Pa.’s Economic Outlook is Poor but Not Permanent

The American Legislative Exchange Council (ALEC) released its annual Rich States, Poor States’ report, which includes economic rankings for each state. Unfortunately, the news isn’t good for Pennsylvania. The state ranks 34th in economic performance and 38th in economic outlook.

Economic performance is based on three factors: state gross domestic product, absolute domestic migration, and non-farm payroll enrollment. Pa. ranked below the national average on all three, but the worst in absolute domestic migration, at 41. This ranking is unlikely to improve in the near future as one person left Pa. every 11.5 minutes in 2016.

That’s not to say Pennsylvania can’t turn things around. Policymakers can improve the fiscal and regulatory climate in the state—two factors that contribute to economic and domestic migration trends. But without changes, fewer jobs will be available and Pennsylvanians will continue to go elsewhere in search of better lives.

To determine the rankings of the report’s second component—economic outlook—ALEC used fifteen indicators to predict performance. Pennsylvania ranks twenty-fifth or worse in all but three of these indicators. The commonwealth’s performance on taxes is especially poor as a result of its high corporate income tax rate and poor showing on the “remaining tax burden” variable. Combine this with high property taxes and it becomes easier to understand why people are leaving the state.  

Before Pennsylvania can reduce the tax burden imposed on working people, it needs to restructure its finances. Governor Wolf’s budget moved the state slightly in that direction, but his proposals still require $1 billion of tax increases. In contrast, the House budget restrains spending, holds the line on taxes, and begins implementing structural spending reforms.

The House budget is a critical step forward, but more can be done. CF has offered numerous policy suggestions to reform government and lower the state’s tax burden. Embracing both will improve our economic rankings, and more importantly, improve the lives of Pennsylvanians.