APRIL 3, 2012

PA to Copy Missouri's Failed Land Banking Policy

Pennsylvania is close to adopting Missouri's 40 year old failed land banking policy. House Bill 1682, which has already passed the House and the Senate's Urban Affairs and Housing committee, would enable local governments to establish public entities that could acquire land, incur debt, and develop vacant properties. However, these entities often block development.

Missouri' Show-Me Institute discovered St. Louis' land bank refused almost half of all purchase offers from 2003 to 2010. It even rejected a charter school company offering $300,000 for 13 abandoned parcels back in 2005. As of April 2011, all 13 of the parcels remain vacant. Check out the video below to learn more about St. Louis' experience.

Philadelphia, already anticipating the passage of HB 1682, introduced ordinances to create a land bank that would give the district Council member authority over development. The Show-Me Institute also had a stern warning about this practice in yesterday's Philadelphia Inquirer:

One rundown St. Louis building had offers from four different buyers, all rejected by the land bank. But when the area alderman showed up at a land bank meeting and asked that it be sold to another buyer, it was.

Unfortunately, the same policy has been written into Philadelphia's land bank bill. In its current form, it would forbid the bank from entering into a transaction without the approval of the district Council member. This will almost certainly thwart development.

posted by KATRINA CURRIE | 09:38 AM | 0 comment

FEBRUARY 3, 2012

Largest Growth in Pennsylvania Private Sector Jobs Since 1999

The Bureau of Labor Statistics has updated their employment data by state through the end of 2011 (subject to revision).

Looking at December job data ("not seasonally adjusted") over the past couple decades reveals some interesting trends:

• 2011 saw the largest one-year growth in private sector jobs in Pennsylvania since 1999, according to Bureau of Labor Statistics data.
• Manufacturing job growth in Pennsylvania was higher than any year since 1990.
• From 2000 to 2010, the private sector lost 116,400 jobs, while government jobs grew by 30,800.
• In 2011, government jobs declined by 20,200, but the private sector grew by 79,000 jobs.

posted by NATHAN BENEFIELD | 00:44 PM | 0 comment

JANUARY 31, 2012

Corporate Welfare Not Needed to Get a Cracker

The Pittsburgh Tribune-Review reports that Pennsylvania lawmakers are pushing a special tax deal to attract a "cracker" plant to the state. The proposed Shell cracker—which breaks down natural gas into ethylene, used in plastics—has been much talked about, with the Keystone State reportedly a finalist with Ohio and West Virginia. The plant would create thousands of jobs, at least by internal estimates.

The proposal would expand Keystone Opportunity Zones, exempting certain businesses from taxes (primarily targeted to the cracker). What's wrong with a KOZ? Well for one thing, tax breaks for a few require higher taxes, spending being equal, on all other businesses. Further, a Legislative Budget and Finance Committee report finds that the KOZ program has little accountability, and the promised jobs often failed to materialize. Most importantly, tax breaks and corporate welfare don't actually generate economic growth, they simply shift resources.

Rather than expanding corporate welfare, here is what lawmakers need to do to make Pennsylvania more attractive:

• Enact a natural gas policy that removes the political uncertainty stemming from the Frack Attack, and provides predictability for the gas industry.
  
• Improve Pennsylvania's business climate for all businesses. Indeed, lawmakers should take the lesson from the Keystone Opportunity Zones—that businesses are attracted to lower taxes—and apply it statewide.

posted by NATHAN BENEFIELD | 01:31 PM | 0 comment

JANUARY 20, 2012

Fiscal Outlook for Pennsylvania: Not Too Rosy

This week the new Pennsylvania Independent Fiscal Office held its first annual seminar on the state economy and revenue. After a series of presentations on the state of the economy and state budgeting/revenue from a national perspective—all with the perspective that robust growth is unlikely and risks to the economy persist—the IFO presented on future budget trends and released its five-year fiscal outlook.

Here are some highlights (or lowlights, to be accurate):

• Pennsylvania's population will continue to age, with an estimated 25 percent increase in senior citizens, and a 1.8 percent decline in working-age population.
  
• This translates into slow revenue growth: Estimated annual growth in General Fund Revenue is projected to average 1.6 percent annually for 2011-14, and 4 percent annually from 2015-17.
  
• This is in contrast to General Fund expenditures, which are expected to grow absent significant policy changes. The big categories of growth are Public Welfare (driven by Medicaid), Corrections, Pensions, and Debt.
  
  • General Fund Public Welfare spending is expected to go up by 8 percent per year from 2011-14. As noted, federal policy (stimulus and Affordable Care Act) is driving this growth—increasing Medicaid eligibility and preventing state reform through the "Maintenance of Effort" requirement.
  • Commonwealth debt payments will grow by 7.3 percent per year from 2011-14.
  • Pennsylvania's corrections spending is expected to grow 6.9 percent per year from 2011-14.
  • Commonwealth pension contributions will skyrocket by 40 percent per year over the next three years. As a share of General Fund spending, pension payments will rise from 4.2 percent for FY 2011-12 to 11.6 percent for FY 2016-17.
  • The IFO projects education spending will decline by 1 percent per year from 2011-14—this forecast is based on expected enrollment declines, rather than anticipation of legislative priorities.

All these forecasts are based on current policy, i.e., no changes to current programs. But it should be blatantly obvious that reform must occur. Lawmakers must tackle the big cost drivers. Pension reform, Medicaid and welfare reform, criminal justice reform, and reducing our debt burden must be budgetary priorities. Moreover, to improve the revenue picture lawmakers must focus on policies that promote prosperity.

posted by NATHAN BENEFIELD | 04:34 PM | 0 comment

DECEMBER 28, 2011

Map: PA Among Highest Unemployment Tax Rates

The Tax Foundation has a new map showing unemployment insurance tax rates. As you can see, Pennsylvania has one of the highest tax rates in the nation.

The unemployment insurance tax is a payroll tax imposed on employers/employees—a higher rate makes it more expensive to hire workers.

Moreover, the effective rate is expected to go up, as Pennsylvania's Unemployment Trust Fund is more than $3 billion in debt. Last week the state House passed legislation to issue $3.5 billion in bonds, to pay off the loans owed to the federal government, and effectively get a lower interest rate, while legislation passed this summer would provide modest savings.

But neither solves the inherent problems of an unemployment system that is quickly drained during recessions, making it increasingly costly to hire workers in a bad economy.

posted by NATHAN BENEFIELD | 02:03 PM | 0 comment

DECEMBER 27, 2011

Marcellus Drilling Rescues Williamsport

Earlier this month, I visited Williamsport, home of the Little League World Series and a growing economy. Clearly it's not just baseball that brightens this central Pa. city – Williamsport has seen unemployment drop almost 20 percent in the past two years, representing jobs desperately needed in a city that last year had a poverty level 14 percent higher than the state average. One of the major reasons for this growth? According to the executive vice president of the Williamsport/Lycoming Chamber of Commerce, it's Marcellus Shale.

Now, Williamsport and Lycoming County certainly aren't the only beneficiaries of the natural gas boom, we see these stories throughout the state. What struck me is that it's not just the natural gas industry and those involved that benefit from Marcellus Shale – it's everyone working in Williamsport! As more people move into town to take natural gas-related jobs, foot traffic is increasing at the mall, sales are going up, and more retail jobs are being created.

According to the Department of Labor and Industry, retail hirings reached 200 in the Williamsport area, which increased the number of retail jobs to 6,700. In October, that pushed retail above its previous year's level for the first time since October 2008.

But it's not just job creation that's perking up in Williamsport, it's overall job improvement throughout the city. As a local resident pointed out to me, as new, well-paying Marcellus jobs come into town, employers in all industries throughout Williamsport have had to up their game, treating and compensating employees better because they have to compete to retain and attract good workers. In the past two years, average hourly earnings in Williamsport have gone up 16 percent.

While Williamsport still has plenty of room to grow, this is great news for a city that had a median household income that was nearly 45 percent lower than the state average in 2010. And it's great news for our state, as the benefits of natural gas drilling continue to touch more and more Pennsylvanians.

posted by DAWN MELING | 00:35 PM | 0 comment

DECEMBER 12, 2011

New Study Show Impact of Shale Gas

Hot on the heels of UGI Utilities' 13 percent reduction in gas rates, comes a comprehensive study examining the impact of shale gas on the economy nationwide. The report by IHS Global Insight, a 50 year pioneer in economic forecasting, confirms shale gas as a current and future economic powerhouse.

Perhaps the most welcome finding is the projected 870,000 jobs attributed to the shale gas industry by 2015. Jobs from shale drilling span a variety of industries and currently average $23.16 per hour -- a welcome bright spot in very dim economy.

The impact has been felt here in Pennsylvania as the Patriot News summarized this weekend:

According to a recent federal report, "The fastest 12 growing occupations in Pennsylvania are all directly related to Marcellus Shale," said Sue Mukherjee, director of workforce development for the state's Department of Labor and Industry. The number of employees in the core oil and gas industries in Pennsylvania has more than doubled in the last three years. Mukherjee said the number of new hires who come from within the state has increased to 74 percent.

Projecting out further, shale gas is expected to contribute nearly $1 trillion in federal, state, and local taxes in the next twenty-five years. So much for those who insist drilling companies somehow sidestep taxation.

More drilling also means cheaper gas prices for residents. IHS reports that producing gas domestically, rather than importing, has lowered prices from potentially $12 per million BTU to around $4. This massive cost savings is passed on to the consumer via lower heating and electricity prices -- a savings Pennsylvanians see on every monthly statement.

By 2035, lower gas prices will equate to an average increase in disposable household income of more than $2,000 annually. According to Pennsylvania Secretary of Community and Economic Development Alan Walker, lower gas prices have already saved Pennsylvania residents and businesses $13 billion over the last two years. And more affordable local energy will likely make the state attractive to energy-intensive businesses, like manufacturing, creating another opportunity for significant job creation.

Given that shale drilling has led to the discovery of over 100 years of natural gas supply in America, a principled impact fee will enable Pennsylvania to truly become the keystone of the nation's energy future. But an unnecessary and excessive tax could push future drilling, and the jobs that come with it, to other states with plentiful natural gas resources and friendlier business climates.

posted by JOHN BOUDER | 00:46 PM | 0 comment

DECEMBER 1, 2011

Chart of the Day: Shale Growth Fuels Tax Growth

We noted previously how the boom from Marcellus Shale natural gas has fueled a dramatic increase in state corporate tax collections.  Pennsylvania Department of Revenue data also show a major increase in other state taxes in counties with shale drilling. 

The top five drilling counties in 2011 (Bradford, Lycoming, Susquehanna, Tioga and Washington) saw sales tax collections grow by 15 percent last year, more than double the state totals.  Motor vehicle sales tax and inheritance taxes (partly due to dramatic wealth increases) in shale outpaced state growth even more dramatically.  And realty transfer taxes—on homes sold—grew by 19 percent in shale counties while declining statewide.  Indeed, the shale boom is one of few things keeping the housing market from continuing its decline.

When debating an "impact fee," lawmakers must consider the tax revenue already being generated from natural gas drilling and related economic growth.

posted by NATHAN BENEFIELD | 08:30 AM | 0 comment

NOVEMBER 21, 2011

Right to Work Helps Oklahoma Economy

A new analysis from the Oklahoma Council of Public Affairs shows that since the Sooner State passed a right to work law in 2001—allowing all workers to choose whether or not to join or pay a fee to a union—the state has outpaced the nation in manufacturing job growth. 

At the same time, Oklahoma has become a net winner in state-to-state migration, as more residents moved to Okalahoma from other states than left the state for elsewhere.  This reverses a downward trend Oklahoma had been expericencing prior to 2000.

Naturally, the vast majority of domestic imigrants came from forced unionization states.  Concidentally, Pennsylvania, a forced union, state has been among the biggest losers in state migration for decades.

posted by NATHAN BENEFIELD | 10:30 AM | 0 comment