Erase Corporate Welfare from the Budget

Pennsylvania’s tradition of concentrating economic power in the hands of a few has proven to be inadequate at best, and harmful at worst.

Corporate welfare spending makes this concentration of economic power possible. Our state has the dubious distinction of ranking 1st in the nation in handouts to privileged interests since 2007. It's no surprise that growth in jobs, income, and population have been anemic during this time. 

Supporters of corporate welfare, or government-led economic development, believe public officials can spend money more wisely than the people who earn it. But this couldn't be further from the truth. 

From 2005-2015, states spending the most on corporate welfare saw slower economic growth than states spending the least. This lack of a correlation between government subsidies and economic growth is indicative of their ineffectiveness. 

Failed corporate welfare programs impose real costs on working people. For instance, in 2014, the state doled out $200,000 to a Kraft Heinz plant in Lehigh Valley, but less than two years after receiving the grant, the plant announced it was closing. Now the Department of Community and Economic Development (DCED) is asking for a reimbursement from Kraft Heinz.

If DCED weren't in the grant making business to begin with, taxpayers would not be on the hook for “clawing back” ill-advised grants. And the time and money devoted to the grant process would not be wasted but rather used to create viable economic opportunities in the private sector.

Sure, private sector actors leading the way on economic development won’t always succeed. However, they're more likely to make better investment decisions than government actors, who are too often influenced by politics.

Put simply, entrepreneurs are best equipped to make rational economic decisions. This is why the private sector is the true engine of job growth. And it's why CF has suggested eliminating the more than $790 million in government grants, loans, and tax credits.

Table 1. Corporate Welfare Grant & Loan Programs 2015-16  Budget (Thousands)
General Fund
Agriculural Excellence $1,100
Agricultural Research $1,587
Agricultural Promotion, Education and Exports $250
Alternative Fuels Funding $7,091
Ben Franklin Tech Development Authority Transfer $14,500
City Revitalization and Improvement Fund $8,000
Commonwealth Financing Authority Transfer $88,812
Council on the Arts $892
Food Marketing Research $494
Grants to the Arts $9,590
Hardwoods Research and Promotion $350
Industry Partnerships $1,813
Infrastructure and Facilities Improvement Grants $19,000
Keystone Communities $6,350
Life Sciences Greenhouses $3,000
Livestock Show $177
Machinery and Equipment Loan Fund $45,568
Marketing to Attract Business $2,005
Marketing to Attract Tourists $7,014
Municipalities Financial Recovery Revolving Fund Transfer $3,000
Neighborhood Improvement Zone Fund $39,401
New Choices/New Options $500
Open Dairy Show $177
Partnerships for Regional Economic Performance $11,880
Pennsylvania First $20,000
Pennsylvania Race Horse Development Fund $250,563
Tourism-Accredited Zoos $550
Transfer to the Nutrient Management Fund $2,714
World Trade PA $5,829
Youth Shows $140
Total $552,347
Tax Credits
Film Tax Credit $60,000
Job Creation Tax Credit $10,100
Research and Development Tax Credit $55,000
Keystone Opportunity Zone $79,300
Keystone Innovation Zone $25,000
Resource Enhancement and Protection Tax Credit  $10,000
Alternative Energy Production Tax Credit $2,000
Total $241,400
Total $793,747

The savings realized by eliminating these programs could be used to lower tax rates across the board, help bridge the budget gap, or a combination of the two. Taking economic power out of Harrisburg and putting it back into Pennsylvania's communities is what true economic justice looks like.