No Way to Run a Railroad

Candidates for public office often pledge to “run government like a business” or at least abide by sound business principles. In the collective opinion of the business owners and Chief Executive Officers participating in the Fall 2017 Keystone Business Climate Survey state government is falling far short of that goal.

The business leaders have a decidedly negative view of the state’s budget process and that in turn has caused a burst of optimism that followed the inauguration of President Donald J. Trump to vanish and to be replaced with a pessimistic outlook. This in turn has resulted in a drop in job approval ratings for Governor Tom Wolf and both houses of the General Assembly.

A lopsided 91% of the owners/CEOs responding to the survey conducted by the Lincoln Institute of Public Opinion Research said they are unsatisfied with Pennsylvania’s state government budgeting process. Of that number 71% are very unsatisfied. Ninety-four percent disapproved of the fact lawmakers adopted a spending package without simultaneously passing a revenue package to fund that spending.

That action resulted in the current budget stand-off as legislators approved spending in excess of anticipate revenue have not been able to come to an agreement on how to fund the gap. But, respondents to the survey are generally supportive of missing the state budget deadline if it means holding the line on taxes. Seventy-five percent said preventing a tax increase is more important than meeting the budget deadline, 21% disagreed.

A proposal floated by state Senate Republicans to borrow money from future tobacco fund settlement payments to help fund the current year’s budget deficit was solidly opposed by the business leaders. Eighty-three percent disapproved of the idea �” 60% strongly disapproved. Thirteen percent agree with the proposal.

The budget battle has taken a toll on the popularity of both Governor Wolf and the legislature. Governor Wolf, a former CEO himself, has always been deeply unpopular with his one-time peers. In the Spring 2017Keystone Business Climate Survey just 16% approved of his job performance while 76% disapproved. The governor’s job approval rating slid even further in the Fall survey dropping to 10% positive �” 82% negative.

The state Senate, theoretically under Republican control, took the biggest hit to its job approval rating. Approval of Senate Republicans dropped from 30% positive/ 55% negative last Spring to 16% positive/75% negative in the current survey. The state House also found its job approval taking a hit, dropping from 32% positive/52% negative in the Spring to 21% positive/72% negative in the Fall poll.

Optimism Evaporates

In the wake of Donald Trump assuming the presidency, the Spring 2017 Keystone Business Climate Survey found a surge in optimism in the state’s business climate. That burst of exuberance was short lived as the numbers have returned to the negative trend that existed prior to the election. When asked if business conditions in Pennsylvania are better, the same, or worse than they were six months ago, respondents to the survey saying better dropped from 27% last spring to 18% in the current survey; conversely those saying business conditions have gotten worse rose from 20% last spring to 25% in the Fall poll.

Looking ahead six months just 16% expect business conditions to improve, 24% expect business conditions to get worse. That is a reversal from last Spring when 36% expected business conditions to get better and 18% predicted they would get worse.

Employment levels have also dropped, albeit slightly. Fifteen percent of the companies participating in the survey said employment levels are higher than they were six months ago, 18% report they are lower. Again this is a reversal from last spring when 17% reported employment levels were up, and 15% said they were down. Looking ahead, however, there is some optimism: 20% predict they will add employees over the coming six months, while 10% expect the number of workers they employee to drop.

Sales remain a bright spot. Thirty-two percent of the businesses participating in the Fall 2017 Keystone Business Climate Survey say sales over the past six months increased, 24% reported a sales decrease. In the coming six months, 28% expect sales to go up, 12% forecast a drop in sales.

State Issues

Among the ideas floated to deal with Pennsylvania’s budget crisis is allowing the placement of video gaming terminals (VGTs) in bars and restaurants and the legalization of on-line gaming as a means of generating additional tax revenue. Fifty-one percent of the owners/CEOs disagree with that ideas, while 43% agree.

There is a proposed amendment to the state constitution that would limit the annual increase in state government spending to the rate of inflation plus population growth. Seventy-five percent of survey respondents agree with that proposed amendment �” 42% strongly agree; 18% disagree.

Another proposal before the General Assembly is the calling of a limited (governance, structure) state constitutional convention. Fifty-three percent agree such a convention should be called; while 19% disagree. On this question 28% remain undecided.

The Pennsylvania Supreme Court recently struck down a 20 year-old law that allowed impairment evaluations by medical professionals of long-term injured workers compensation cases. This decision will have a significant financial impact on businesses throughout the state. Despite that, 75% of the respondents were unaware of the court’s ruling.

Made aware of this court action, and told it will likely result in double-digit increases in workers compensation premiums next year, the owners/CEOs were asked how this increase would affect their business. Thirty percent said they would have to raise prices; 17% indicated they would be forced to cut employee benefits; 15% suggested they would have to lay off workers; eight percent said they would cut employee hours, and six percent said such an increase would force them out of business.

Federal Issues

Congress has failed to repeal and/or replace the Affordable Care Act, commonly known as Obamacare, nor has it enacted any significant reforms to the current system. Sixty-nine percent of the respondents to the survey said this lack of action has had an adverse impact on their business �” 34% said the adverse impact was significant. Over the past year 48% report their costs for providing employees with health insurance has risen substantially, 20% said they have experienced a moderate increase in rates; while 3% said rates stayed about the same. Another 24% do not provide employees with health care coverage.

When asked who was responsible for the lack of action on health care reform, 32% blamed both congress and the president; 39% blamed congress as a whole; and three percent placed the blame on President Trump.

The other big issue, now before congress, is tax reform. The failure of congress to enact such reforms would have an adverse impact at 77% of the businesses surveyed, with 31% saying the adverse impact would be significant. Ten percent said a lack of action would positively impact their business operations.

Job Approval Ratings

The business owners and Chief Executive Officers participating in the Fall 2017 Keystone Business Climate Survey continue to have a strong favorable opinion of the job being done by President Trump: 67% offered a positive view, while 26% were negative. U.S. Senator Pat Toomey’s job approval rating stands at 47% positive/34% negative. U.S. Senator Robert P. Casey, Jr.’s job approval rating dropped from 21% positive last Spring to 12% positive in the Fall survey while his negative rating jumped from 59% in the spring to 71% in the current poll. U.S. Treasury Secretary Steven Mnuchin posted a 33% positive/20% negative rating.

Governor Tom Wolf continues to post the highest disapproval ratings of any statewide elected official. His negative rating actually increased from 76% last Spring to 82% in the Fall survey; his positive number dropped from 16% in March to 10% in September. Attorney General Josh Shapiro’s job approval rating is also in negative territory: 17% positive/28% negative. Likewise State Treasurer Joe Torsella is upside down with a 10% positive/26% negative rating. Only state Auditor General Eugene Depasquale is in positive territory having posted a 22% positive/20% negative rating.

Approval of both federal and state legislative chambers has also dropped over the past six months. The United States Senate earned a 4% positive/94% negative rating; the U.S. House of Representatives fared marginally better with a 12% positive/84% negative rating. At the state level, the owners/CEOs strongly disapprove of the state Senate giving it a 16% positive/76% negative rating; and they dislike the job being done by the state House of Representatives giving the lower house a 21% positive/72% negative rating.

Methodology

The 2017 Keystone Business Climate Survey was conducted electronically by the Lincoln Institute of Public Opinion Research, Inc. from September 12, 2017 �” October 12, 2017. During that time frame 315 responses were collected. Of that number, 85% were from the owner of a business, 12% from the CEO/COO/CFO, and 1% from a state level manager. Geographically, 28% of the respondents were from southeastern Pennsylvania, 18% from southcentral Pennsylvania, 17% from southwest Pennsylvania; 12% northcentral Pennsylvania, 10% northwest Pennsylvania; 8% northeastern Pennsylvania; 6% from the Lehigh Valley and 1% from the Altoona/Johnstown area. Complete numeric results can be viewed at www.lincolninstitute.org.