With the inauguration of President Joe Biden now in our rearview mirror, it is time to focus on legislative matters of a more local variety, namely those arising in the Pennsylvania legislature. Peter N. Calcara, PICPA vice president of government relations, joins us to discuss the priorities of both the legislature and the PICPA, continued COVID impacts, budgetary concerns, and more.

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By: Bill Hayes, Pennsylvania CPA Journal Managing Editor

Podcast Transcript

Fresh off the eventful election and inauguration of President Joe Biden, it can be easy to forget that the results of the 2020 election season hit closer to home as well. A whole new legislature has come together in Pennsylvania, and today's guest is here to walk us through the priorities of Pennsylvania's House and Senate, as well as those of the PICPA government relations team. Peter N. Calcara, PICPA's vice president of government relations, will discuss the Pennsylvania budget, the impacts of COVID, how PICPA members can get involved in the legislative process and more.

The new General Assembly for Pennsylvania was sworn in on January 5th. What can you tell us about the new legislature at this time?

[Calcara] This was the 205th Pennsylvania General Assembly, and I like to tell groups when I speak to them that the Pennsylvania General Assembly is a two-year session. It starts January 2021, runs until November of 2022 so it's a very long session. This year's swearing-in was marked by not only the COVID-19 pandemic issues, but also some tragedy. Just a few days before swearing in, Rep. Mike Reese died. He was a very popular member of the General Assembly. He was 42. He was an up-and-comer in the leadership. That really dampened the ceremony, even though COVID wiped most of that out this year.

Over in the Senate, there was some controversy with seating of a member – an incumbent. Jim Brewster, from Allegheny County, was not seated with the rest of the members because there was a legal challenge to his reelection that has subsequently been decided, and Senator Brewster has been sworn in.

You had COVID, you had the death of a young member, and then an election dispute all rolled up into one day that's usually very ceremonial and very joyous. There was a lot less of that than normal. The make of the General Assembly, Republicans still control, after the election, both chambers and the House. They have a 112 to 90 majority, and that's with one vacancy. Vacancy, I just mentioned, Representative Mike Reese, and Republicans having 28-21 majority in the state Senate. There's now another vacancy. Just the other day Senator Dave Arnold passed away – he was in his late forties – from brain cancer. Republicans have majorities. Two special elections will likely be called to fill those two seats, one in the House and one in the Senate. Both chambers – I think the four caucuses in the chamber, the House Republicans, House Democrats, Senate Republicans and Senate Democrats – I think you can say they're probably more politically polarized than they were prior to the election. What does that mean to address some of the issues? We certainly will have to wait and see.

As we enter into this new legislative session and move along in it, what do you expect the legislature to be prioritizing?

[Calcara] I would say two or three major priorities for the general assembly. One, as it always is, is passage of a fiscal year 2021/2022 state budget. New fiscal year begins July 1st. Governor Wolf presents his 21/22 budget in a few weeks, in early February, so he'll outline his priorities at that point. We do expect some tax proposals to be part of it. Combined reporting has been an issue for Governor Wolf in his last six budgets. We expect him to come back with that again, plus we believe there'll be some additional tax proposals included in the governor's budget address. The General Assembly will be faced with probably a $3 to 4 billion budget deficit. How do they close that? Again, we'll see more of that in Governor Wolf's budget address and subsequent budget hearings.

The other two major issues I think the General Assembly will have to deal with are congressional apportionment and state redistricting. Every 10 years after the census, the state has to divide its congressional seats and its state legislative seats. In Congress, we currently have 18 members, we're likely to lose one, at least one. So the General Assembly will actually simply just passing legislation in both the House and the Senate, and the governor will have to sign it. Statewide, there's a commission that divides the 203 and 50 state Senate seats. Those are really the big two or three. I kind of lump Congress, the congressional reapportionment, and state redistricting into one, but they're really two separate items. Then there's going to be a number of other issues: transportation funding. PennDOT has been a piggybank for the Department of Transportation for a number of years. How long can that go? Election reform: both sides actually want to see some additional changes. We had some issues in the last election, so election reform, I think, will be a top priority as well.

The circumstances around last year's budget were kind of unusual. Will those circumstances continue to impact this budget cycle? What do you think?

[Calcara] Last year, the General Assembly actually did a smart move in breaking the budget up into two steps. The first budget they passed in May gave them some time to see what the impact of COVID was going to be on the state's resources through the rest of the year. Then, surprisingly, they really threaded the needle in getting the second part of the budget done in November after the elections and before the end of the session. I think it gives them an opportunity to just measure how deep this COVID crisis is going to be on state revenues. It buys them some time, and I think they learned some lessons and maybe a slow approach is a good approach.

You mentioned the pandemic to a degree there. Obviously, we're still in the midst of COVID. How do you think that this ongoing pandemic is going to impact this year's budget cycle?

[Calcara] Surprisingly, the impact on our revenues has not been as significant as anticipated. There was talk of the current year having a $5-6 billion deficit. That didn't materialize. There was certainly a deficit, but a couple of factors played into actually improving the numbers over the course of the year. One is the federal CARES Act, I think helped to a certain extent. There's also the potential under President Biden for more aid coming to, not only the state, but local governments as well. Pennsylvania received in the first CARES Act $4.9 billion for different uses. The second round of federal stimulus provided additional funding that we're still evaluating and seeing how that's being spent. Overall, I think Pennsylvania has weathered this better than a lot of other states, so we'll have to wait and see. Hopefully, with the virus and the vaccine, hopefully that will get things back to normal sooner rather than later.

We talked a little bit about the new legislature's priorities, but certainly there's going to be PICPA priorities as well. What are we looking at for PICPA's priorities this session?

[Calcara] Priority number one for the PICPA is a Paycheck Protection Program loan forgiveness at the state level. I think a lot of members may have missed this, but we had legislation teed up last session in the form of House Bill 2497 that actually passed the state House and was two-thirds of the way through the state Senate. But because Congress didn't, at that point, enact clarity with regard to the taxability of these loans at the federal level, the General Assembly, the Senate basically said, "Well, we need to wait for Congress before we do that.” That will be priority number one. Representative George Dunbar, who was the sponsor of House Bill 2497, is, as we speak, teeing up a new bill, a reintroduction of House Bill 2497, in the new session and we're hopeful that we can get traction on that legislation, particularly in the House, sooner rather than later. It's not going to be an easy lift by any means, but we are confident that we can hopefully get a bill on the governor's desk, maybe before the budget negotiations really start off.

A couple of other issues: Our CPA law has not been amended in a number of years. There are a number of provisions that need to be updated, particularly in the area of peer review. We're going to introduce some legislation to modernize, if you will, our CPA Law. We're always on the defensive with a number of proposals. I'm sure we're going to see another attempt to expand the sales tax on professional services. That's a perennial that comes back every year. Just a question of whether there's enough support. There's always a lot of chatter, particularly on social media, about eliminating property taxes and adding a tax on professional services and other services. That's certainly something we'll have to monitor. Our state tax committee, which is one of our very active committees, is looking at a number of different tax proposals as well, that we may be having introduced as part of the budget discussion later this year.

We certainly have these unique circumstances right now that revolve around COVID and certainly, as you said, hopefully with the vaccine coming, some of these can be addressed. Let's hope for that, but how have these unique circumstances, like the Capitol currently being closed for visitors, impacted PICPA's ability to help get these measures passed?

[Calcara] It's been a challenge to say the least: not having access to legislators and staffers certainly puts you at a disadvantage. Last year, particularly after March with everything shut down, the General Assembly's entire focus was on COVID-related legislation. I'm not going to get into the battles that went back and forth between members of the General Assembly and Governor Wolf. They're certainly well documented, but it was hard to find space in that agenda when everything was COVID-related. Hopefully, that will not be as big of an issue this year and we can maybe find some space on the General Assembly's agenda to address, as I mentioned earlier, the PPP loan forgiveness and some of these other issues.

You talk about finding ways to get on the agenda of the legislature. In what ways during this process, have you had to adjust your strategy?

[Calcara] As I mentioned, the days when, as you know, our office is directly right across the street from the Capitol. On a session day, we would spend the entire day on the Hill walking and just meeting with lawmakers and staffers, informal. The amount of intel that you get just in those types of, as I say, reconnaissance missions is overwhelming. There's only so much you can do via email and text messages. You lose that face-to-face continuity or relationships that you have, but we've been as much as possible trying to leverage virtual meetings. I know people either you love them or you hate them, but Zoom meetings and what have you, trying to have as much of that interaction as possible. We hosted a number of virtual town hall meetings last year with members of the General Assembly.

We have another series of town halls scheduled next month in February with members of the General Assembly, just to touch base not only with them, but with their constituents. It's nice. The days of maybe “Days on the Hill” that we used to have maybe won't be popular for a number of years, probably. This way, we have virtual Days on the Hill, and multiple ones. Lawmakers like them because they can do a lot of them in a short period of time. It's working well, but losing that direct face-to-face contact is a big loss. It's certainly a big loss. I thought I would never say this, but I actually miss the Capitol. But it'll be back someday. It'll come back someday soon, I hope.

Clearly, we've addressed the work that yourself and the government relations team in Harrisburg is doing, but you need to have the PICPA members involved if you're going to have the right impact. That's certainly something that's more important than ever. How can PICPA members get involved in that process, especially with some adjusted processes?

[Calcara] The easiest way is look at our website and look at the virtual town hall meetings that we have planned in February. I know a lot of members will be in tax season, but these are really quick hits that bring our members together with legislative leaders. That's a nice way to get kind of updated. This will be after the budget so you can get really an up to date on what's happening with the budget and what are some priorities for different lawmakers.

Second, and I think the best, is our Legislative Update newsletter, which is out every week that the General Assembly is in session, plus a couple of other added bonus additions as well. It's a good way to keep updated on legislation that's introduced and proposals from the Department of Revenue that are out there. That's another factor, that we've been engaged throughout the whole shutdown with the Department of Revenue, reviewing different proposals. Legislative Update provides you information in a really easy-to-read manner. It's just a way to stay up to date on what's happening in Harrisburg. You can catch that on our website at picpa.org. If you go into the advocacy page, you'll find the Legislative Update and you can sign up for the newsletter there.