With the gubernatorial election in the rearview mirror, business leaders were optimistic that Pennsylvania’s still-divided government can find areas of compromise in Gov. Tom Wolf’s second term.
Wolf, a Democrat, cruised to victory last week over Republican challenger Scott Wagner, a former state senator and owner of trash company Penn Waste.
Democrats also picked up 11 seats in the state House — mostly in the Philadelphia suburbs — and added five seats in the Senate, though the General Assembly remains firmly in Republican control.
“The majority in both chambers has narrowed, which forces a little more compromise,” said Mike Manzo, senior vice president of government affairs for Triad Strategies, a Harrisburg-based public affairs firm. “Neither side can afford to be ideological and obstructive.”
During his first term, Wolf found common ground with Republican leaders on public pension and liquor law reforms. Lawmakers also expanded gambling in Pennsylvania and legalized medical marijuana.
But the York County Democrat also has been opposed by Republicans in his calls for a higher state minimum wage, a severance tax on natural gas and expanded eligibility for overtime pay.
Business leaders who largely backed Wagner said they don’t expect Wolf to give up on those issues during his next term.
But seeing more Democrats across the aisle, Republicans may be willing to work with Wolf to iron out deals in exchange for advancing GOP priorities.
CORPORATE TAX CUT?
Topping the list could be business regulations and taxes, including potential changes in corporate net income tax.
Businesses are eager to see the state’s CNI cut from its current rate of 9.99 percent. Wolf supports a cut, but his support has been linked to what is known as combined reporting, a policy business leaders and Republicans oppose. Combined reporting would require multistate corporations to add together into one tax report the profits of all of their subsidiaries, regardless of their locations. Businesses argue that combined reporting is burdensome and hard to administer.
“As long as the other side asks for combined reporting, it probably won’t go anywhere,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry.
Nonetheless, the state chamber is hopeful state lawmakers will take a page out of the federal playbook and address tax reform in 2019.
“One of the major things fueling the economy has been the federal tax reform,” Barr said. “One of the things that holds Pennsylvania back is the state corporate tax rate.”
Kevin Schreiber, president and CEO of the York County Economic Alliance, said he believes a deal could be brokered over the CNI rate or possibly a severance tax.
“For many years, they have talked about reform,” said Schreiber, a former Democratic member of the House. “There is probably a deal to be made.”
And as they look ahead to the 2020 election, both parties could see pressure to show results. Lawmakers may look to strike deals on bipartisan issues like funding for workforce development and infrastructure, political consultants said.
In a tight labor market, the Wolf administration already has been pushing for more apprenticeship programs, including pre-apprenticeship opportunities for high school students, as part of an initiative dubbed PAsmart.
“I think you will see broad consensus on apprenticeship programs. It’s a win-win situation. You will see support for more funding for that,” said Charlie Gerow, a CEO of Harrisburg-based Quantum Communications.
Brent Sailhamer, director of government affairs for the Keystone Chapter of the Associated Builders and Contractors, said ABC members “couldn’t be more thrilled” with the workforce push by the governor. And they expect the focus will continue.
ABC also hopes 2019 will bring renewed interest in Congress on a federal infrastructure plan, which may prompt state discussions on transportation funding.
The Trump administration, which came in with promises of more spending for roads, bridges, ports and other infrastructure, has been pushing a public-private plan. But efforts to advance a bill have stalled.
“I think everyone is listening to the rhetoric on bipartisanship,” Sailhamer said. “I think an infrastructure package is a great way to start.”