In the most dramatic turn-around in the 23-year history of the Keystone Business Climate Survey the owners and chief executive officers of Pennsylvania companies reversed a years-long downward trend in confidence in the state's business climate and expressed optimism about the near-term future.
Twenty-seven percent of the respondents said business conditions in Pennsylvania have gotten better over the past six months. That is a 22% jump over the 5% who reported an improving business climate in the survey taken last September. The number of businesses reporting worsening conditions likewise dropped from 50% last Fall to 20% in the current survey.
Large swings in those numbers are rare, with the major changes usually coinciding with significant economic developments like the Great Recession of 2008-2009 and the September 11, 2001 terror attacks. This is the first time such a large swing in optimism has occurred in a positive direction.
Looking forward there is also a significant uptick in business confidence. Thirty-six percent of the business owners/CEOs say they expect business conditions in Penn's woods to improve over the coming six months. That compares to just 5% that expected improving business conditions in the September survey. Eighteen percent said they expect business conditions to get worse over the coming six months, down from the 43% in the Fall who said they expected conditions to worsen.
Employment levels remained stable over the past six months with 17% reporting higher employment levels and 15% saying they had fewer employees. But, looking ahead six months 28% say they expect to add to their employment rolls while just 4% forecast cutting the number of people they employ.
Likewise, sales numbers held steady over the past six months with 27% reporting sales increases and 24% reporting declining sales. Again, those participating in the Spring 2017 Keystone Business Climate Survey expressed optimism for the coming six months with 47% saying they expect an increase in sales and 9% forecasting a decrease.
Job Approval Ratings
To what can we attribute this major swing in business confidence? A look at job performance ratings offers a clue. Seventy percent of the business owners/CEOs say they approve of the job being done by President Donald Trump, with 23% offering a negative rating. At the state level, Governor Tom Wolf posted a 16% positive job approval rating with 76% saying they disapprove of the job being done by the commonwealth's chief executive.
At the federal level Republican U.S. Senator Pat Toomey earned a 52% job approval rating against 28% who disapprove of his job performance. The numbers flipped for Democratic U.S. Senator Robert P. Casey, Jr. who had a 21% positive rating and a 59% negative rating. Federal Reserve Chairman Janet Yellen posted a 36% positive/24% negative job approval rating, while new U.S. Treasury Secretary Steven Mnuchin received a 26% positive/13% negative rating.
Among the statewide constitutional or "row" officers, two-term Auditor General Eugene Depasquale posted a 20% positive/12% negative rating. Only in office for two months, Attorney General Josh Shapiro and State Treasurer Joe Torsella posted high "no opinion" numbers, but among those with an opinion 18% view Josh Shapiro's job performance positively, 19% offered a negative assessment. State Treasurer Torsella received an 11% positive/12% negative rating.
Legislative bodies at both the state and national levels continue to receive low marks from participants in the Keystone Business Climate Survey. The U.S. Senate posted a 22% positive/68% negative rating while the U.S. House of Representatives received a 25% positive/68% negative rating. The Pennsylvania Senate's job approval stands at 30% positive/55% negative, while the Pennsylvania House of Representative's earned a 32% positive/52% negative rating.
Once again Governor Tom Wolf and the Republican-controlled General Assembly are grappling with a state budget deficit estimated to be about $3 billion. To close that gap, 67% of the business chieftains say the state should cut spending; 25% support a combination of spending cuts and tax hikes; 5% support enactment of targeted tax hikes while 2% support broad-based tax hikes such as personal income and/or sales taxes.
Budget proposals by both the governor and Republicans in the legislature include projected revenue from expanding gambling. But, the business owners/CEOs say by 55%/41% that on-line gaming should not be legalized as a way to generate additional tax revenue. However, there is business support for charging municipalities that do not have a local police force a per capita fee for state police protection. That idea received support from 68% of the respondents with 29% disagreeing.
Those participating in the Spring 2017 Keystone Business Climate Survey strongly disagree with the enactment of a severance tax on natural gas drillers, and expanding sales taxes to cover accounting and legal services as a way of increasing tax revenue. Sixty-seven percent disagree with that approach -- 48% strongly disagree -- with 30% in agreement.
The business owners/CEOs were split on legalizing marijuana for recreational use to generate tax revenue. Forty-Seven percent agree with the legalization of recreational marijuana, 49% disagree -- with 41% strongly disagreeing.
The Commonwealth of Pennsylvania's substantial and growing unfunded public pension liabilities has caused a third of the business participating in the survey to alter plans they have to invest or expand in the state.
There is opposition to having the state reduce the transportation subsidy to local school districts. Governor Wolf has proposed reducing that subsidy due to the drop in gasoline prices. Sixty-four percent disagree with that idea, while 27% agree.
Pennsylvania has an abundant supply of natural gas, but additional pipelines are needed to get that gas to market. Eighty-nine percent of the business leaders agree that pipelines should be build -- 62% strongly agree. Ten percent disagreed with the building of additional pipelines. Thirteen percent said more/easier access to natural gas products would be a major benefit to their business, 28% said they would somewhat benefit. Twenty-four percent said they utilize natural gas, but would not benefit from easier access. Another 34% said they do not utilize natural gas in their business operations.
Fifty-two percent of the businesses participating in the Spring 2017 Keystone Business Climate Survey report they rely on skilled tradesmen such as carpenters, electricians and plumbers in their business. Of that 52%, 43% report the lack of available skilled tradesmen has impacted their ability to expand their business.
The prospect of significant reform to the federal tax code is having a strong impact on optimism among the state's business leaders. Seventy-four percent said they are more optimistic about the future of their business as congress and the president take up tax reform. Seventeen percent said the prospect makes them less optimistic.
The owners/CEOs would still like to see the Affordable Health Care Act, otherwise known as Obamacare, repealed and replaced. Sixty-two percent support repeal and replacement; 33% would like there to be targeted changes to the law while 2% want no change.
The Spring 2017 Keystone Business Climate Survey was conducted electronically from March 14, 2017 through April 7, 2017. A total of 325 responses were collected of which 82% were from the owner of the business; 16% from the CEO/COO or CFO; 2% from a local manager and 1% from a state manager. Twenty-six percent of the respondents were from southeastern Pennsylvania, 19% from south-central Pennsylvania, 17% from the southwestern region of the state, 12% from north-central Pennsylvania, 9% northwestern Pennsylvania and 3% each from the Lehigh Valley and from the Altoona/Johnstown area. Complete numeric results are posted here.
Permission to reprint is granted provided the Lincoln Institute of Public Opinion Research is cited.