keepingSCORE January 2012 - BIPAC

January 2012 

Budget Energy Environment Health Care Infrastructure Labor Legal Tax Workforce 

The Pennsylvania Business Council (PBC) envisions a 

Commonwealth in which residents enjoy a very high quality 

of life in sustainable communities, where those seeking 

employment find high quality jobs with good compensation, 

and where those who invest their capital and hard 

work can grow firms that flourish and are profitable. 

In order to create and renew this vision of Pennsylvania, 

PBC is working aggressively with more than 30 business 

associations in a partnership to define key long-term 

policy strategies and solutions that make the Commonwealth 

more competitive; and elect candidates for office 

who offer the best capacity to create and sustain a better 

Pennsylvania. 

Chair 

Denis P. O’Brien 

PECO 

Secretary 

Gretchen R. Haggerty 

United States Steel 

Treasurer 

Kathy Pape 

Pennsylvania American Water 

Education Foundation Chair 

T. William Boxx 

McKenna Foundation 

President & CEO 

David W. Patti 

Director of Administration 

and Education Foundation 

Suzie Barbush 

Political & Grassroots Director 

Christopher Nicholas 

Issue Manager 

James Zawacki 

Event Manager 

Ashley L. Parsells 

The General Assembly returned from its winter break to tackle several ―holiday leftovers.‖ 

The General Assembly wrestled with the thorny issue of education reform and while the Senate did pass a 

comprehensive education bill that would have, among other reforms, authorized a school voucher program, 

the bill did not pass the House. Instead, the House broke SB 1 into its component parts and addressed 

various aspects of education reform separately. House Bill 1980 (Aument–R) provides a comprehensive 

revamping of the teacher evaluation process. Other separate pieces of legislation were introduced that would 

have dramatically reformed Pennsylvania’s charter schools as well as a separate piece of legislation 

authorizing school vouchers. 

The General Assembly completed the processes of Redistricting and Reapportionment. These two activities 

occur every ten years after the completion of the national census. Redistricting is the process of redrawing 

the Commonwealth’s Congressional districts and is done by the General Assembly through a piece of 

legislation enacted by the General Assembly and signed by the Governor. Reapportionment is the process of 

redrawing the State Senate and State House districts and is done by an appointed commission. This 

commission, called the Pennsylvania Legislative Reapportionment Commission, is comprised of the Majority 

and Minority Leaders in the House and Senate and a chairperson, who is usually a senior judge or a law 

school dean. The Commission draws up a proposed map of all 50 State Senate seats and all 203 House 

seats, holds public hearings on this proposed map, and then approves the map by a vote of the Commission 

members. This year, as is usual, this vote is along party lines resulting in State Senate and State House seats 

that favor the Republican over the Democrat party. 

In addition to the reapportionment of the General Assembly, the General Assembly was faced with the task of 

redistricting Pennsylvania’s Congressional districts for the House of Representatives in Washington, D.C. This 

process is done by passage of a bill by the state Legislature which goes through the legislative process like 

any other bill. Because the Republicans control both the House and Senate, as well as the Governor’s 

residence, the GOP constructed the plan to aid its efforts to retain and add members to the state delegation. 

Approval of the new Congressional map was the last order of business before the General Assembly 

adjourned. 

PEG PAC Chair 

Gary Veshecco 

Erie Insurance 

Consultants 

Earl M. Baker, PhD 

Dimitri Daskalakis, JD 

Michael E. Greenberg, PhD 

Kathleen Woolever 

Pennsylvania Business Council 116 Pine Street, Suite 201 Harrisburg, Pennsylvania 17101 717-232-8700 www.pabusinesscouncil.org


DEFINING SUCCESS 

Oppose increasing taxes on the job creators. Oppose increasing 

the Personal Income Tax rate and the Sales & Use Tax. 

Oppose ―Combined Reporting.‖ 

Cut spending. 

Limit General Fund spending growth. 

Limit irresponsible debt. 

Change the budgeting process. 

Reinstate ―sunset‖ review and termination. 

Conduct performance audits. 

Although the Corbett Administration was able to enact a no tax increase budget in spite of a $4.2 billion deficit, 

the work of returning the Commonwealth to fiscal stability is far from complete according to State Budget 

Secretary Charles Zogby in his mid-fiscal year review. Zogby said that because of the continuing weakness in 

the national economy revenues for the 2011-2012 fiscal year will be $500 million below estimated levels 

and that this anticipated shortfall combined with projected growth of $800 million in Medical Assistance, 

debt service, and school employee pension costs will lead to serious budgetary challenges for Pennsylvania 

this year and next. 

According to Budget Secretary Zogby, the greatest challenges to budget stability are from factors that are 

largely beyond the Governor’s control, such as: 

The persistent weakness in the national economy. Since the current budget was enacted most 

economists have lowered their forecasts for growth in the national Gross Domestic Product from 

3.0% in May to 1.7% in December. Forecasts for growth in consumer spending and for wages and 

salaries have also been revised downward. 

The ongoing economic crisis in Europe. Uncertainty about the fate of the euro and the European 

Union and the growing debt crisis in Europe have created global economic uncertainty and prolonged 

stagnation of the US economy and delayed its recovery. 

GETTING IN THE GAME 

Click here to be directed to the Pennsylvania Office of the 

Budget website and explore the mid-year update as well as other 

documents that explain the Commonwealth’s budget process 

and background. Governor Corbett’s FY 2012-2013 budget 

proposal and materials will be posted here in coming weeks. 

Uncertainty over federal funding. Last month’s failure by the Congressional Supercommittee to 

trim federal spending triggered automatic sequestration cuts to the states of 8.8% which could 

take place in January 2013. 

Health care cost inflation. In 2012-13 the cost for Medical Assistance and long-term care costs 

alone are expected to be $400 million. 

Commonwealth pension costs. Pension cost growth in 2012-13 budget will be $520 million: $320 

million for public school employees’ retirement and another $200 million for state employees’ retirement. 

Debt service. This cost is expected to grow by $80 million in 2012-13, providing additional impetus 

for the Administration and the General Assembly to develop a capital spending plan that put 

this item on a sustainable path. 

The Governor’s Budget address for FY 2012-13 is scheduled for Tuesday, February 7, 2012. 




To be competitive, Pennsylvania businesses must be able to 

procure plentiful, reliable, and affordable energy. This requires 

the infrastructure and regulatory climate that fosters generation, 

transmission, and distribution systems throughout the 

Commonwealth. Specifics: 

Develop and exploit all energy sources and technologies allowing 

market forces to determine eventual ―winners and losers‖ 

without government favoritism or sanction. 

Facilitate the development of Marcellus Shale natural gas 

reserves. 

Oppose severance tax until the industry is successfully rooted 

in the Commonwealth and then consider only in light of competitiveness 

with other states. 


Call your state lawmakers. Tell them to pass legislation soon 

that provides certainty to Pennsylvania’s growing natural gas 

industry by setting standards, defining the role of municipal governments 

in drilling and industrial operations, and establishing 

the parameters of an impact fee. Click here to find the contact 

information for your state lawmakers. 

Marcellus Shale Impact Fee legislation has been voted in both the House and Senate and appears to be 

moving toward a consensus resolution between the two chambers. House Bill 1950, introduced by Rep. 

Brian Ellis (R-Butler), passed the House 107-76 with twenty members not voting. Likewise, SB 1100, introduced 

by Senate President Pro Tempore Joseph Scarnati (R-Jefferson), providing similar impact fee language, 

passed the Senate by a 29-20 vote in November. Both of these bills provide for the assessment of 

so-called impact fees which are intended to offset any adverse impacts resulting from drilling for natural 

gas in the Marcellus Shale gas fields which underlie a large portion of Pennsylvania. Both of these bills 

create a special fund within the General Fund and prohibit any impact fee revenues from being placed in 

the General Fund. The Pennsylvania Business Council, Pennsylvania Chamber and others in the business 

community have been working aggressively to ensure that any impact fee legislation is competitive with 

fees and taxes in other states, and provides a uniform regulatory framework for Marcellus Shale gas wells 

preventing individual municipalities from imposing their own ordinances and fees. Legislative leaders are 

working on a deal to take to a formally convened conference committee. 

House Bill 1294 was adopted by the House in October on a 184–17 vote and now awaits action in the 

Senate Consumer Protection and Professional Licensure Committee. This legislation would authorize the 

PUC to approve alternative ratemaking mechanisms for regulated utilities, including gas, electric, water, 

and wastewater utilities allowing them to begin to recover their capital investments in a more timely way 

and enable them to proceed with important Pennsylvania infrastructure improvement. These charges 

should be used to make distribution and collection systems that maintain and improve the reliability and 

safety of utility services, and that protect the environment of the Commonwealth. The Legislature provided 

a similar financing tool – known as a Distribution System Improvement Charge, or DSIC – to water companies 

in 1996 and it has been working well. Other states have followed this example and expanded the 

authorization for electric, gas, and wastewater infrastructure improvements. The legislation and the PUC 

would provide adequate safeguards for customers to just and reasonable rates. Alternative ratemaking 

would also protect customers from sudden rate spikes for infrastructure. 

The proposed XL Pipeline to transport crude oil from Canadian tar sands in northeastern Alberta to multiple 

distribution points in the United States has been halted by President Obama. The XL Pipeline is an extension 

of the Canadian Keystone pipeline which was proposed in 2005 by TransCanada Corporation and 

completed in 2010 after five years of delays. Construction of the Keystone XL pipeline is supposed to create 

at least 20,000 jobs in the US and is supposed to help make America less dependent on oil from the 

Middle East. The President blamed his decision on a requirement to reroute the pipeline because the original 

route would have passed through the environmentally sensitive Sand Hills of Nebraska. Policymakers in 

Nebraska report they would have been able to find an alternative route well before construction would 

have reached the state. TransCanada is now considering a route to Texas, rather than the Gulf Coast, that 

might not require Federal Government approval. 




Any state legislative or regulatory policy to reduce greenhouse 

gas emissions must stem from federal legislative authority; 

be based on sound science; recognize that a diverse 

fuel source is a necessary component of Pennsylvania’s 

economy; rely on market driven solutions to identify technologies; 

and provide sufficient time to bring enabling energy 

technologies to market. 

As the state moves to finalize a state water plan, and works 

to consider and implement regulatory programs from the 

variety of basin commissions and compacts involved in managing 

water in the Commonwealth, it must be done in a manner 

that does not advantage one sector of the economy to 

the detriment of another. 

In September, the Corbett Administration announced a major reorganization of the Department of Environmental 

Protection (DEP). Secretary Michael Krancer and his team evaluated the agency’s existing structure 

to assess its operational efficiency, improve coordination, and enhance communication to improve its 

ability to protect the Commonwealth’s environmental resources. The reorganization announced in September 

is intended to move DEP’s focus back to essential environmental protection practices and permitting 

functions. The reorganization at a glance consists of the following points: 

 

 

Office of Oil and Gas Management. This new entity is created by transforming the Bureau of Oil 

and Gas Management to provide better oversight of the natural gas industry. The integration of 

both central staff and field staff under the same management structure will enhance the uniformity 

of DEP’s administration of the oil and gas industries. 

Bureau of Environmental Cleanup and Brownfields. The restructuring ensures that all site remediation 

activities conducted under PA’s Land Recycling Program are closely coordinated. This 

new Bureau will allow DEP to incorporate all aspects of site cleanup under one structure to reflect 

environmental cleanup programs statewide. 


Keep up-to-date with environmental news by bookmarking DEP’s 

newsclips. Click here for the page. 

 

 

 

Office of Water Management. This restructured office will integrate programs operating under 

the same set of state and federal regulations for a uniform management structure. All of DEP’s 

stream restoration will be combined under a new Bureau of Conservation and Restoration to 

enhance communication among restoration programs. 

Office of Program Integration. This new office will develop and coordinate the implementation of 

initiatives and programs within DEP. This office will assist Field Operations by creating a consistent 

approach to statewide initiatives and policies. 

Office of Pollution Prevention and Energy Assistance. The Office of Energy and Technology Deployment 

is restructured and renamed the Office of Prevention and Energy Assistance. This office 

will continue to foster the deployment of alternate energy sources plus it will work with regional 

staff to reach out and help companies achieve greater pollution prevention, energy efficiency, 

and improved compliance efforts. 




Adopt basic health plans. 

Allow association health plans. 

Oppose health care mandates. 

Promote Health Savings Accounts. 

Balance access to innovative therapy with cost-effectiveness. 

Require fair health care provider contracting. 

Adopt quality measures. 

Expand health information technology. 

Utilize best practices. 

Enact malpractice reform. 

Retire the MCARE Fund. 

Increase physicians in underserved areas. 

Encourage careers in science. 

In November of 2011, Governor Tom Corbett announced that the Commonwealth was moving ahead with 

the implementation of a key provision of the Patient Protection and Affordable Care Act, the creation of a 

state-run insurance exchange. An insurance exchange is an on-line method of shopping for healthcare 

insurance intended to make it easier for the millions of people who get coverage individually or who are 

covered by small businesses. One advocate who testified in favor of the state-run exchange characterized 

health exchanges as ―an Expedia-type of computer function where you would go to shop for health care 

from a large variety of providers and then purchase coverage that best fits the needs and budget of the 

individual consumer.‖ In addition to being a one-stop shopping spot for health insurance, the exchanges 

are the only place where many of the newly eligible health care consumers will be able to apply for the tax 

credits that are intended to make the coverage affordable. The existence of an exchange in Pennsylvania 

was never in doubt. The Affordable Care Act requires the creation of exchanges in all 50 states but give the 

states a choice of either running their own exchange or a Federally-run exchange. After receiving input from 

stakeholders at three separate public hearings around the state, it was clear that the preferred choice was 

a state-run exchange. Governor Corbett also prefers the state-run exchange over a Federally-run exchange. 

Under the federal health care law, states are required to have their exchanges up and operating by January 

1, 2014 or else opt into the Federal exchange. The State Insurance Department is currently working on 

a multi-million dollar Federal grant proposal to plan how the exchange would work. The entire process of 

establishing a health care exchange is proceeding under the shadow of the United States Supreme Court 

agreeing to hear a case challenging the constitutionality of the Patient Protection and Affordable Care Act. 

Earlier in December, the Court agreed to hear a challenge brought by the attorneys general for 26 states, 

including Pennsylvania. 


Click here to download and review an extensive (247 pages) 

report on health exchange planning compiled for the Commonwealth 

by KPMG. 




We must increase infrastructure replacement, development, and 

funding. Among the goals: 

Maintenance of current roads and bridges. 

Maintenance of mass transit systems. 

Maintenance and expansion of water and sewer systems. 

Expansion of energy transmission systems. 

Expanded rail systems and intermodal operations. 

In April 2011, Governor Tom Corbett created the Transportation Funding Advisory Commission (TFAC) 

charged with identifying and debating new and innovative ways to meet the transportation needs of the Commonwealth. 

In August, this commission, chaired by Secretary of Transportation Barry J. Schoch, issued its 

report detailing the challenges facing the Commonwealth’s transportation. The TFAC report presents a comprehensive 

overview of the challenges facing the Commonwealth and provides a recommended funding 

package to help meet these challenges. Unfortunately, little or nothing has been done to implement the 

recommendation of the TFAC report. As of the end of December, the Governor had yet to make present a 

plan for taking action on the TFAC report. Notwithstanding the Governor’s reticence, Senator Jake Corman 

(R-Centre) has introduced legislation to implement the recommendations in the TFAC report. Senate Bills 

1326, and 1327 introduced in early November contain language implementing the recommendations of the 

TFAC report. These three bills are currently in the Senate Transportation Committee awaiting the Governor’s 

announcement as to his plans for implementing the TFAC’s recommendations 


Help to advance HB 3 which would provide a framework for public 

private partnerships (P3s) in Pennsylvania. Click here to send 

a letter to your state Representative. 

House Transportation Committee Chairman Rick Geist (R-Blair) has been working this year to win passage of 

prime sponsored legislation providing for Public/Private Partnerships (P3s) to fund certain long term infrastructure 

projects. House Bill 3 authorizes the Commonwealth to enter into partnership agreements with 

private firms to provide the capital for a highway construction or maintenance project while the Commonwealth 

would maintain ownership of the asset being constructed. The private firm gets a return on its investment 

over time, often from tolling. House Bill 3 is currently awaiting final action by the House. PBC and 

many in the business community support the legislation and have urged the House to take action ASAP. The 

delay in passage is sending a negative signal to those who might invest in Pennsylvania infrastructure. 

SAFTEA-LU, which is an acronym for Safe, Accountable, Flexible, Transportation-Legacy for Users, is the Federal 

Highway Administration’s main program for distributing Federal money to the states for highway, bridge, 

and road construction and maintenance. Federal highway fund authorization usually has a term of six year. 

The current authorization expired in 2009 and has been operating under a series of continuing resolutions 

since that time. The most recent appropriation for this program is $1.4 billion which US House Republicans 

would like to cut by 30 percent. There is a difference of opinion between House Republicans and House and 

Senate Democrats. The House Republicans are calling for a five-year $260 billion plan while Democrats are 

calling for a two-year, $109 billion plan. Current highway and transportation programs will expire on March 

1. House Transportation Committee Majority Chairman John Mica (R-Florida) is expected to bring up legislation 

in early February. 




Limit UC to temporary, partial benefits based on actual earnings 

with eligibility restricted to persons unemployed through 

no fault of their own. 

Fairly compute employer UC contributions through an experience 

rating calculation. 

Compel those applying for UC benefits to register for employment 

search services, counseling and re-training through Pa 

CareerLink; and to accept work if it is offered. 

Adjust and limit Pennsylvania UC benefits to account for other 

benefits such as employer-paid severance benefits. 

Create a fair Workers’ Compensation Law that aims to return 

employees to productive, gainful employment, while providing 

adequate but not excessive benefits for work-related occupational 

injuries and illnesses. 

Eliminate Project Labor Agreements (PLAs) for Public Projects 

Reform prevailing wage law to reflect market realities and with 

modern thresholds. 

End compulsory unionism. 


Help advance a meaningful unemployment compensation bill by 

writing to your state representative asking them to communicate 

with House Labor & Industry Chairman Ron Miller their desire for 

reforms that will reduce costs. Click here to sign an electronic 

letter. 

Legislation ranging from reform to repeal of Pennsylvania’s 50 year old prevailing wage law took center 

stage with the House Labor & Industry Committee. House Bill 1277, introduced by Rep. Scott Perry (R- 

Cumberland) provides for an outright repeal of the Prevailing Wage Act. This bill is currently in the House 

Labor & Industry Committee and is not expected to gain sufficient votes for passage. Among the other 

prevailing wage bills introduced in the House of Representatives are a number of bills that either specifically 

exclude political subdivisions from the prevailing wage law or allow municipalities to opt out of the 

statute. Among the former are HB 1190 which excludes projects in a Keystone Opportunity Zone from the 

statute or HB 1543 which excludes projects on lands owned or held by a historical organization or a nature 

conservancy from prevailing wage requirements. Bills allowing political subdivisions to opt out of the Prevailing 

Wage Statute include HB 1409 which applies to school districts and SB 796 and SB 820. Other 

bills in the state legislature dealing with prevailing wage provide for a temporary suspension of the Prevailing 

Wage Statute. Both HB 1135 and SB 792 from June 30, 2011 to July 1 , 2015. Other prevailing wage 

bills that have been introduced include HB 1271 and SB 822 which expand the definition of ―maintenance 

work‖ to exclude certain projects from the Prevailing Wage Law. 

Rep. Sheryl Delozier (R-Cumberland ) introduced HB 927 which is a comprehensive rewrite of Pennsylvania’s 

child labor laws that have not been examined since 2002. The House Labor & Industry Committee 

held public hearings on Delozier’s bill in August of 2011 but has not brought the bill up for a vote. Another 

piece of legislation addressing child labor introduced in 2011 is HB 1548 introduced by Rep. Thomas Murt 

(R-Montgomery). This legislation, which passed the House 197-0 in June of 2011, updates and modernizes 

Pennsylvania’s child labor laws pertaining to the employment of minors by the entertainment industry 

in places where alcohol is served. This bill would require film production companies to obtain a special 

permit when employing children in filming in establishments where alcohol is served. This bill is currently 

in the Senate Labor and Industry Committee. 

Senate Bill 1375 authored by Senate Labor & Industry Committee Chair John Gordner (R-Columbia) passed 

the Senate in mid-January. The bill would extend unemployment compensation benefits to some 17,000 

out-of-work Pennsylvanians. Lacking in the bill are much needed controls to reduce the long-term costs of 

unemployment compensation and the related taxes paid by the business. The business community will ask 

the House to improve it with cost-saving measures. Pennsylvania owes the Federal UC Fund billions of 

dollars. A bill passed in June made improved the situation somewhat, but not sufficiently to reduce the 

debt. Senate Bill 1310, also authored by Gordner, would essentially refinance the debt by allowing Pennsylvania 

to float bonds to repay the Federal government to avoid penalties. UC taxes would then repay the 

bond. Senate Bill 1310 passed the Senate, was sent to and passed by the House, but with amendments. 

The Senate must now concur in the House amendments or send the bill to Conference Committee. 




Enact the ―Fair Share Act‖ to reform joint and several liability. 

Implement reforms to reduce frivolous lawsuits. 

Provide meaningful product liability reform including a statue 

of repose for product liability actions. 

Enact reasonable protections for retailers who unknowingly 

sell a defective product. 

Apply to all tort actions the same ―venue shopping‖ reforms 

that have reduced medical malpractice claims. 

Balance legal liability from the sale of food products against 

customers’ choices to over-indulge in these products. 

Work to ensure access to competitive and affordable medical 

malpractice insurance. 

Amend the Constitution to empower the Legislature to consider 

limits on damages. 

Amend the constitution to use merit selection, rather than 

popular election, for the appointment of state appellate 

judges. 

―Venue Shopping‖ refers to the practice of filing a personal injury lawsuit in a county other than the venue 

where the action originally arose. Venue shopping has become notorious in Pennsylvania with an inordinate 

number of personal suits being filed in Philadelphia. Plaintiffs’ lawyers are drawn to the courts in 

Philadelphia because they perceive that their clients will receive a better treatment in the Philadelphia 

courts than in the courts of their own jurisdiction. House Bill 1976 introduced by Rep. Bryan Cutler (R- 

Lancaster) specifies that a plaintiff may file a cause of action against a corporation or similar entity to recover 

damages for death or injury to a person in one of the following: 

The county where the plaintiff is domiciled. 

The county where all or a predominant part of the cause of action arose 

The county where the principal place of business of the corporation or similar entity is located. 

House Bill 1976 was reported from the House Judiciary and Appropriations Committees on party-line votes, 

but not considered for final passage after Southeastern Republicans indicated they would not support the 

bill. 

The Senate Judiciary Committee is sitting on HB 495 — the ―benevolent gesture bill‖ prime sponsored by 

Rep. Keith Gillespie (R-York) that would allow a health care provider, assisted living residence, or personal 

care home to express regret or remorse for a patient outcome without the statement being used against 

them as an admission of guilt in court. The medical community and business community have been advocates 

of this legislation for years. Several studies have found that it could lower the number of malpractice 

suits. Many doctors are trained in medical schools and by their lawyers to avoid expressing regret or apologizing 

for anything unfortunate that might happen to a patient. This bill passed the House in March, but has 

not been considered by the Senate Judiciary Committee. 


Help pass HB 1976 that seeks to put an end to ―venue shopping.‖ 

Click here to send a prepared letter to your state Representative. 

Pending in the House and Senate Judiciary Committees are, respectively HB 304 (prime sponsored by Rep. 

Gordon Denlinger (R-Lancaster)) and SB 384 (prime sponsored by Sen. Lisa Baker (R-Monroe)) which 

would create a ―statute of repose‖ forbidding product liability lawsuits on items manufactured more than 

15 years previously. Consideration of this legislation by the Judiciary Committees is a key business priority 

for 2012. 

Also pending in the House and Senate Judiciary Committees are, respectively HB 388 (prime sponsored by 

Rep. Scott Boyd (R-Lancaster)) and SB 383 (prime sponsored by Sen. Lisa Baker (R-Monroe)) which would 

protect ―innocent sellers‖ form liability in cases where they played no role in the design, manufacture, or 

training for a product that allegedly caused an injury, death, or damage. Consideration of this legislation by 

the Judiciary Committees is a key business priority for 2012. 




Maintain the phase-out of the Capital Stock & Franchise Tax. 

And then eliminate the tax altogether. 

Adopt the Single Sales Factor for the apportionment of corporate 

revenue subject to PA’s corporate net income tax. 

Eliminate the cap on the deductibility of net operating losses. 

Oppose the implementation of ―Combined Reporting.‖ 


1.) Call Senator Mensch at 717-787-3110 to say ―Thank you!‖ 

for his legislative tax package. Ask how you can help advance 

his legislation as part of this year’s budget process. 

2.) Read the ―Delaware Loophole‖ legislation and decide for 

yourself whether the good outweighs the bad. You can find 

Reed’s legislation on the PBC website by clicking here. 

The Senate Finance Committee recently reported out two bills intended to remove two provisions of PA’s 

Personal Income Tax (PIT) which are particularly harmful to smaller businesses that pay this tax. Both bills 

were re-reported to Appropriations and may well become part of the budget package: 

 

 

SB 562, introduced by Senator Jake Corman (R-Centre), amends the PIT to allow losses in one category 

of income to be offset against another category of income. This bill would bring the PIT into line 

with the Federal income tax which currently allows such offsets. 

SB 1354, introduced by Senator Jake Corman (R-Centre), provides a loss carry-forward provision for 

the PIT. This bill will allow a business owner paying the PIT to carry losses forward into future business 

years thereby offsetting losses in the early years of a business against income earned in later years. 

This bill will also bring PA’s PIT into conformity with the Federal income tax. This bill was also introduced 

by Senator Corman and will most likely be referred to the Appropriations Committee for a fiscal 

note. 

A bipartisan group of House members led by Republican Policy Committee Chairman Dave Reed (Indiana) 

and Eugene DePasquale (D-York) introduced legislation in mid-January that would seek to ―close the 

Delaware Loophole‖ and use the resulting revenue to adopt the Single Sales Factor for the state’s Corporate 

Net Income (CNI) tax, phase-in 100 percent deductibility of net operating losses, and eventually reduce 

the 9.9 percent CNI rate to something closer to the national average. The tax reforms are much needed 

and very much appreciated proposals. But, the business community is wary of granting the state Department 

of Revenue so-called ―Add-Back‖ powers to address what some allege are abuses in the way deductions 

for interstate transactions are used. The so-called ―Delaware Loophole‖ refers to a practice through 

which firms create passive investment corporations in Delaware or other states with no corporate income 

tax and then make intra-company payments for royalties or interest thereby reducing tax liability in high 

business tax states like Pennsylvania. The practice is completely legal. Critics, however, argue that intracompany 

payments made across state lines for no business purpose other than the avoidance of tax liability 

should be curtailed. The Rendell Administration recommended and pursued mandatory unitary combined 

reporting — essentially tax all business transactions wherever they occur — as a remedy. Reed and 

DePasquale’s proposal would empower the Department of Revenue to make case-by-case determinations 

rather than risk a broad policy with wider-ranging and unknown consequences. Reed and his supporters 

argue the state Revenue Department will know unfair and inappropriate deductions when they see them 

and ―add-back‖ that income to increase the firm’s tax liability. Speaking for many in the business community, 

PBC President & CEO David W. Patti explained to the media, ― Add-backs are not as deleterious as 

mandatory unitary combined reporting, but the fear and danger is that add-backs could be used in an arbitrary, 

capricious way — even a malicious or vindictive manner — by a future Administration. ― Making matters 

worse, Pennsylvania has a horrendously slow and unfair tax appeal process. Reed has signaled a willingness 

to compromise but legislative leaders have stated a desire to move some version of the bill. 




Support the Center for Advanced Manufacturing Careers and 

similar efforts to provide a trained workforce for Pennsylvania’s 

manufacturing sector. 

Produce more science, technology, engineering and mathematics 

(STEM) graduates. 

Improve interagency cooperation and state/local coordination 

of workforce development policymaking and programs. 

Ensure education accountability through common curriculum. 

Educate parents, teachers and students about opportunities 

in skilled careers. 

Increase Career and Technology Education. 

Maintain and Fund Industry Partnerships. 

Strengthen our community colleges and mandate articulation 

with four-year state universities. 


Learn more about efforts to improve K-12 education in 

Pennsylvania and across America, by reviewing materials at: 

Efforts to win passage of comprehensive education reform died in the waning legislative days before the 

holiday break. It is unclear whether they can be resurrected. 

Senate Bill 1, introduced by Senator Jeffrey Piccola (R—Dauphin) and Senator Anthony Williams (D- 

Delaware) with much fanfare at the beginning of the session finally passed the Senate on a 27-22 vote in 

October. This legislation, titled the Opportunity Scholarship Act, would expand school choice in Pennsylvania 

by creating a voucher program for low-income students in the state’s worst performing schools. The 

bill would also increase the state's successful Educational Improvement Tax Credit (EITC) program by $25 

million. Scholarships for low-income students will be reserved for students in failing schools for the first 

three years, and then expanded to all low-income students across the state. The Legislature has attempted 

to pass a school choice program three times since 1995—all have failed. Governor Corbett supported 

intent and general outline of SB 1, but insisted on adding several other components to make a comprehensive 

reform package. These reforms would have overhauled the state’s charter school program, 

providing more accountability. The House was unable to muster the votes to pass the legislation in whole 

or in parts. 

The House did begin work on another important education reform — the performance evaluation of teachers. 

House Bill 1980, introduced at the end of October, replaces the current teacher evaluation system 

that permits only two ratings for teachers: ―Satisfactory‖ or ―Unsatisfactory;‖ with a four-level rating system 

that rates all school employees as ―Distinguished,‖ ―Proficient,‖ ―Needs Improvement,‖ or ―Failing.‖ The 

legislation would also, for the first time, make student performance a criteria for teacher evaluations. 

House Bill 1980 was the subject of extensive public hearings by the House Education Committee in early 

November and reported out of committee on November 16. The bill, however, was never brought up for a 

floor vote before the House adjourned for the holidays. 

Commonwealth Foundation Research 

www.studentsfirst.org. 

Pennsylvania Department of Education

keepingSCORE January 2012 - BIPAC

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