Good Jobs, Strong Industries, A Better Pennsylvania: Towards a 21st Century State Economic Development Policy Press Conference

Remarks of Senator Pat Browne
Senate Bill 1279/The Economic Development and Fiscal Accountability Act

Good morning.

As we enter the final weeks of the first quarter of 2010, we have yet to see any encouraging signs of recovery from the national economic recession. Unemployment across the nation continues at double digit levels and most economic indicators are tepid at best.

Here in Pennsylvania, we have fired better than some areas, be we have not been immune from the negative aspects of the recession. Communities across our state and the state itself have paid a major price as a result of the economic downturn that ravished our nation. Our unemployment rate is marginally better than the national average, but still too many of our citizens are out of work.

Hundreds of jobs instantly disappeared as major companies floundered and failed. Those events made the news, but equally as devastating on Main Street were the closures of countless smaller businesses. Each closure weakened the economic network of their community and the lost commerce further sapped the strength of affiliated businesses.

And, the impact of those closures and job losses – large and small — directly affected all residents of the Commonwealth.

With less money in hand, people simply were not spending as much and subsequently we saw dramatic reductions in our state sales tax revenues. In addition, business closures and job losses resulted in substantial decreases in personal and corporate income tax receipts.

Those reductions in direct collections, coupled with decreases in state revenue up and down the ledger, resulted in a perfect storm that dramatically affected Pennsylvania’s ability to make ends meet. Budgetary revenue projections completely failed. The spending numbers that looked good ultimately proved to be unsustainable. That’s why Pennsylvania faced a $3 billion shortfall last year.

In response, we were forced to make major reductions across most areas of the budget. In fact one of the hardest hit areas was the Department of Community and Economic Development, the engine that drives most of the state’s efforts to promote business development and job creation.

This Department which had an overall budget of 653.6 million in fiscal Year 2006-07 was reduced to a total state allocation of $264.8 million for the current fiscal year and even that level of funding was imperiled by the Governor’s subsequent freeze of many discretionary funds in January.

In fact, that is one of the reasons why the DCED has seen the cuts that it has experienced. It is one of the few Departments in state government that includes substantial discretionary spending line items.  Overall, more than three-quarters of state spending goes to areas that have little to no room for major reductions. It’s extremely difficult to reduced state spending for education, corrections and public welfare.

That meant the DCED took a major hit in funding last year. That reduction in discretionary spending meant fewer state investments in programs that provide support for new business and job creation. Some of the programs were defunded and others were dramatically scaled back. 

This process, in a way, resulted in a vicious circle.

Without support for economic development and seed money for start-up companies, we are losing out in job growth which in turn means we are losing out in revenues that would be gained from personal and corporate income tax receipts.

Now more than ever, when our state economy is stretched to the breaking point and beyond and revenues are lean, government must increase accountability in its economic development efforts to ensure that funding is not being squandered and that businesses receiving the assistance are fulfilling their promises.

That’s why I introduced Senate Bill 1279, the Economic Development and Fiscal Accountability Act.

This legislation requires reporting, job quality standards, and allows for public protections for taxpayer dollars used for economic development subsidies. 

Specifically Senate Bill 1279 requires that the Department of Community and Economic Development report to the General Assembly annually to quantify the cost of all economic development subsidies, including revenues not captured as a result of tax exemptions such as those offered in Keystone Opportunity Zones as well as other tax abatements or exemptions. 

In addition, my legislation also requires that local property taxing entities – counties, municipalities and school districts — report to the Department of Revenue on tax exemptions within their jurisdiction. 

Entities receiving state subsidies would be required to submit reports both before a subsidy is received, as well as regularly after, to allow for more effective quantification of the number of jobs created, as well as wages and certain benefits offered as part of those jobs. 

The bill ensures that the promised jobs are created and that they pay appropriate wages. 

With the reductions in state funding, it is essential that increase the accountability of those who are receiving taxpayers’ support.

And, my legislation provides the groundwork for taking corrective action when those obligations are not met. Under Senate Bill 562, the state will have the ability to recapture economic development funds if the benefiting entity fails to live up to the terms of the contract. 

Finally, this legislation brings more transparency to the process and give the public an enhanced ability to monitor these projects. Taxpayers will have the right to file suit to ensure enforcement of the Economic Development and Fiscal Accountability Act and the right to review all reports and records relevant to it as well.. 

I call on my colleagues to stand with me to bring this accountability and transparency to the process. This legislation is an important step in ensuring that taxpayer dollars are not wasted on projects that are not in the best interest of the public and instead channeled to those efforts that will spur economic growth and job creation.

Thank you.