despite the fact senate leaders indicated their willingness to renew the funding when the new session of the General Assembly reconvenes in January.

Senators argue the lay-offs are unnecessary because the administration could merely move funding among budget categories to cover costs until after the New Year.  Wolf claims he can’t do that, but during the long budget battle of two years ago he made hundreds of such transfers.  It isn’t a matter of can’t – it is a matter of won’t.

So once again Governor Wolf is signaling his willingness to inflict great pain upon innocent parties in his efforts to achieve his spending goals.  As 570 families enter the holiday season with paychecks about to end, they are the first of millions who will suffer economic harm in the coming months.  Charities and schools are soon to follow.

A representative survey of just 176 nonprofit organizations found that during the last budget battle 68% were adversely affected by the disruption in state reimbursements.  Had that fight gone on much longer numerous school districts across the state would have been forced to close.  Many kept their doors open only by borrowing.  Likewise many counties were forced to cut services and/or borrow money.  All of this came at significant cost to taxpayers.

The early signal by Governor Wolf that he plans to continue using fiscal hostage taking as a tactic is ominous.  The recent General Election produced a veto-proof Republican majority in the state Senate.  And while not holding veto-proof numbers in the state House, Republicans did add to their already substantial majority.  Thus the stage is set for a lengthy fight.

Overlay all these factors with the unofficial start of the 2018 gubernatorial election cycle and it becomes quite possible Penn’s Woods may see something it has never seen before: a fiscal year with no official budget.  It happens in Washington all the time where so-called continuing resolutions keep the money flowing because congress and the president can’t agree on a spending plan.

But even a state version of a continuing resolution is not possible unless all parties agree that money must continue to flow.  At this point it is unlikely Governor Wolf will bow to political reality any time soon. Rather he is doubling down on his policy of your pain is his gain.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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This Week on Lincoln Radio Journal: Public Sector Labor Climate


Radio Program Schedule for the week of November 26, 2016 – December 2, 2016

This week on Lincoln Radio Journal:

  • Lowman Henry talks with Elizabeth Stelle of the Commonwealth Foundation about their new report on Pennsylvania’s public sector labor climate
  • Joe Geiger from the First Nonprofit Foundation has Risa Paskoff of Aaron’s Acres in the Community Benefit Spotlight
  • Beth Anne Mumford from Americans for Prosperity-PA has a Lincoln Radio Journal commentary on Pennsylvania’s Economic Freedom Partners

This week on American Radio Journal:

  • Lowman Henry talks with Brittany Hughes producer of the Media Research Center’s new film Collateral Damage: Forgotten Casualties of the Left’s War on Coal
  • Andy Roth of the Club for Growth has the Real Story on issues that will dominate the first 100 days of the Trump Administration
  • Eric Boehm of Reason Magazine talks with Christina Sandefur of the Goldwater Institute about Chicago’s attempt to regulate AirBNB
  • Col. Frank Ryan, USMC (Ret.) has an American Radio Journal commentary on illogical government

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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This Week on Lincoln Radio Journal: Challenges Facing Governor Wolf


Radio Program Schedule for the week of November 19, 2016 – November 25, 2016

This week on Lincoln Radio Journal:

  • David Taylor of the Pennsylvania Manufacturers Association and Matt Brouillette from the Commonwealth Partners Chamber of Entrepreneurs have a Capitol Watch look at challenges facing Governor Tom Wolf
  • Lowman Henry has a Town Hall Commentary on election winners and losers who were not on the ballot

This week on American Radio Journal:

  • Lowman Henry talks with John Philip Sousa, IV of the 2016 Committee about how Donald Trump won a larger percentage of minority votes
  • Doug Sachtleben of the Club for Growth has the Real Story on possible return of congressional earmarks
  • Eric Boehm of Reason magazine takes a look at Republican dominance of state legislatures
  • Dr. Paul Kengor from the Center for Vision & Values at Grove City College reflects on the real meaning of Thanksgiving on his American Radio Journal commentary

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Leo Knepper has Election Results on Lincoln Radio Journal


Radio Program Schedule for the week of November 12, 2016 – November 18, 2016

This week on Lincoln Radio Journal:

  • Lowman Henry has a Newsmaker interview with Leo Knepper from the Citizens Alliance of Pennsylvania examining General Election results
  • Dr. Jake Haulk and Eric Montarti have an Allegheny Institute Report on why the lack of job creation is creating a state revenue shortfall
  • Beth Anne Mumford of Americans for Prosperity-PA has a Lincoln Radio Journal commentary on the upcoming lame duck session of congress

This week on American Radio Journal:

  • Lowman Henry talks with John Gizzi of Newsmax about the impact of the presidential election on the Supreme Court of the United States
  • Andy Roth of the Club for Growth has the Real Story on the policy agenda for the first 100 days of the Trump Administration
  • Eric Boehm of Reason magazine and Matt Kittle of Wisconsin Watchdog discuss how Wisconsin and Pennsylvania put Donald Trump into the White House
  • Colin Hanna of Let Freedom Ring, USA has an American Radio Journal commentary on why Trump won

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Winners and Losers


One of the many quirks of our political system is that each year there are winners and losers among politicians whose names are not actually on the ballot.  This year is no exception.  Neither Governor Tom Wolf nor State Senator Scott Wagner was up for election this year, but results of the balloting sent their career paths in opposite directions.

Governor Wolf has had a tough first two years in office dealing with a Republican-controlled legislature. His efforts to dramatically expand government spending, and to implement the historic tax hikes needed to pay for that agenda resulted in the longest budget stalemate in state history.  Legislative Republicans won.

Tuesday voters rewarded the GOP with even larger legislative majorities. Democrats in the state senate are now on life support.  Two Democratic incumbents were defeated by challengers; a third Democrat seat went Republican after the incumbent gave up several months ago and resigned from the ballot.  Combined, the three seats give Republicans a 34-16 edge and something rarely if ever seen in state government: a veto proof majority.

Meanwhile, across the rotunda in the House of Representatives Republicans saw their already historically high majority expand by three seats as four incumbent Democrats and one incumbent Republican lost.  The Republican pick-ups came in southwestern Pennsylvania which has been trending toward the GOP for several election cycles.  In fact, the most endangered species in Penn’s Woods might well be the non-urban legislative Democrat, with only a handful of Democratic lawmakers representing districts outside of the state’s urban cores.

All of this matters because next year’s state budget battle is shaping up to be even tougher than the first.  Republicans caved into Governor Wolf’s spending demands this year, but failed to fully fund the budget.  That coupled with revenue sources that either never materialized or have failed to meet projections presages a major fiscal fight next year.

Not only have Republicans added to their numbers, but this year’s legislative elections moved both chambers further to the Right.  Moderate state senators like Cumberland County’s Pat Vance and Lancaster’s Lloyd Smucker have been replaced by far more conservative legislators.  The continued drift of the House GOP caucus from moderate southeastern dominance to conservative central and western Pennsylvania influence means tougher sailing for those wanting to raise either taxes or spending.

Governor Wolf also saw his agenda rejected in another race; that the battle for Pennsylvania’s U.S. Senate seat.  The Democratic nominee, Katie McGinty, was Governor Wolf’s first chief of staff and architect of the tax and spend plan that triggered the epic budget battle.  Incumbent U.S. Senator Pat Toomey made hay of that effectively painting McGinty as out of touch with the financial needs of average Pennsylvanians. He won, she lost.

How then do the fortunes of one state senator rise on all of this? Senator Scott Wagner was an establishment pariah when he ran for an open seat in York County in 2014.  Shunned by his own party Wagner accomplished an historic first in Pennsylvania: He won a special election on a write-in defeating both party nominees.

The upstart senator has quickly gained clout and was tapped by his colleagues to lead the Senate Republican Campaign Committee.  The SRCC as it is known is tasked with recruiting, funding and electing Republicans to the state senate.  After playing a major role in helping to win several seats two years ago, Wagner effectively recruited candidates like Senator-elect John DiSanto of Dauphin County who upended Democratic incumbents last week.  Much of the credit for the senate’s now veto-proof majority goes to Wagner.

This is important because Scott Wagner has made no secret of his desire to run for governor in 2018 and is widely expected to announce his candidacy within weeks.  Having built a strong senate majority gives him a leg up both on the Republican nomination and on a grassroots organization for the battle against Tom Wolf who is expected to seek re-election.

Thus the 2016 election has set the stage for the beginning of the next big electoral battle in Pennsylvania. Political fortunes have risen and fallen. And the never ending cycle of campaigns has already begun anew offering no respite for weary voters.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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