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Stagnation: PA business climate remains sluggish


Pennsylvania’s business climate remains sluggish as the commonwealth continues to struggle in the aftermath of the Great Recession.  Business conditions, employment levels and sales have all backslid over the past six months with owners blaming high taxes, government regulation and a lack of skilled workers for the malaise.

The Fall 2016 Keystone Business Climate Survey conducted by the Lincoln Institute of Public Opinion Research found half of the business owners and chief executive officers survey saying the state’s economy has gotten worse over the past six months, only five percent felt Pennsylvania’s business climate had improved during that time frame.

Comparatively, one year ago 42% felt the business climate had gotten worse, while six percent at that time said it had improved.  There is little optimism that business conditions will improve soon. Forty-four percent say they expect the state’s economy to continue getting worse over the upcoming six months, five percent expect to see an improvement in the business climate.

Along with that pessimistic overall prognosis twice as many businesses report having reduced their workforce as say they have added jobs.  The majority of businesses – 66% – reported that employment levels remained about the same over the past six months.  But, 21% said they have reduced their employee compliment while 11% added employees.  The picture improves slightly as the owners/CEOs look ahead to the coming six months.  Sixteen percent say they plan to add employees, 12% expect to reduce their workforce.

Sales have also taken a hit over the past six months.  Thirty-nine percent said their sales remained about the same from March thru September.  But, 39% reported decreased sales and were off-set by only 21% having reported sales increases.  Looking forward, 51% expect sales to remain stable.  Twenty-Four percent forecast an increase in sales, 23% are braced for a sales decrease.

Factors Impacting Business Growth

Among the factors cited by businesses for why they considered expanding their businesses over the past two years, but decided against expansion taxes and regulation topped the list of barriers.  Onerous federal regulations were cited by 41% of the businesses that considered, but rejected, expansion plans.  Coming in a close second was Governor Tom Wolf’s proposed tax increases cited by 40% as a reason why they did not expand. Pennsylvania’s tax structure was listed by 29% as having frustrated expansion plans.

Thirty-six percent cited onerous state regulations as a barrier to expansion, while another 35% cited the lack of a skilled work force.  Nearly half of the businesses surveyed said they currently have open positions for which they have been unable to find qualified applicants. Forty-two percent say they have been unable to fill one to five jobs; 2% have six to ten open positions; one percent has more than ten jobs unfilled due to lack of qualified applicants.

State Issues

Pennsylvania fiscal condition continues to be of concern to the business owners and CEOs participating in the Fall 2016 Keystone Business Climate Survey.  Eighty-five percent disagreed – 70% strongly so – with Republicans in the General Assembly having agreed to a $1.4 billion spending increase and then raising taxes to enact the current year’s state budget.

Looking ahead to what will likely be another epic budget battle next summer, 92% say the General Assembly must address cost drivers such as pension reform before considering an increase in taxes.  In fact, 34% said the state’s massive unfunded pension liability has caused them to not consider expanding in Pennsylvania.

Among pension reforms being considered is moving state employees from the current defined benefit pension system to a defined contribution plan. Thirty-nine percent of the businesses surveyed said they offer employees a company administered defined contribution plan to which the company contributes.  Only 3% of the private businesses surveyed continue to offer a defined pension plan.  Another 40% offer employees no retirement plans at all.

Earlier this year the General Assembly did pass, and Governor Tom Wolf signed into law, some modest changes to the state’s century-old liquor laws. Business owners/CEOs said those reforms did not go far enough.  Fifty-two percent would like for the state to completely privatize both retail sales and wholesale distribution of alcoholic products.  Another 26% would like to see just retail sales privatized.  Twelve percent said the recent changes were sufficient.

Pennsylvania has an abundant supply of natural gas, but additional pipelines are needed to get that gas to market.  Eight-nine percent agree – 60% strongly agree – that this resource should be developed and more pipelines built.  Nine percent disagree.  Twenty-five percent said easier access to natural gas would be a benefit to their business with an additional 14% saying it would be a major benefit.  Thirty percent said they do not utilize natural gas in their business.

Over the past nine years since the passage of Act 44 the Pennsylvania Turnpike Commission has diverted $5.2 billion to PennDOT to help pay for state highways and public transit.  This has resulted in annual fare increases for turnpike travelers.  Sixty-three percent of those participating in the Fall 2016 Keystone Business Climate Survey said this should end and fare revenue be used only to maintain and improve the turnpike.  Twenty-nine percent felt the sharing of revenue should continue.

Job Approval Ratings

President Barack Obama and Governor Tom Wolf continue to suffer from significantly low job approval ratings among the business community.  Eighty-four percent have a negative view of the President’s job performance; 86% disapprove of the job being done by Governor Wolf.

U.S. Senator Pat Toomey, who faces re-election in November, received a 50% job approval rating against 23% with a negative view of his job performance.  The job being done by U.S. Senator Robert P. Casey, Jr. is viewed negatively by 56% of the business owners/CEOs, 18% give him positive marks.  Likewise, 54% say Federal Reserve Chair Janet Yellen is doing a poor job, 15% approve.

Pennsylvania has three statewide constitutional or “row” offices. Two are serving by appointment, their elected predecessors having resigned after being convicted of crimes.  Auditor General Eugene DePasquale is the surviving official elected in 2012 still in office.  Seventy-three percent have no opinion of his job performance, with 14% saying he is doing a good job and 14% having a negative opinion of his job performance.  Likewise about two-thirds offered no opinions on state Treasurer Tim Reese or Attorney General Bruce Beemer.  Of those who did, 18% give Beemer a negative rating, 6% a positive one while 15% hold a negative view of Reese, 5% a positive view.

As has been the case throughout the Keystone Business Climate Survey’s 22-year history the owners and chief executive officers hold the federal congress and the state legislature in very low regard.  Just 8% approve of the job being done by the United States Senate, 11% approve of the job being done by the U.S. House of Representatives.  Seventeen percent approve of the job performance of the Pennsylvania Senate; 19% approve of the job being done by the Pennsylvania House of Representatives.

Finally, the Lincoln Institute asked participants in the survey who they support for President of the United States and United State Senator from Pennsylvania in the upcoming November General Election.  Seventy-three percent said they will vote for the Republican nominee Donald Trump, 12% support the Democratic nominee Hillary Clinton and 6% say they will vote for Libertarian Gary Johnson.   Republican incumbent U.S. Senator Pat Toomey has the support of 81% of the owners/CEOs, Democratic challenger Katie McGinty has 12% support.

Methodology

The Fall 2016 Keystone Business Climate Survey was conducted electronically by the Lincoln Institute of Public Opinion Research, Inc. from September 13 through October 5, 2016.  A total of 370 businesses responded to the survey invitation.  Of those 81% are the owner of the business, 14% are the CEO/COO/CFO and one percent a business manager.

Twenty-five percent of the responses came from the Philadelphia/southeastern part of the state; 18% from Pittsburgh/southwestern Pennsylvania; 16% from south/central Pennsylvania; 13% from northwestern Pennsylvania; 11% from northeastern Pennsylvania; 10% from north-central Pennsylvania; 4% from the Lehigh Valley and 3% from the Altoona/Johnstown area.

Complete numeric results are posted on-line at http://www.lincolninstitute.org

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Governor Wolf Posts 82% Disapproval Rating


Malaise: Business Owners Turn Deeply Negative

Governor Wolf posts 82% disapproval rating

Governor Tom Wolf, who owned and operated a mid-sized business before running for office, has become enormously unpopular with his former peers posting the second highest negative rating for a governor in the 20-year history of the Keystone Business Climate Survey.  The September poll of business owners and chief executive officers found 82% hold a negative view of the governor’s job performance while 12% say he is doing a good job.

The governor’s budget proposals lie at the heart of the business community’s disapproval. Eight-one percent say the Wolf tax and spending plans would harm Pennsylvania’s business climate, 64% say they would do significant harm.  Further, Wolf gets the lion’s share of the blame for the budget impasse.  Fifty-eight percent say the budget stalemate is the governor’s fault, just 6% blame legislative Republicans.  Another 32% say both the governor and the legislature are to blame for the lack of a state budget.

Business Climate

One year ago, for the first time since the Fall of 2004, more of the business owners/CEOs participating in the survey said that business conditions in Pennsylvania had gotten better (20%) during the preceding six months that felt it had gotten worse (19%).  By last Spring those number had slipped significantly into negative territory with 13% saying business conditions had improved and 33% saying the state’s business climate had gotten worse.  In the current (September 2015) survey, 42% say the business climate in Penn’s Woods got worse over the past six months, 6% say it has improved.

Optimism for improvement of the state’s business climate in the coming six months has faded since last Spring.  Only 6% expect business conditions to improve headed into the new year, down from the 12% who expressed optimism last Spring.  Those who expect the business climate to get worse rose from 44% in March to 49% in the September survey.

Employment levels are also slipping.  Fifteen percent of the owners/CEOs said they have increased the number of employees in their business over the past six months, 21% said they now employ fewer people.  Looking ahead, 14% plan to add employees in the coming six months, 16% expect to have fewer employees.

Sales are also down.  Twenty-eight percent of the businesses participating in the survey say their sales have decreased over the past six months, 27% say sales are up.  There is a bit of optimism for the future, however, as 25% project an increase in sale over the upcoming six months while 18% are bracing for a decrease.

State Issues

The ongoing state budget impasse remains a top issue. Governor Wolf has put the biggest proposed tax hike in the nation on the table, the Republican-controlled legislature refuses to go along. Owners/CEOs participating in the Fall 2015 Keystone Business Climate Survey are not willing to see a resolution of the budget stalemate at any cost. Ninety percent said they do not want a new state budget if it will result in a significant increase in their taxes.  Nine percent say they are willing to pay significantly higher taxes if it would result in an immediate budget resolution.

Education spending is one of the sticking points in the budget.  Governor Wolf is demanding significantly higher spending.  But the poll found business owners disagree with the need to spend more on K-12 public education.  Forty-four percent say the state already spends too much on public education and another 30% feel current spending levels are about right.  Twenty-two percent agree with the governor that too little money is spent on education.

There is strong agreement with the Republican legislative position that the public education pension system must be reformed before any increase in spending is approved. Eighty-seven percent see pension reform as a prerequisite to spending more on education, 10% disagree.

Looking at the budget generally, 69% agree that any resolution to the state budget impasse must include a plan to privatize Pennsylvania’s state-run liquor store system.  Twenty-two percent do not link liquor privatization to a budget resolution.

Asked which statement most closely describes Governor Tom Wolf’s budget proposal 45% said it is a significant increase in spending, 21% identified it as the biggest spending increase in state history and 15% correctly identified it as a tax and spending increase greater than that proposed by all 49 other states combined.  Two percent termed the budget a “modest increase” in state spending.

By some estimates Pennsylvania spends about $700 million a year on individual grants or tax breaks to certain companies or industries. Such grants are viewed by some as “economic development,” by others as “corporate welfare.”  Thirty-two percent of the business owners/CEOs said such grants should be eliminated entirely and taxes reduced on all businesses.  Eleven percent favor the elimination of such grants with the savings used to balance the state budget.  Forty percent would reduce, but not eliminate economic development grants, and 4% think more money should be spent on such projects.

Job Approval Ratings

Eighty-two percent disapprove of the job being done by Governor Wolf, up from the 70% who held a negative view of the governor in the March 2015 poll.  That number is the second highest disapproval rating for a governor in the 20-year history of the Keystone Business Climate Survey surpassed only by the 86% negative rating received by Governor Ed Rendell in September of 2009. The only elected official with a lower job approval rating that Governor Wolf is President Barack Obama. Eighty-eight percent of those participating have a negative view of the President’s job performance, 10% view him in a positive light.  U.S. Senator Pat Toomey received a 47% positive job approval against a 28% negative rating.  U.S. Senator Robert P. Casey, Jr. didn’t fare as well, 64% disapprove of the job the senior senator from Pennsylvania is doing, 15% approve.  The business leaders are also not pleased with the job being done by federal fiscal officials.  Forty-four percent disapprove of the job being done by Federal Reserve Board Chairman Janet Yellen, 21% approve.  U.S. Treasury Secretary Jack Lew is viewed negatively by 42%, while 11% approve of his job performance.

Pennsylvania Attorney General Kathleen Kane is under indictment for allegedly leaking secret grand jury information.  Sixty-eight percent disapprove of her performance in office, 8% approve.  However, 43% say she should not resign from office and is innocent until proven guilty.  Forty percent think she should resign and 10% want her to be impeached.

Legislative chambers continue to be viewed negatively by the business owners/CEOs.  Only ten percent have a positive opinion of the job being done by the United States Senate, 15% approve of the job being done by the U.S. House of Representatives.  The state legislature fared better: 31% approve of the job being done by the Pennsylvania Senate, the Pennsylvania House of Representatives earned a 34% job approval rating.

Presidential Race

Business community support for presidential candidates closely mirrored current nationwide polls. Donald Trump leads the pack at 26% followed by Dr. Ben Carson at 23%.  Carly Fiorina registered 7% followed by Ted Cruz at 7% and Scott Walker (who has since exited the race) at 6%.  The rest of the field, including all of the Democratic candidates, scored at 5% or less.

Methodology

The Fall 2015 Keystone Business Climate Survey was conducted electronically between September 14, 2015 and September 21, 2015.  A total of 324 business leaders responded.  Of those 80% are the owner of a business; 14% are the CEO/COO/CFO; 2% a local manager and 1% a state manager.   Twenty-nine percent of the respondents have businesses based in southeastern Pennsylvania, 21% in southcentral Pennsylvania, 17% in southwestern Pennsylvania, 9% in northwestern Pennsylvania, 7% in northeastern Pennsylvania, 5% in the Lehigh Valley, and 5% each in north central Pennsylvania and the Johnstown/Altoona area.  Complete numeric results of the poll are available at www.lincolninstitute.org.

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