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Lowman S. Henry

Lowman S. Henry

Chairman & CEO
Lincoln Institute
of Public Opinion Research

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Town Hall Commentary

PA Business Climate Improving

by Lowman S. Henry
 

For the first time in a decade, by a narrow margin, more Pennsylvania employers say business conditions in the commonwealth are improving than say the state's economy is getting worse. But, that optimism is tempered by a lack of job creation and lower wage hikes due to the implementation of the Affordable Care Act, better known as Obamacare.

George W. Bush was president and on the verge of re-election in 2004, the last time respondents to the Lincoln Institute's Keystone Business Climate Survey thought the business climate was getting better rather than worse. Since then the nation has experienced the Great Recession and subsequent slow recovery.

But, the current survey finds 20% of the business owners and CEOs responding say over the past six months business conditions in Pennsylvania have gotten better, while 19% say the state's economy has gotten worse. By comparison, one year ago 31% felt business conditions had gotten worse and just 14% saw an improvement.

There is not, however, optimism for the immediate future. Looking ahead six months, 27% expect business conditions in Pennsylvania to get worse, while 16% expect conditions to get better.

Driving the current burst of optimism are increasing sales. Thirty-six percent of the companies said sales have increased over the past six months as 24% reported decreased sales. Looking ahead, 32% project sales will increase, 13% expect sales to drop.

Employment levels dropped over the past six months, with 20% reporting higher employment and 24% saying employment at their business has decreased. Looking ahead six months, 21% project adding employees, while 9% plan to employ fewer workers.

Impact of the Affordable Care Act

It is clear the Affordable Care Act (ACA), or Obamacare, is having a negative impact on both the number of jobs that are being created, and on wages and pay hikes. Twenty-five percent of the business leaders participating in the survey said they have decided not to hire additional employees due to the requirements of Obamacare. Ten percent said they have actually reduced the number of employees because of ACA; while another 3% said they hired, but did so later than they had planned. Less than 1% said they hired sooner than planned because of Obamacare. Fifty-eight percent said ACA has had no impact on their hiring plans.

In terms of wages/salaries, 33% said they have delayed giving pay raises due to the costs of Obamacare. Twenty-eight percent indicated they reduced the amounts of pay raises, while 26% said they paid new hires less to compensate for the costs associated with compliance of the Affordable Care Act. Five percent reduced the pay of current employees, while 2% said they increased employee pay in response to ACA requirements. A total of 42% said Obamacare has no impact on their wages/salaries.

State Issues

Education spending has been a major issue in the gubernatorial campaign. But, unlike the electorate at-large, business owners and CEOs participating in the Fall 2014 Keystone Business Climate Survey say the state spends too much money on public education. Forty percent think state government spend too much on public education, 29% say the state spends too little, while 27% say state spending on public education is about the right amount.

By a large margin, 78% to 19%, the employers say they are not willing to pay higher taxes to provide additional funding to public education. There is, however, strong support for the Educational Improvement Tax Credit (EITC) which businesses can claim for donating money to K-12 educational institutions. Forty-seven percent think the General Assembly should allocate more month to the tax credit fund so more businesses can participate; 36% say the fund should be kept at current levels.

Taxes have also been a major campaign issue in 2014. When asked whether Pennsylvania should retain the current "flat" income tax or move to a "graduated" income tax where low income earners are exempt and higher income earners pay a higher rate 84% said they support the current "flat" income tax, 14% would like to see a "graduated" rate.

A proposal to exempt the first $30,000 from state income taxes and raise the rate for money earned above that level from 3.07% to 5% drew strong opposition from the business leaders. Seventy-three percent oppose such a system with 60% saying they are strongly opposed. Twenty-three percent said they would support such a change.

Mandating paid sick leave for employees was opposed by three-quarters of the business owners and CEOs who participated in the Lincoln Institute survey. Seventeen percent said they would support mandating paid sick leave for businesses with over 50 employees. Another 6% support mandating paid sick leave for all businesses regardless of size.

Job Approval Ratings

Mirroring the national trend, President Obama received a highly negative job approval rating from the business owners and CEOs. Eighty-five percent voiced a negative view of the president, while 13% offered a positive assessment.

U.S. Senator Pat Toomey is viewed favorably by 51% of the survey participants while 24% have a negative view. The numbers reverse for U.S. Senator Robert P. Casey, Jr. as 60% offered a negative view of his job performance against a 21% positive rating. Fed Chairman Janet Yellen received a 38% negative/ 28% positive rating; and, U.S. Treasury Secretary Jack Lew scored a 42% negative/8% positive.

At the state level Governor Tom Corbett sports a 52% positive rating while 35% disapprove of the job being done by the Republican governor. The CEOs and business owners turned thumbs down on Attorney General Kathleen Kane, who received a 49% negative rating against just 16% positive. Most offered no opinion on the job performance of Auditor General Eugene Depasquale and State Treasurer Rob McCord. Of those who did, Depasquale had a 20% negative/11% positive rating and McCord scored 21% negative/17% positive.

Participants in the Fall 2014 Keystone Business Climate Survey took a dim view of the job being done by both Congress and by the Pennsylvania General Assembly. Eighty-nine percent offered a negative assessment of the U.S. Senate, with 7% having a positive view. The U.S. House of Representatives fared slightly better scoring a 72% negative/22% positive rating. Sixty-three percent have a negative view of the job being done by the Pennsylvania Senate, 19% approve. The Pennsylvania House of Representatives turned in a marginally higher score, with a 62% negative/23% positive rating.

And, Governor Tom Corbett finally came out ahead in one poll. Sixty-five percent of the business owners and CEOs said they plan to vote for the incumbent governor in the November 4th General Election, 20% say they will cast their ballot for Democratic challenger Tom Wolf. However, 53% expect Wolf to win the election, while 29% predict a Corbett victory.

Methodology

The Lincoln Institute's 2014 Keystone Business Climate Survey was conducted electronically from September 26, 2014 through October 17, 2014. A total of 316 responses were received. Of those, 69% are the owner of their business, 24% are the CEO/COO or CFO, another 4% are a state or local manager. Twenty-seven percent of the respondents are located in southeastern Pennsylvania, 18% in southwestern Pennsylvania, 14% in the northwest section of the state, 17% in south-central Pennsylvania, 11% in northeastern Pennsylvania, 6% in the Lehigh Valley, six percent in north-central Pennsylvania and 1% in the Altoona/Johnstown area. Complete numeric results are available at www.lincolninstitute.org.