Third and State
The Bureau of Labor Statistics reported this morning that nonfarm payrolls in Pennsylvania grew by 100 jobs in August and the unemployment rate edged up slightly to 5.8%.
To be clear that 100 is not missing a zero.
The jobs picture with respect to resident employment was actually substantially worse as 35,000 fewer residents reported having a job in August.
The first point as always with employment data is we should be cautious about interpreting a single month of data. As Figure 1 illustrates while Pennsylvania added 2,450 jobs a month in 2013, the pace of job growth so far this year has been stronger with the commonwealth adding 4,300 jobs a month.
The primary motor of job growth in Pennsylvania since January has been the construction industry which has been growing much faster in Pennsylvania than in the rest of the country. That pattern reversed itself in August as the construction sector lost more jobs than any other sector (down 3,000 over the month).
This drives home that job growth in Pennsylvania remains unhealthy in that when we have gotten good news in recent months that good news has depended on strong growth in one sector, construction.
For more on Pennsylvania’s recent economic performance be sure to check out the State of Working Pennsylvania 2014. As a final depressing note, remember slow job growth generally means slow or no growth in wages and incomes for most workers and that means a shrinking middle class and rapidly rising top incomes.
Poverty remained high in the commonwealth last year, highlighting that many residents have not yet recovered from the recession and underscoring the need for the state to do more to help struggling Pennsylvanians afford such basics as decent housing, nutritious food, and reliable child care and transportation.
Nearly one in seven Pennsylvanians lived in poverty in 2013, according to new Census Bureau data released on Sept. 18. For a family of four, that meant living on less than $24,000 last year. The median annual income in Pennsylvania, adjusted for inflation, did not rise between 2012 and 2013, and remained far below pre-recession levels.
The change in poverty varied across Pennsylvania, with 20 of 39 counties measured showing a difference from 2007 to 2012.
The child poverty rate in Pennsylvania increased from 15.9% in 2007 to 19% in 2013, making it the 28th highest in the nation.
Despite these increases, Pennsylvania’s overall and child poverty levels were below the national average.
Median household income in Pennsylvania was $52,007 in 2013, $243 below the national average and 23rd highest among the 50 states and Washington, DC.
Pennsylvania’s median income remained statistically unchanged from 2012. In inflation-adjusted terms, Pennsylvania’s median household income was $2,547 lower than it was prior to the recession.
Nationally, median household income showed a modest ($133) increase from 2012 to 2013. Pennsylvania needs to act to prevent the commonwealth from falling further behind as other states' household incomes grow.
This data on the stagnation of working families and the poor dovetails with the results of a Keystone Research Center report, released two days before these Census numbers, that showed that the top 1% of earners enjoy a larger share of income, while the middle class has shrunk, in every Pennsylvania county since the late 1970s.
Pennsylvania is already short of money and borrowing to pay bills less than three months into a new budget year. And that's after transferring $225 million from other state funds in July.
State officials can't blame a natural disaster, unfortunate accident or month of unexpectedly low tax collections. Instead, the culprit is a built-in imbalance between revenues and expenditures triggered, in large part, by policymaker choices.
Today’s action marks the first time in recent memory when the commonwealth has had to borrow operating cash so early in the budget year, particularly when the economy is expanding. The actions today should serve as yet another warning to both lawmakers and citizens of the growing price of failing to fix the state’s ongoing fiscal challenges.
This is not the first sounding of the alarm on this issue. In 2013, the Independent Fiscal Office warned of the state’s ongoing deficit. In July, Moody’s Investor Service cited the commonwealth’s “large and growing structural imbalance that reflects underperforming revenues, the continued use of one-time measures in the budget, and the ongoing deferral of restoring reserves,” when it downgraded Pennsylvania’s credit rating.
As the rating agency made clear, the state budget is fiscally unsound, and relying on optimistic revenue projections and one-time transfers that do little to correct a structural imbalance. The Rainy Day Fund hasn't been replenished since it was cleaned out in 2010 at the height of the recession.
The Corbett administration isn't exclusively to blame. Lawmakers made matters worse by adding new tax cuts the commonwealth clearly cannot afford. Examples include the House’s recent refusal to close a loophole in the bank tax that has further destabilized the state budget by limiting revenue growth as the economy expands.
A path to a more sustainable budget exists, but we need to stop digging the hole deeper. Lawmakers need to examine the tax cuts that have been whittling away at the state revenue base and adopt commonsense, recurring revenues such as a severance tax on natural gas.
We know the price of inaction: Pennsylvania’s budget situation will only grow more precarious, with more cuts to classrooms and critical services; more reliance on one-time revenues and other gimmicks to bring in quick cash; and more pressure on local property taxpayers to pick up the tab.
It was a good day for corporations that own land in Pennsylvania; not so much for individual Pennsylvanians who eat food and earn money.
The Senate Finance Committee voted 6-5 on Sept. 16 to advance SB 76 to the Appropriations Committee, often a bill's last stop before the full Senate takes up consideration of it.
Voting to advance the property tax elimination bill were: Republican Senators Mike Brubaker of Lancaster County, Pat Browne of Lehigh County, John Eichelberger of Blair County and Senate Pro Tem Joe Scarnati of Jefferson County; and Democratic Senators John Blake of Lackawanna County, and John Wozniak of Cambria County.
Voting against SB 76 were Republican Senators Pat Vance of Cumberland County, Stewart Greenleaf of Montgomery County, and Scott Hutchinson of Venango County; and Democratic Senators Rob Teplitz of Dauphin County, and Matt Smith of Allegheny County.
The bill's supporters will tell you that SB 76 would eliminate property taxes. What they are less vocal about is how it would make up that lost revenue.
SB 76 would raise the sales tax from 6 percent to 7 percent and expand the tax to cover such currently non-taxable items and services as food, non-presciption medications, garbage collection, funeral expenses, child care and non-housing charges at many nursing facilities, among other things. Many business-to-business services would be exempt from the sales tax.
The bill also would increase the personal income tax from 3.07% to 4.34%.
So SB 76 would be a true tax cut only for corporations and large businesses that would no longer have to pay local property taxes. For the rest of us, it would merely be a tax shift, and to some pretty essential items and services at that.
But worst of all, SB 76 would hurt Pennsylvania's public schools. It would make permanent recent state cuts to education. It would drain billions of dollars from schools in future years by artificially capping state education funding at levels unrelated to actual costs. And it would undermine local control of schools and hand over funding decisions to Harrisburg.
It's not too late to stop SB76. Watch this blog for further updates on the bill's status.
In the meantime, here's PBPC's statement on the Senate Finance Committee's action.