HARRISBURG - A troubling state tax revenue report for April is throwing into sharper relief a debate over the best way to create jobs and bring more tax dollars into state coffers.
With two months until the state budget passage deadline, Gov. Tom Corbett and state lawmakers are facing big decisions about whether to spur job growth through new business tax cuts and targeted tax credits or by spending more state dollars on the important health care and transportation sectors of the economy to create thousands of new jobs.
The debate racheted up with news that Pennsylvania's unemployment rate was 7.9 percent in March, marking the seventh month it has been worse than the national jobless rate. The national jobless rate declined to 7.5 percent in April from 7.6 percent in March.
The jobless rate in the Scranton-Wilkes-Barre area was 9.6 percent in March, marking the third year in which the region's joblessness led the state.
Gov. Tom Corbett added fuel to the jobless debate when he discussed job growth in the Marcellus Shale industry during a PaMatters radio interview. Mr. Corbett talked about ongoing efforts at community colleges to offer certificate programs to train people to fill a demand for welding jobs in the gas fields.
He then said, according to a transcript provided by the governor's office: "There are many employers that say we're looking for people, but we can't find anybody that has passed a drug test in a lot of them. That's a serious concern for me."
The governor's remarks were made in the context of drilling-related jobs where employers want proof an employee is drug-fee due to safety concerns, said Corbett spokeswoman Christine Cronkright.
But the remark prompted state Treasurer Rob McCord, a potential Democratic gubernatorial candidate next year, to say Mr. Corbett is out of touch with the economic reality facing families.
The Pennsylvania Chamber of Business and Industry said the governor raised a legitimate workforce concern about job applicants being unable to meet drug testing requirements.
A different perspective on Pennsylvania's high jobless rate was offered by the state Independent Fiscal Office, a recently created agency that analyzes fiscal trends.
Pennsylvania's jobless rate has remained high due to previously "discouraged workers" starting to look for jobs again, the IFO said. More than 9,600 discouraged workers re-entered the Pennsylvania labor force during the first quarter of this year.
However, increased economic activity isn't translating into jobs, said IFO Director Matthew Knittel.
"Firms don't appear willing to hire," he added.
Meanwhile, the state Revenue Department report for April, a key tax collection month, showed that total tax collections so far this fiscal year are $67 million, or 0.3 percent above estimates made last year.
That may seem like good news, but the IFO said a continuing weakness in state sales tax collections means that the anticipated revenue growth won't pan out when the fiscal year ends June 30.
Mr. Corbett based his proposed budget for fiscal 2013-14 on revenues being $233 million above original estimates. His $28.4 billion state budget proposal would increase spending overall by 2.4 percent, provide a modest boost for basic education, eliminate the state capital stock and franchise tax and bring $175 million in savings by curbing public pension costs.
"The IFO report should raise a red flag for lawmakers," said Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a Harrisburg think tank. "Pennsylvania's revenue outlook is not as rosy as everyone expected back in February. Now is not the time to vote on costly new tax cuts for profitable corporations as the House plans to."
The Republican-controlled House plans a floor vote this week on legislation to close portions of the "Delaware Loophole" and gradually reduce the state corporate net income tax rate from 9.99 percent to 6.99 percent, said Stephen Miskin, spokesman for House Majority Leader Mike Turzai, R-28, Pittsburgh.
House GOP and Democratic lawmakers have sparred over whether this bill will completely close the loophole that allows businesses headquartered in other states to avoid paying the CNI tax on their operations here.
Mr. McCord and others have outlined a different path on the road to economic recovery.
"The key to job creation is wise investment in the sectors of the economy that will make a positive difference for Pennsylvania's future," he said.
Enacting a transportation funding package for roads, bridges and mass transit and agreeing to expand Medicaid coverage for hundreds of thousands of low-income Pennsylvanians under terms of the federal Affordable Care Act are the types of investments needed, he added.
Undertaking both programs can jump-start the state's economy, said Senate Democratic Appropriations Chairman Vincent Hughes, D-7, Philadelphia.
Mr. Corbett has voiced concern about the cost of an expansion to state taxpayers even with Washington picking up 100 percent of the costs the first three years and 90 percent of the costs after that.
But a number of outside studies have pointed to economic and fiscal benefits from Pennsylvania's participation.
An analysis by the Pennsylvania Economy League concluded the expansion will boost the state's economy, support more than 34,000 jobs and generate billions of dollars in economic activity.
Advocates of transportation funding say it will create thousands of construction-related jobs and avoid economic losses if more deteriorating bridges are weight-posted.
Bipartisan support is gathering in the Senate for legislation to spend $2.5 billion more on roads, bridges and mass transit during the next few years. The bill sponsored by Senate Transportation Chairman John Rafferty, R-44, Collegeville, would generate revenue from gradually phasing out the cap on the state Oil Company Franchise tax and increasing motorists fees and fines.
Mr. Corbett's smaller $1.8 billion transportation funding proposal is seen as creating 50,000 jobs.
House GOP leaders have shown more appetite for privatizing the state-owned liquor stores which they say will create jobs, too.
Contact the writer: rswift@timesshamrock.com