When the COVID-19 pandemic hit hard in early spring, many wondered what effect it would have on legislative activity in Harrisburg. It turns out, as was the case for most of us, adjustments were made and the work went on. House and Senate lawmakers were in session 58 days from the onset of Gov. Tom Wolf’s emergency declaration on March 6 through the middle of July, when the General Assembly recessed. In that time, 69 bills were signed into law by the governor.
The process was not without fits and starts. A few of the challenges included new rules and procedures to allow members to vote remotely, a Black Lives Matter protest that shut down the House for a day, a new Speaker of the House had to be elected, and several members contracted COVID-19.
Here are some of the major bills approved by Pennsylvania’s policymakers this spring and summer.
Early State Budget
With state revenues crashing due to COVID-19, lawmakers and the Wolf administration moved quickly to enact a stop-gap budget for the new fiscal year that began July 1, 2020. On May 29, Wolf signed a general appropriations budget, found in House Bill 2387, that funds state operations and services through five months of the new fiscal year, and includes guaranteed full-year funding for basic and higher education and other priority items at fiscal year 2019-2020 levels. Pennsylvania ended the 2019-2020 year with $32.3 billion in general fund collections, about 9.1% below estimate.
The $25.75 billion fiscal year 2020-2021 general appropriations budget includes funding provided through the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. The budget sustains funding at 2019-2020 levels for Pre-K Counts and Head Start, basic and special education in K-12 schools, and higher education. The budget also provides $300 million from the CARES Act to make up for a decline in gaming revenue that annually supports school property tax relief.
State lawmakers appropriated more than $2.6 billion out of the $3.9 billion that the federal government sent to Pennsylvania in the Coronavirus Relief Fund. The federal supplemental appropriations to various Pennsylvania executive branch departments addresses program costs and financial burdens incurred during the pandemic. The following appropriations were made:
- Pennsylvania Commission on Crime and Delinquency – $150 million
- Department of Agriculture – $40 million
- Department of Community & Economic Development – $930 million
- Department of Education – $9 million
- State System of Higher Education – $30 million
- Pennsylvania Higher Education Assistance Agency – $42.2 million
- Department of Health – $20 million
- Department of Human Services – $1.11 billion
- Pennsylvania Emergency Management Agency – $100 million
- Pennsylvania Housing Finance Agency – $175 million
In addition, the Pennsylvania Emergency Management Agency received $50 million in grants available to help support fire and EMS companies that have seen excess costs as a result of the COVID-19 crisis.
PICPA-Backed PPP Loan Forgiveness Approved
The PICPA spearheaded efforts in Harrisburg to allow full deduction for Paycheck Protection Program (PPP) related business expenses at the state level.
House Bill 2497, sponsored by Rep. George Dunbar (R-Westmoreland), clarifies the treatment of PPP loan forgiveness under state tax law. When PPP loans are forgiven (turned into grants), they are not includable in taxable income for federal income tax purposes (CARES Act Section 1106). However, the Pennsylvania personal income tax statute does not incorporate these provisions. As a result, there is uncertainty as to whether they are includable in taxable income.
The nontaxable treatment of PPP loan forgiveness for taxpayers subject to the Pennsylvania personal income tax would put those persons on the same footing as corporations subject to the Pennsylvania corporate net income tax (CNIT). The state’s CNIT conforms to the Internal Revenue Code. Since the starting point for computing Pennsylvania taxable income is federal taxable income, these amounts would be excluded from a corporation’s tax base. The Dunbar bill clarifies this provision that already exists in the law as it relates to Pennsylvania CNIT. The tax treatment of loans forgiven under the PPP should not depend upon how a business is organized. The purpose of the program is to help businesses during the crisis, in whatever form they operate. Businesses should be entitled to use the full benefits received from these programs to maintain their operations during the COVID-19 pandemic and not have to worry about whether they are taxable.
House Bill 2497 passed the House in June and is pending in the Senate Finance Committee. Legislation with a similar provision (House Bill 2408) passed the House on May 4, 2020.
Occupational Licensure Reform
On July 1, Wolf signed into law reforms to the occupational licensing process in Pennsylvania. The measure is part of a broader bipartisan effort at criminal justice reform working through the General Assembly. Senate Bill 637, now Act 53 of 2020, was sponsored by Sens. John DiSanto (R-Dauphin) and Judy Schwank (D-Berks) and passed both the House and Senate unanimously.
Act 53 overhauls Pennsylvania’s occupational licensing laws that denied qualified residents the right to work because of an old or irrelevant criminal record. The new law requires the Department of State’s 29 licensing boards and commissions, which regulate more than 255 types of licenses, to make the following changes:
- Boards and commissions can no longer use a person’s criminal history to deny a license unless their criminal history is directly related to the occupation in which they are seeking licensure.
- Boards must individually consider applications based on the offense, the amount of time since the conviction, and the applicant’s personal progress and training, among other factors, before withholding licensure.
- Boards are required to create a public list of criminal offenses that may prevent licensure.
- Potential applicants may get a preliminary decision as to whether their conviction will likely disqualify them from licensure so they do not waste time and money on training. Individuals can still apply and present evidence to support their licensure.
Wolf had signed an executive order in 2017 requiring a review of job licensing compared with other states. A task force appointed by Wolf issued a report in 2018 outlining many proposals to modernize job licensing.
Constitutional Amendments Clear First Hurdle
State lawmakers adopted two proposed amendments to the Pennsylvania Constitution: Senate Bill 1166 and House Bill 196.
Senate Bill 1166 would amend the Pennsylvania Constitution to limit future emergency declarations by the governor and require legislative approval of any declaration lasting more than 21 days. The bill would create three separate ballot questions: one to limit emergency declarations, another to clarify the General Assembly’s authority to terminate or extend a disaster declaration without the governor’s approval, and a third to ensure equality under the law and prevent discrimination based on race or ethnicity.
House Bill 196 would reform the process of electing appellate court justices. The bill would divide the Supreme Court, Superior Court, and Commonwealth Court into judicial districts to ensure a broader range of regional interests are represented on Pennsylvania’s highest courts. Since judges are currently elected on a statewide basis, the majority come from the state’s two most populous counties, resulting in most of the state being underrepresented on the state’s highest courts.
Bills that amend the state Constitution do not need to be approved by the governor, but they must be approved by the General Assembly in two consecutive legislative sessions and then approved by voters via referendum.
A Look Ahead to the Fall Session
The first order of business when lawmakers return in the fall will be funding state operations and services for the remaining seven months of the fiscal year. Closing a budget deficit that will likely be approaching $5 billion will present many opportunities and threats to Pennsylvania’s taxing structure that need to be monitored very closely.
Peter N. Calcara, CAE, is PICPA vice president of government relations. He can be reached at email@example.com.