Lincoln * Institute

Lowman S. Henry

Lowman S. Henry

Chairman & CEO
Lincoln Institute
of Public Opinion Research

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Lincoln Institute
of Public Opinion Research, Inc.

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Town Hall Commentary

PA Economy Stuck in Low Gear

by Lowman S. Henry
 

The economic recession in Pennsylvania leveled off last spring, but results of the Fall 2010 Keystone Business Climate Survey reveal the recovery has not yet begun. The drop in sales that plagued Pennsylvania businesses through 2009 and into early 2010 has slowed, however employers continue to shed jobs as they try to minimize losses and perhaps turn a profit.

One year ago the survey found owners and chief executive officers in a dour mood over the state's business climate. At that time a record 64% said they felt business conditions in Pennsylvania had gotten worse in the previous six months. The spring 2010 survey found some improvement with 43% saying they viewed the economy has having gotten worse. There was no change in the recently completed October 2010 survey with 43% again saying business conditions in the commonwealth had deteriorated over the past six months.

The number of owner/CEOs saying the state's economy has improved over the past six months increased slightly from 13% last spring to 17% in the fall survey. That is also an improvement from one year ago when just 1% viewed the economy as improving. Forty percent in the Fall 2010 survey said they viewed the state's economy as having remained about the same over the past six months.

Looking ahead, 38% expect the state's economy to remain about the same over the coming six months, 34% forecast a continuing decline in economic conditions, while 27% expect the Pennsylvania economy to improve.

The bad numbers come in the area of employment. Twenty-nine percent report that employment levels at their company are lower than they were six months ago. Last October, 25% of the companies reported declining employment. The good news is that 17% percent in the current survey say employment levels at their company have increased, that is up from the 11% that reported increasing employment levels a year ago. Fifty-three percent say employment levels in October remained at about the same level as they were last March.

Pennsylvania likely will have to deal with stubbornly high unemployment for the immediate future. Over the coming six months employers project essentially the status quo in the number of people they employ. Sixty-four percent say they plan to keep employment at the current level for the next six months, 18% forecast a decline in employment while 18% expect to add employees.

The bright spot, to the degree there is one, comes in the area of sales. In March of this year 52% of the companies surveyed by the Lincoln Institute reported sales had declined over the previous six months. That number dropped to 40% in the October survey. The companies reporting sales increases rose from 21% last spring to 25% in the current poll. Thirty-five percent of the companies said their sales remained constant throughout the year.

As we look ahead to the coming six months, 32% say they expect sales at their company to increase, while 20% forecast a decline. A plurality, 46% say they expect sales to remain level.

Pennsylvania's generally poor business climate relative to other states has prompted a number of companies to consider moving from the commonwealth. Fourteen percent say they are considering moving at least some of their operations to other states, while 3% say they are considering moving all of the Pennsylvania operations elsewhere.

Job Approval Ratings

Elected officials generally speaking got negative job performance reviews by the business owners and CEOs surveyed by the Lincoln Institute. U.S. Senator Arlen Specter, who was defeated for in the May Primary by Congressman Joe Sestak received the highest negative rating at 78% and only 12% giving him a positive review.

President Barack Obama and his economic team also were given poor job performance reviews. Seventy-four percent have a negative view of the President's job performance with 20% expressing approval. Sixty percent disapprove of the job being done by U.S. Treasury Secretary Timothy Geithner Forty-five percent held a negative view of Federal Reserve Chairman Ben Bernanke relative to the 32% who have him a positive rating.

On the state level, Governor Ed Rendell also is held in minimal regard. Seventy-four percent expressed a negative view of the governor's job performance with just 18% giving him positive marks. Sixty-two percent gave negative ratings to U.S. Senator Robert P. Casey, Jr. The only statewide elected official to receive a majority positive job performance rating was Attorney General Tom Corbett, who chalked up a 58% positive rating against a 19% negative rating. Auditor General Jack Wagner earned a 21% positive rating and a 17% negative rating, with 62% holding no opinion. Sixty-seven percent voiced no opinion on the job being done by State Treasurer Rob McCord, with 11% giving him a positive job performance rating and 22% a negative rating.

Legislative bodies also are viewed in a negative light by Pennsylvania employers. Ninety percent hold a negative view of the job being done by both the U.S. Senate and the U.S. House of Representatives. Seventy-seven percent hold a negative view of the Pennsylvania House of Representatives and 72% voiced a negative view of the job being done by the Pennsylvania state Senate.

National Issues

President Barack Obama's proposal to stimulate the U.S. economy by spending $50 billion on infrastructure improvement projects such as highways, airports and railways was opposed by a two-to-one margin by the employers and CEOs who participated in the Fall 2010 Keystone Business Climate Survey. Sixty-one percent said they oppose the stimulus plan while 38% offered support. If, as suggested by many Democrats in congress, projects implemented under the proposed stimulus were subjected to project labor agreements (PLAs), meaning only unionized labor could be used on the projects, then opposition to the program skyrocketed to 89% and approval dropped to 9%.

On the subject of the Bush-era tax cuts which are set to expire at the end of this year, 68% said they favor extending all of the tax cuts while 21% want to extend the tax cuts for those making $250,000 per year or less and 9% do not want to see any of the tax cuts extended.

State Issues

Conventional wisdom holds that roads and bridges in Pennsylvania are in such bad shape that they constitute a transportation crisis. Results of the Lincoln Institute's poll of business owners and CEOs found less of a sense of urgency. Forty percent rated the condition of the state's roads and bridges as poor, but 43% rated them as fair. Fifteen percent say the roads and bridges are in terrible shape, while 1% say road and bridge conditions are excellent.

Sixty-eight percent say they are not willing to pay higher gasoline taxes to fund improvements to Pennsylvania's roads and bridges, while 27% say they would pay higher gasoline taxes. Thirty-eight percent expressed a willingness to pay higher vehicle and/or driver license registration fees, but 60% objected to higher fees.

Among the options being considered to raise tax revenue are additional taxes on companies drilling in the Marcellus shale reserve. Fifty-two percent said they would agree with a severance tax on gas drilled in the Marcellus reserve, while 45% opposed such a tax.

Education funding remains one of the largest expenditures in the Pennsylvania state budget each year. A plurality of 34% of the employer/CEOs polled say spending on K-12 public education in Pennsylvania is at about the right level; 25% think spending is too low and 24% think it is too high.

And what are we getting for the money we spend on public education? Forty-six percent say despite the additional spending the quality of K-12 education in the commonwealth has remained about the same over the past five years; 30% say it has gotten worse and 14% say the quality of public education has improved. When asked to give K-12 public education a letter grade, 10% assigned it an "A," 35% a "B," 26% a "C," 16% a "D," and 6% an "F."

When asked if they think it is possible for the next governor of Pennsylvania to balance the state budget without raising taxes, 75% said they think that it can be balanced without new/additional revenue, while 22% think it cannot. Further, the employer/CEOs polled believe the level of spending by state government has an impact on the Pennsylvania business climate. Fifty-eight percent said state spending has a significant effect on the state's business climate; 30% say it has a moderate effect, while 9% think it has no impact.

General Economic Climate

Among the difficulties businesses face in expanding and creating new jobs is access to credit. Forty-three percent of the respondents to the Fall 2010 Keystone Business Climate Survey said access to credit has gotten more difficult over the past six months. Only foour percent said they found getting credit to be easier; and 37% said access to credit has remained about the same. Another 13% said they do not access credit.

Cutting jobs and hours has been a key tactic for many businesses in dealing with the effects of the economic recession. Fifty-one percent said they have had to reduce employees work hours while 42% say they have laid-off employees. Changes in pricing have also played a role in coping with the effects of the bad economy. Thirty-seven percent said they have cut prices, 29% increased prices. Another 14% have reduced their product lines while 7% have closed or consolidated facilities.

Election

Ninety-four percent of the business owner/CEOs participating in the Lincoln Institute poll say they plan to vote in the upcoming November General Election. In the race for the U.S. Senate, 68% say they plan to vote for Republican Pat Toomey while 15% expect to cast their ballots for Democrat Joe Sestak. Republican Tom Corbett is the choice of 70% of the respondents for governor of Pennsylvania, while 13% say they will vote for Democrat Dan Onorato.

Methodology

The 2010 Keystone Business Climate Survey was conducted electronically by the Lincoln Institute of Public Opinion Research, Inc. from September 27, 2010 thru October 18, 2010. A total of 181 individuals participated in the poll of which 67% were the owner of the business, 23% were the Chief Executive Officer and the balance the state or local manager of the business. Complete numeric results are available at www.lincolninstitute.org.