Hitting the Skids: Keystone Business Climate Survey finds PA economy still slipping

Columnist : Lincoln Institute
Harrisburg (PA) – Pennsylvania employers reported the lowest business climate confidence levels in nearly a decade according to the Lincoln Institute’s Spring 2003 Keystone Business Climate Survey. Business leaders also gave mixed reviews to Governor Ed Rendell’s budget and tax shifting proposals.

“Business confidence in Pennsylvania’s economy continued a year-long slide mirroring national business trends,” said Lowman S. Henry, Chairman of the Lincoln Institute. “Companies also reported reduced employment and slumping sales.” However, Henry said there was some optimism among employers that a turnaround in the economy could begin later this year.

Fifty-five percent of the corporate leaders who participated in the Keystone Business Climate Survey said business conditions in Pennsylvania are worse than they were six months ago. This is the first time in the nine-year history of the semi-annual survey that a majority of businesses have said business conditions had gotten worse in the preceding six months. Just 9% said they felt business conditions in Pennsylvania had improved during the past six months, 36% felt business conditions had remained about the same over that time frame.

Looking ahead, the survey found 44% of the businesses optimistic that the state’s business climate will improve during the coming six months, while 41% expect business conditions to remain about the same. Twelve percent expect business conditions to continue to decline.

Employment levels have remained steady at 49% of the businesses responding to the survey, while 35% report employing fewer workers than they did six months ago. Only 14% reported having more employees than they had last September. Looking ahead six months, 59% forecast having the same number of employees in their workforce, 22% say they anticipate hiring more workers, while 17% forecast filling fewer jobs.

Sales have also hit the skids. Forty-one percent of the corporate executives surveyed said they have suffered from decreased sales over the past six months. Twenty-six percent said their sales had improved since last September, while 31% said sales remained about the same. There is considerable optimism that sales will improve headed into the fall. Forty-seven percent predict their sales will increase while only 14% expect declining sales. Thirty-seven percent of the firms project sales will remain steady.

Job Performance Ratings

President George W. Bush continues to receive strongly favorable job performance ratings from Pennsylvania’s business community. Eighty-three percent have a positive opinion of the President, with 16% reporting a negative view of his performance in the nation’s highest office, and 2% undecided.

Despite the nation’s economic woes, the Keystone Business Climate Survey posted a strong positive job performance rating (76%) for Federal Reserve Board Chairman Alan Greenspan. His rating was, however, down from 82% last fall. Ten percent of those participating in the current survey gave Greenspan a negative rating, while 14% were undecided.

n the Keystone Business Climate Survey’s first measure of Pennsylvania Governor Ed Rendell’s job performance the new state chief executive got decidedly mixed reviews. Thirty-eight percent said they had a positive view of the governor’s job performance, but 32% said they had a negative opinion. Since it is still early in his term, a relatively high 30% offered no opinion.

U.S. Senator Rick Santorum is the most popular statewide figure surveyed. He received a 63% job approval rating, with just 16% saying they had a negative view of the state’s junior senator. Another 20% offered no opinion. However, his partner, U.S. Senator Arlen Specter received the lowest job approval rating in the survey with just 31% holding a positive view of his job performance. Thirty-eight percent said they had a negative opinion of Senator Specter, while 31% offered no opinion.

Policy Issues

Governor Ed Rendell’s budget proposals, particularly his plan to raise the Personal Income Tax, drew a negative reaction from the Pennsylvania businesses executives who participated in the Spring 2003 Keystone Business Climate Survey.

Forty-seven percent disagree with the governor’s tax and spending package, while 44% said they support the Rendell plan. That overall negative position was driven by opposition to the governor’s proposal to raise the Personal Net Income tax from 2.8% to 3.75%. Seventy percent said they oppose, with 49% strongly opposing the proposed personal income tax hike. Twenty-nine percent agree with the plan to raise the PIT.

The Governor’s plan to shift funding for local school districts by cutting property taxes and replacing the revenue with $1.5 billion in additional state subsidies drew a mixed response. Forty-nine percent said they support the idea, 44% said they disagree. The remaining 6% held no opinion.

Business executives disagreed with Governor Rendell’s plant to bail the state out of its current cash shortfall. When asked if they agreed or disagreed with the governor’s plan to use $700 million from the proposed increase in the Personal Income Tax, along with money from the state’s “rainy day fund” to plug the deficit in the 2003-2004 budget, 57% said they disagreed, while 37% expressed support for the plan.

Another centerpiece of the governor’s economic agenda is a proposal to borrow, through bonding, $1.5 billion and spend the money on an economic stimulus program. Fifty-eight percent of the corporate chieftains participating in the Keystone Business Climate Survey said they support the bonding initiative, while 34% disagreed.


The Lincoln Institute’s Keystone Business Climate Survey was conducted between April 4, 2003 and April 15, 2003. The survey was sent electronically to 1,400 corporate executives throughout the commonwealth. As of the April 16, 2003 deadline, 179 had responded. Complete numeric results of the Spring 2003 Keystone Business Climate Survey can be obtained on-line at www.lincolninstitute.org.