Pennsylvania Again Near the Bottom in Competitiveness Ranking as Other States Widen Gap

What’s going on with the Tresco Paving Company, an open shop contractor in Westmoreland County, is sadly emblematic of a culture in Pennsylvania that has us languishing near the bottom in an annual economic competitiveness ranking, Rich States, Poor States, by the American Legislative Exchange Council (ALEC).

Westmoreland County froze Tresco out of two paving projects by requiring Project Labor Agreements (PLAs) for every job over $150,000 -- a PLA is typically incorporated for massive construction projects only. The bottom line is that a PLA demands that union workers be used on even small county jobs, and even though Tresco was the low bidder on the jobs, it lost out.

The county ended up paying $52,000 more in taxpayer dollars than it needed too. The amount of money wasted will almost certainly increase when Tresco, as it expects, gets shut out of a third job this week.

“Pennsylvania’s chronic economic underperformance can be reversed by enacting a pro-growth, pro-production agenda in Harrisburg,” said PMA President David N. Taylor. “America’s economy is poised for growth, and, if we want to earn more capital investment, industrial production, and jobs, the Commonwealth needs to scrap the anti-enterprise polices that are holding us back.”

Businesses and workers all across Pennsylvania are victims of policies that place us 38th on Rich States, Poor States rankings based on 15 equally-weighted economic policy variables, including tax rates, labor policy, and regulatory climate. What’s worse for Pennsylvania is that some states are making the policy changes necessary for economic growth, and are leaving us even further behind.  

“Our study clearly shows that the state that value economic freedom and competitiveness outperform states that adhere to a tax-and-spend model, with policies having a substantial effect on where business and individuals choose to set up shop,” said Jonathan Williams, the chief economist and vice president of ALEC’s Center for State Fiscal Reform. “And it’s important to keep in mind that Pennsylvania will not stand still by doing nothing to change its policies. It will keep trending down.”

One glaring example lies with Kentucky and Missouri this year joining 26 other states with Right to Work laws, giving workers the right to decide for themselves whether to join or financially support a union. These states have a distinct economic advantage over us; it’s evident when you change Pennsylvania’s Right to Work variable in the ALEC study. We become a Right to Work state and we jump from 38th to 33rd in the rankings.  Change another variable in eliminating our uncompetitive estate/inheritance tax structure, and we move all the way up to 28th.

Other comprehensive policy challenges are our high corporate and personal income tax rates, and our rampant lawsuit abuse challenges.

The net effects of our policies can be seen in our slogging job creation numbers and sluggish tax collections. Compared to many states are job creation has been “pitiful,” says Frank Gamrat, Ph.D., Senior Research Associate, Allegheny Institute for Public Policy.

“While recent growth has been slightly faster since September 2016, it is still struggling to shift to a higher sustained pace, especially with manufacturing weakness and mining still yet to launch a full recovery,” Gamrat said.

Revenue collections for the Commonwealth are again tracking well behind projected levels. After the first quarter of this fiscal year, General Fund revenues were below projections by over $218.5 million.  After three quarters, that gap widened to more than $679.3 million or three percent below official estimates. 

Gamrat said that if policies remained unchanged, we are on a tragic track of higher taxes but even less spending on core government services.

“You can see it already on the local level where property taxes are going up to fund public pension obligations,” he said. “The state is headed in the same direction.”

What’s more, we are in danger of not taking full advantage of the economic multipliers from even our homegrown opportunities, most notably, shale gas.  

“We have the lion’s share of the product," Gamrat said referring to the Marcellus expanse in Pennsylvania, “but the product is portable. I’m sure Kentucky, who just passed a right to work law, would love to have a chance to process the gas.”

Besides paving, the Tresco Companies include a trucking division and a concrete and an asphalt manufacturing plant. They employ 80 with family sustaining incomes and, as Diane Tresco said, top “health care and pension plans.” They’ve received numerous awards for the quality of their work, and in Pennsylvania, they are being denied work even when coming in as the lowest bidder.

Little wonder other states are leaving us behind.

 

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