Legislative Update - Week Ending March 18, 2022

by PICPA Government Relations | Mar 18, 2022


Senate Wraps Up Its Budget Hearings

The Senate Appropriations Committee has wrapped up its review of Gov. Tom Wolf’s proposed 2022-2023 fiscal-year budget. Senators on the committee spent much of the last three weeks questioning various agency and department heads as they analyzed the details of Wolf’s proposed $43.7 billion spending plan.

On March 15 Labor and Industry Secretary Jennifer Berrier provided senators with details on how a $6.8 million federal grant the department received will benefit Pennsylvanians. Committee members questioned the department’s efforts to curb unemployment compensation fraud and resolve problems that are preventing unemployment compensation claimants from receiving payments they are owed.

Also appearing in the final hearings this week were the departments of General Services, Drug and Alcohol Programs, Military and Veterans Affairs, the Pennsylvania State System of Higher Education, and the Pennsylvania Historical and Museum Commission. Hearings concluded with Budget Secretary Greg Thall.

House and Senate lawmakers return to session later this month. Both chambers have been on budget recess since mid-February. 

 

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State Legislative Maps Approved by State Supreme Court

On March 16, the Pennsylvania Supreme Court approved the final plan of the Legislative Reapportionment Commission. In its order, the court said the plan shall be used in all forthcoming elections to the General Assembly until the next constitutionally mandated reapportionment shall be approved.

The decision also keeps the primary date on May 17, the same date as Congressional primary elections.

Candidates for state House and Senate could begin collecting signatures to run for office on March 18. The period for circulating petitions ends March 28.

The commission adopted final reapportionment plans on Feb. 4, 2022, for both the state House and Senate by a 4-1 vote. House Majority Leader Kerry Benninghoff (R-Centre) cast the lone dissenting vote.

 

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IFO Provides Fiscal Analysis of Tax Proposals

In response to a recent letter from Rep. Stan Saylor (R-York), chair of the House Appropriations Committee, the Independent Fiscal Office (IFO) provided an analysis of the budgetary impact of three tax proposals pending before the General Assembly. The bills, which address like-kind exchanges, Section 179 expense reporting, and net operating loss deductions are all a part of this year’s budget deliberations.

According to the IFO, the results for the three bills are as follows:

  • House Bill 105 allows conformity to the federal income tax code for like-kind exchanges. The IFO estimates a negative revenue impact of $30 million to $35 million (first full fiscal year effective), which declines to $20 million to $25 million per annum after several years.
  • House Bill 333 allows conformity to the federal income tax code for Section 179 expensing for pass-through entities. For the current tax year, Section 179 allows full expensing of eligible investments up to $1.08 million. Pennsylvania law only allows $25,000. The IFO estimates a negative revenue impact of about $60 million (first full fiscal year effective), declining to $30 million after several years and then $15 million after several more years.
  • House Bill 1960 increases the share of taxable income that C corporations can offset through net operating loss deductions from 40% to 80% over four years. The IFO estimates that the bill would reduce revenues by $115 million (first full fiscal year), peak at $250 million after two to three years, and then decline to $200 million.

 

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Charter School Regulations Rejected by Education Committees

The state House and Senate education committees this week voted, along party lines, to send letters to the Independent Regulatory Review Commission (IRRC) disapproving state Department of Education final form regulations related to charter and cyber charter schools.

The Department of Education delivered the regulations to the education committees and IRRC on Feb. 10. The regulation changes were initiated by the Wolf administration after the General Assembly could not agree on charter reform legislation.

IRRC will meet on March 21 regarding the regulations. If IRRC approves them, either the House or Senate Education committees has 14 calendar days from when it receives the approval letter from IRRC to issue a concurrent resolution on the regulations. The House and Senate would have a limited number of days thereafter to pass the concurrent resolution.

 

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House Lawmaker to Introduce Plan to Address Employee Misclassification

State Rep. John Galloway (D-Bucks) is working on legislation to codify recommendations contained in the preliminary report of the Joint Task Force on Employee Misclassification.

The task force annual report estimates the following:

  • An estimated 11,670 misclassified employees suffered injury or illness at work in 2020 and were denied workers’ compensation.
  • The estimated losses to misclassified employees without workers’ compensation insurance who suffered injury or illness at work in 2020 is $176.3 million.
  • The annual number of employers who currently misclassify at least one employee is 49,266.
  • The annual number of misclassified employees in Pennsylvania is 389,000.
  • The annual lost revenue to the Unemployment Compensation Trust Fund due to misclassification is $131 million.
  • Between $6.4 million and $124.5 million in General Fund revenue was lost in tax year 2019 due to misclassification.

Galloway notes that misclassification of employees occurs when a business wrongfully classifies a worker as an independent contractor even though the nature, type, and oversight of their work determines they should be considered an employee under the law. Misclassification occurs in many industries, including home health care, construction, and online-managed businesses such as Uber and Lyft drivers.

 

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Senate Committee Convenes Hearing on Adult-Use Marijuana

The Senate Law and Justice Committee convened its third public hearing March 14 on the topic of legalizing adult-use marijuana. Senators heard testimony regarding the creation of a new state agency to regulate both medical marijuana and adult-use marijuana, if the latter is legalized in Pennsylvania.

Sen. Mike Regan (R-Cumberland), chair of the committee, has circulated a co-sponsor memo for a bill that would allow marijuana use by adults 21 and older. The senator says he intends to include language that would decriminalize marijuana and seek to expunge the records of those with nonviolent low-level cannabis charges.

The Independent Fiscal Office estimates that tax revenues from adult-use marijuana sales could generate between $400 million and $1 billion in Pennsylvania.

 

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State Lawmaker Retirement Announcements Mount

State lawmaker retirement announcements jumped following the state Supreme Court decision on new legislative districts for the 2022 elections.

In the Senate, Mario Scavello (R-Monroe), Robert “Tommy” Tomlinson (R-Bucks), and John Yudichak (I-Luzerne) all announced that they will retire at the end of this legislative session. They join already announced Senate retirees Jake Corman (R-Centre) and Bob Mensch (R-Montgomery).

The following state House members have announced their retirements in recent weeks: Karen Boback (R-Wyoming), Bob Brooks (R-Westmoreland), Dianne Herrin (D-Chester), Andrew Lewis (R-Dauphin), and Jeff Wheeland (R-Lycoming). State Rep. Frank Farry (R-Bucks) announced he will retire from the House to run for Tomlinson’s Bucks County 6th State Senate District. To date, 26 state House lawmakers announced they will not run for reelection.

At the federal level, Rep. Fred Keller (R, PA-12) announced that he will not seek reelection after being drawn out of his congressional district and into the district of fellow Republican Dan Meuser (PA-9).

 

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