Shapiro’s Budget Better Be “Competitive as Hell”

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Pennsylvania governor Josh Shapiro likes to brag about being “competitive as hell.” Unfortunately, Pennsylvania is losing—and I’m not talking about football.

U.S. News & World Report pegs the commonwealth’s economy at 38th among the 50 states. For the best states to find a job, WalletHub ranks Pennsylvania 46th nationally.

Unsurprisingly, residents are finding greener pastures elsewhere. Pennsylvania lost 25,000 residents to outmigration in 2023, according to the Census Bureau. In the last 13 years, Pennsylvania has experienced just one year of positive domestic migration—a net loss of more than 300,000 movers.

Those leaving Pennsylvania are predominantly young, working-age adults seeking better economic opportunities in states like Florida and Texas. Polling shows fleeing Pennsylvanians want more affordable living, lower taxes, and better-paying jobs.

This mass exodus shrinks Pennsylvania’s tax base and negatively affects the state’s fiscal well-being. In the governor’s midyear budget briefing, the Shapiro administration reports that Pennsylvania already has a $1.1 billion budget deficit this year. The Independent Fiscal Office forecasts that this deficit will grow to $4 billion, exhausting the state’s General Fund by 2026.

If the governor wants Pennsylvania to become “competitive as hell,” he must revisit, in his February budget address, three campaign promises that he sidelined in his first year: reducing taxes, reducing regulations, and enacting lifeline scholarships.

At 8.49 percent, Pennsylvania’s corporate net income tax (CNIT) rate remains one of the highest rates nationally. Recognizing that this exorbitant rate scares away businesses, Shapiro pledged to reduce the CNIT to 4 percent by 2025, building on a 2022 law that slowly reduces it. But the governor must explain how he plans to do it. The clock is ticking.

In addition, Shapiro vowed to eliminate Pennsylvania’s taxes on cell phone usage. Unfortunately, he spent more time tweeting than working to reduce this excessive tax.

Candidate Shapiro assured voters that regulatory reform would make Pennsylvania “open for business.” He hasn’t delivered on his end of the bargain either, however.

To his credit, Shapiro launched a money-back guarantee for state licensing and permit applications. If the state doesn’t meet processing deadlines, applicants can request a refund on their application fees. But this guarantee hardly reduces the cost of opening a business or obtaining the necessary licensing for specific occupations, such as barbery, cosmetology, and massage therapy.

If the governor wants to reduce the regulatory burden of entering the marketplace, he has his work cut out for him. Pennsylvania currently enforces 166,219 regulations—22 percent above the national average. By cutting the red tape, Shapiro and Pennsylvania lawmakers can drastically grow the state economy. Research suggests a 36 percent reduction in regulatory burden could add $9.2 billion and 183,497 jobs to Pennsylvania’s economy.

The governor must also deliver on educational opportunity. Shapiro signed a record $150 million increase to Pennsylvania’s two successful education tax-credit programs. But a genuinely competitively minded governor would realize that other states have done more. Ten states passed universal or near-universal school choice programs in the last two years.

Shapiro recognizes the value of educational choice. Bucking opposition from teacher unions and many in his party, he openly supported the Lifeline Scholarship Program, later renamed the Pennsylvania Award for Student Success (PASS). The program would provide Educational Opportunity Accounts to students attending Pennsylvania’s lowest-performing schools.

Polling suggests that Pennsylvanians want more school choice. A recent survey shows that 67 percent support Lifeline Scholarships/PASS. Unfortunately, Shapiro couldn’t get his fellow Democrats in the Pennsylvania House on board, and he wound up choosing expediency over principles. In July, he vetoed Lifeline Scholarships/PASS from the 2023–24 budget appropriations bill, sending the budget into a six-month stalemate.

To avoid another budget impasse, Shapiro needs to learn from his mistakes. Moreover, he cannot blame a divided legislature for his inability to deliver.

Instead, Shapiro must use his bully pulpit to leverage the deals he promised voters on tax relief, regulatory reform, and Lifeline Scholarships/PASS. By making good on his campaign pledges and addressing last year’s “unfinished business,” Shapiro could indeed make our commonwealth “competitive as hell.”

Unlike football, Shapiro can’t say, “Better luck next season.” The game clock is running—and Pennsylvania and its fiscal, economic, and educational well-being need several scoring drives to have a winning 2024.

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