State Policy

Spending and State Government Reform
Health-Care Reform
Labor Relations
Lawsuit Abuse
Transportation Infrastructure

Spending and State Government Reform

Over the first 10 years of this century, state government spending grew exponentially and increased at a pace far exceeding the rate of inflation. Former administrations spent more from the general fund than revenues received. The legislature passed laws boosting their own pensions, as well as those of various state employees, and further compounded this problem by underfunding pensions and forecasting growth far above reality. These decisions, as well as many others, contributed to a $4 billion general fund deficit by 2010.
In fact, between 2003 and 2010, Pennsylvania’s total state spending increased by $16.2 billion- 39 percent – almost double the rate of inflation of 17.4 percent over the same time period. Likewise, Pennsylvania’s general fund spending grew at an average annual rate of 6.2 percent.
Such excessive spending has led to a decline in Pennsylvania’s economic competitiveness, and earned the commonwealth less-than-stellar rankings for job, personal income and population growth. Additionally, the state’s reckless spending growth has been a major contributing factor to the state’s current fiscal crisis.
Although Governor Corbett drastically cut $4 billion from his first budget to fulfill his top campaign promise, and has kept his spending in line with revenues in subsequent budgets, the Commonwealth still has a dismal fiscal future due to the pension debacle.
MBA Recommendations
Enact a Taxpayer’s Bill of Rights. When it comes to state spending, Pennsylvanians have made it clear that they want government to control costs and live within its means. A 2010 survey found that nearly 70 percent of Pennsylvanians want to limit state government spending increases, while fewer than 20 percent think politicians in Harrisburg should continue to have unlimited taxing and spending power. Unfortunately, this hasn’t been the case.
From 1990 to 2010, general fund spending rose more than 100 percent, from $12.4 billion to $27.8 billion. Meanwhile, Pennsylvania’s hard-working citizens and businesses have been left to foot the bill – ultimately hindering the state’s economic growth.
By establishing a taxpayer’s bill of rights that caps general-fund spending increases at the rate of inflation, we will be able to begin rebuilding the state’s economy and ensure that its residents are not taxed out of their jobs and homes.
Additionally, we will be able to curtail future budgetary crises in the commonwealth. Had such a reasonable limit on annual spending increases been in place between 2001 and 2009, Pennsylvania could currently have a budget surplus of more than $3.8 billion.
Switch to performance-based budgeting. Given the state’s current economic situation, it is now vital that we allocate tax dollars to programs that are performing effectively and efficiently, and away from those that are failing. Regrettably, Pennsylvania does not currently evaluate the performance of programs when allocating funding. Rather, the state operates from the prior year’s budget and adjusts for new programs and inflation.
By switching to a performance-based budget, state officials and taxpayers will be able to ensure that their dollars are being directed to agencies with a proven track record. At the same time, state government will be forced to become more efficient and effective.
Institute transparency in state budgeting. Much of Pennsylvania’s current spending problems are the result of secrecy in the budget process. By opening up the process and making budget negotiations more transparent, the average Pennsylvanian will be able to hold their elected official accountable for wasteful spending and pork-laden budgets.
Reducing the size of the legislature. At a cost of $319 million annually, Pennsylvania has one of the most expensive state legislatures in the United States. Additionally, with 203 House members and 50 Senators, Pennsylvania has the second largest state legislature, trailing only New Hampshire, which has 424 members. However, New Hampshire’s legislature is a part-time citizen legislature with its members receiving only $100 per year for their service. Among Pennsylvania’s peers (the 11 largest states plus Maryland), the Commonwealth not only has the most legislators but also the highest number of legislators per 100,000 residents.
Similarly, according to the National Conference of State Legislatures, Pennsylvania’s legislative support staff is the one of the largest in the nation. While one might argue that Pennsylvania’s large population would merit such a large staff, the state’s staff-to-population and staff-to-legislator ratios are also among the highest in the nation. Most disturbing, however, is the fact that the size of the legislative staff has increased by 106 percent over a 30-year period. During this same period, the state’s population grew by just 4.8 percent.
In 2008, former governor Ed Rendell issued a hiring freeze for state government, which has not been lifted. The House and Senate continue to hire necessary positions, but many go unfilled as positions are eliminated through attrition. More than 100 positions were cut from the senate and 200 were eliminated from the state House in the past 8 years.
A 20 percent reduction in the size of the legislature – both members and staff – would provide substantial savings to the Commonwealth while still enabling legislators to provide adequate services to their constituents.
In the 2011 – 12 session, House Speaker Sam Smith (R-Jefferson) introduced a bill to reduce the size of the state house by 50 to 153 members and was later amended to include the state Senate by 12 to 30 members. The bill, HB 153, passed the House by a 140-to-49 vote, but stalled in the Senate State Government Committee.
Imposing term limits for committee chairmen. Pennsylvania’s legislative structure places a substantial amount of power with the chairmen of committees. As a result, a single committee chairman could, in essence, prohibit legislation from ever being considered on the floor. This, coupled with the fact that committee chairmen often remain with the same committee for the duration of their legislative careers, often prohibits forward movement on legislative proposals that could benefit the Commonwealth as a whole. By establishing term limits similar to those imposed at the federal level, we will open up the legislative process and ensure that viable proposals are fully debated by members of the General Assembly.
Reform the pension system, instead of postponing decisions. Pennsylvania public teachers, employees, paid firefighters, police, retirees and legislators have a defined benefit plan. Upon retirement, they receive a guaranteed amount of money based on the number of years served, and the top three years of income. The Ridge administration and legislators increased legislative pensions by 50 percent, state employees by 25 percent, decreased the vested years of employment from 10 to five, and eliminated employee contributions because of multibillion-dollar excesses. Unfortunately, due to the attacks in September 2001, the market tumbled and the two largest retirement systems lost a combined $33 billion. Then legislators heeded to the demands of retirees and increased their cost of living adjustment just before another market downfall. Legislators then passed a law spreading the losses over 10 years, expiring in 2012.
Instead of the equivalent of refinancing the home mortgage and pushing debt down the road, which has been done as recently as 2010, the legislature and governor need to reform the system. For example, reforms that could be made are changing the benefit structure, such as moving to the private industry standard of the 401(k) for future employees, consolidation of the 3,100 individual pension plans in the Commonwealth and using more realistic investment returns when projecting growth.
Facts and Figures
  • From 1970 to 2010, Pennsylvania’s total operating budget increased from $4.2 billion to $65.9 billion, an inflation-adjusted increase of more than 167 percent.
  • Pennsylvania has the second largest state legislature in the United States.
  • Pennsylvania leads the nation in highest number of legislators per 100,000 residents.
  • The Commonwealth’s legislative support staff is among the largest in the nation.
  • Pennsylvania has the highest number of individual pension plans, nearly 3,100, with a combined administrative expense of approximately $36 million. Merging plans would cut administrative costs.
  • During fiscal year 2016–17, pension payments will make up 11.6 percent of the state budget, an increase from 4.2 percent in 2011–12.
  • Also, taxpayer contributions will increase by more than 260 percent to $6.2 billion in fiscal year 2016–17, from $1.7 billion in fiscal year 2011–12.

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Despite a few positive changes to the Commonwealth’s business taxes over the past several years, Pennsylvania’s business tax structure remains among the highest and most burdensome in the nation, creating sticker shock among businesses seeking to expand or relocate their operations within the Commonwealth, and stagnating job growth throughout the state.

In fact, Pennsylvania would have nearly 700,000 more jobs if its economy had grown at the national average for the past 18 years. Instead, the Commonwealth ranks 44th in job growth during that span. When asked, most employers cite an overly burdensome business tax structure as one of the key contributors to the state’s poor economy and a red flag for companies that might otherwise consider locating or expanding in the Commonwealth. This is especially true of the high-tech and manufacturing sectors of the economy, which generate 16.1 percent of the gross state product, employ 670,000 Pennsylvanians and directly add more than $75 billion in value to the Commonwealth each year.

According to CNBC America’s Top States for Business in 2012, Pennsylvania scored 41st in the Cost of Business category and 48th in the Workforce category.

MBA Recommendations
In an effort to reverse this trend and improve the overall com-petitiveness of the Commonwealth, the Manufacturer & Business Association (MBA) supports the following business tax reforms:
Eliminate the cap on net operating loss carryforwards. Currently, Pennsylvania is one of only two states in the nation that imposes a cap on net operating loss carryforwards (NOLs). As a result, startup companies, which often record significant losses in the first few years of operation, face even greater obstacles within the Commonwealth. Likewise, cyclical manufacturers, who are facing regular fluctuations in income as a result of the national economy, are unfairly burdened by the state’s current cap on NOLs. By eliminating the cap on NOLs, the Commonwealth would be able to even the playing field, and attract and retain more businesses to the state.
Reduce the corporate net income tax rate. At 9.99 percent, the Commonwealth’s corporate net income (CNI) tax rate is far above the national average of 6.8 percent. In fact, Pennsylvania’s CNI is the highest flat-rate corporate income tax in the nation. As a result, Pennsylvania has been ranked one of the least business-friendly states in the nation, and struggles to retain and attract businesses.
Continued phase-out of the Capital Stock and Franchise Tax. While Pennsylvania is currently working to eliminate the Capital Stock and Franchise Tax (CSFT), the Commonwealth remains the only state in the nation to impose both an uncapped CSFT and an income tax without requiring a taxpayer to remit only the higher of the two. To this end, the MBA urges legislators to remain committed to phasing out the CSFT by 2014 at the latest. The CSFT rate will be .89 mills in 2013 and, if not postponed, will be reduced to 0 mills in 2014. However, the tax will still be “on the books” unless action is taken to eliminate the tax from the Pennsylvania tax code. The MBA urges lawmakers to eliminate this tax so future legislators and governors are not tempted to increase the tax.
Prevent mandatory unitary combined reporting in an attempt to close the mythical “Delaware Loophole.” Throughout the last several years, some legislators, former Governor Rendell and other administration officials have proposed a major change to how taxes are levied on Pennsylvania businesses. They have proposed that Pennsylvania institute mandatory unitary combined reporting to increase the revenues that Pennsylvania collects from businesses.
Based on historical data, if such a proposal were to be enacted within Pennsylvania, the manufacturing, service and trade industries would see net increases in their tax liabilities of more than $8 million, $20 million and $53 million, respectively. In other words, the proposal would be a tax increase for manufacturers. As a result, mandatory unitary combined reporting would have far-reaching and harmful effects on large and small employers, with the certain result of lost investment and jobs in Pennsylvania.
Also, companies that have holding companies in other states comply with established Pennsylvania law for paying their business taxes. If a company does not comply with the law, there are established penalties.
Replacing this law with new, unclear regulations does not guarantee higher tax revenues from businesses located here. In fact, there is no basis for determining how much revenue adjusting this tax provision would collect. Rather, a change in policy would promise confusion, litigation and potentially reduced collections.
Facts and Figures
  • In the 2012–13 state general fund budget, Governor Corbett and House and Senate leadership implemented a single sales factor apportionment, which was one of MBA’s recommendations in previous editions of Issues. A single sales factor apportions CNI based solely on sales, ignoring investment in assets and payroll within their state so as not to penalize further investment and job creation.
  • Pennsylvania would have nearly 700,000 more jobs today if the economy had grown at the national average since 1990. Instead, the Commonwealth ranks 44th in job growth over that span. Employers consistently cite the corporate net income (CNI) tax as a major contributor to the poor business climate and a red flag that warns away companies that might otherwise consider locating or expanding in the Commonwealth.
  • Currently, the CNI apportionment formula penalizes Pennsylvania employers for expanding their physical presence and hiring employees because the Commonwealth includes property and payroll in the calculation.
  • Pennsylvania is one of only two states that cap NOLs. This creates an uneven playing field for companies in cyclical industries that do business in Pennsylvania and retards development of potentially high-growth startup companies.
  • Currently, Pennsylvania residents pay 11.2 percent of their income in state and local taxes, the 11th-highest burden nationally.
  • The Commonwealth ranks 19th in the Tax Foundation’s 2013 State Business Climate Index, which measures the “business-friendliness” of states’ tax systems, which is an improvement from 27th in 2010. Unfortunately, the Commonwealth remains very low in the rankings for corporate and property tax components (46th and 42nd, respectively).
  • The state’s corporate tax of 9.99 percent is the second highest statutory rate among the 50 states. Accounting for federal deductibility, Pennsylvania’s rate is the highest in the nation. If Pennsylvania were a nation, its overall corporate tax rate of 41.5 percent (federal plus state, accounting for the state-local deduction) would be the highest in the world.
  • Pennsylvania businesses also pay one of the highest capital stock taxes in the country, and Pennsylvania is one of only 10 states that impose an intangible property tax on businesses.
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Health-Care Reform

Health-care costs continue to skyrocket, with many of the state’s businesses experiencing premium increases as high as 50 percent over the past several years. Such increases have forced many businesses to rely on employees to shoulder more of the cost of health care or drop health-care coverage altogether.

As a result, the rising cost of health care and health insurance continues to top the list of issues facing Pennsylvania businesses. In fact, a recent survey of the Manufacturer & Business Association’s (MBA) 4,500 member companies found that more than 86 percent of businesses ranked the cost of health care as the number one issue facing the Commonwealth’s business community.

MBA Recommendations
Prevent implementation of a state-wide, uniform health insurance system. As we all know, one-size-fits-all rarely means what it says. The same goes for one-size-fits-all insurance programs. In fact, with more than 12 million residents, the Commonwealth’s insurance needs are as diverse and complicated as the nation’s. To meet these needs, Pennsylvania’s workforce needs insurance options that are innovative and able to change rapidly. Such requirements are seldom found, if ever, in state government programs. To this end, we must take extreme care to ensure that Pennsylvania’s families are able to receive their health insurance and health care through the private sector.
Increase competition within the insurance market. The state’s ability to improve upon its current quality of care will hinge heavily upon the health-care industry’s ability to develop newer and less expensive treatment options, as well as care-delivery systems. Such innovation is unlikely to grow out of our current system, where competition is minimal. As a result, if we are to sustain our current industry and ensure the health and welfare of the Commonwealth’s residents, we must focus on enacting legislation that increases competition among carriers. Health-care insurers should be prohibited from medical underwriting for small-group health insurance, and be required to establish small-group pricing based on community-pooled rates.
  • The MBA encourages increased transparency to rein in the cost of health care.
  • The MBA encourages establishing best practices for health-care providers, which seek to eliminate excessive and unnecessary costs.
Eliminate biases in health-care laws. Currently, Pennsylvania’s health-care laws create an environment that pushes citizens towards employer- or government-provided insurance programs, and hinders the market for individually purchased insurance programs. Additionally, the state’s laws unfairly stunt the efforts of small employers to provide health insurance to their employees by limiting the pooling efforts permitted for large employers. Such biases artificially inflate prices and prohibit the free-enterprise system from operating as it is intended. They must be adjusted in an effort to level the playing field, and provide employees and employers with greater flexibility and choice.
Reauthorization of the PA Health Care Cost Containment Council. Established in 1986, the Pennsylvania Health Care Cost Containment Council (PHC4) is an independent state agency charged with addressing the rapidly growing health-care costs in Pennsylvania.
The PHC4 has worked to stimulate competition in the health-care market by providing comparative information about the most efficient and effective health-care providers to individual consumers and group purchasers of health services, and by providing information to health-care providers, to identify opportunities to contain costs and improve the quality of care they deliver.
The PHC4 has collected information on more than 40 million patients from hospitals across the Commonwealth. Distributed through yearly reports, this information has saved Pennsylvania’s employers and residents millions of dollars through informed health-care decisions.
We must work to ensure the future of the PHC4 through reauthorization until it is able to become self-sufficient.
Formally oppose the Obamacare Medicaid Expansion. In June 2012, the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare. However, the one part of the law that was struck down was the penalization of states that did not expand Medicaid. Medicaid is a program funded jointly by the state and federal governments that provides health insurance to poor and disabled individuals who earn less than 133 percent of the federal poverty level. PPACA, as drafted, sought to force states to expand to all residents that earned below 133 percent of the federal poverty level, which is about $30,000 for a family of four, by 2014. The Supreme Court’s decision makes it unlawful for the federal government to penalize states that choose to not expand Medicaid. The MBA believes that the state government should not expand Medicaid, as the state simply cannot afford it. The Department of Public Welfare already makes up 38 percent of the state general fund budget. Without expansion, that is approximately $134 million per year.
Even a limited expansion would cost tax payers $178 million annually. These costs would never decrease and would continue to pose a significant burden on taxpayers. Additionally, the waste and fraud, as found in the DPW by the Corbett administration and Auditor General Jack Wagner, should be rectified before more responsibility is given.
Facts and Figures
  • The Department of Public Welfare made up 38 percent of the 2012–13 general fund budget.
  • Small businesses throughout the commonwealth have been experiencing health insurance premium increases up to 50 percent on an annual basis.
  • Eighty-six percent of MBA member companies surveyed ranked health care as the number one issue facing Pennsylvania’s business community.
  • The PHC4 is credited with saving more than 49,000 lives from hospital-acquired infections and heart surgeries gone awry.
  • The PHC4 has earned a reputation throughout the United States as one of the premier agencies of its kind, and has served as a model for other states seeking to curtail spiraling health-care costs.
  • PPACA exchanges were required to be set up by individual states by January 1, 2013.
  • There would be an estimated 2 million to 2.2 million Pennsylvania users if implemented, but there are currently only 1.5 million uninsured citizens in Pennsylvania.
  • Pennsylvania would spend between $10 million and $100 million to operate the exchange every year.
  • Employers could face a new tax of up to $3,000 per employee per year for each employee receiving a subsidy and not on employer-sponsored health insurance.
  • Pennsylvania received $33 million in a start-up grant from the federal government.
  • Limited expansion of Medicaid would cost $134 million, while a full expansion would cost $222 million. By 2021, the cost of full expansions would be $4 billion
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Labor Relations

Throughout the Commonwealth, businesses are faced with countless obstacles as they fight to create jobs and grow in a highly competitive global marketplace. Among the most challenging of these obstacles are antiquated labor laws that rank among the most costly and burdensome in the nation.

In fact, according to the 2012 Forbes Best States for Business, Pennsylvania fell to 35th in the labor category. Additionally, the Commonwealth’s labor laws breed an environment that restricts employees and empowers unions. As a result, Pennsylvania’s economy has failed to maintain adequate job growth over the past 18 years and now ranks among the least business-friendly states in the nation.

Also, unionized states such as New Jersey, New York, Ohio and Pennsylvania lost Congressional seats in the 2010 U.S. Census as voters moved to low-tax, right-to-work states such as Texas, Georgia, South Carolina and Florida.

MBA Recommendations
Enact Right-to-Work legislation. Throughout the United States, 24 states have enacted Right-to-Work legislation, which seeks to protect an individual’s freedom of choice in the workplace by prohibiting unions from negotiating contracts that would require an employee to join or financially support a union as a condition of employment. As a result, right-to-work states are consistently ranked among the top 25 business-friendly states in the nation in Chief Executive magazine’s 2011 Best States for Business. Without fail, all of the top 10 and 16 of the top 20 states are right-to-work states.
Additionally, right-to-work states have seen increased job growth above and beyond that experienced by non-right-to-work states. According to the U.S. Labor Department, the average right-to-work state increased private-sector jobs by 0.3 percent between 2000 and 2010. By contrast, private-sector jobs in the average non-right-to-work state decreased by 5.5 percent. Additionally, employee compensation in the private sector increased by 11.3 percent in states with right-to-work laws, while Pennsylvania’s private-sector compensation only increased by 0.7 percent.
Protect the right to a secret ballot. The founding of our nation was built around the core belief that individuals had the right to choose their representation without fear of retaliation or undue coercion from a tyrannical ruler. For this reason, the founding fathers established a system that protected the right of all Americans to vote in private.
Unfortunately, there has recently been a push within our federal government to infringe upon this fundamental democratic right as it relates union organization. Under this effort, employees would be forced to vote for representation publicly by signing cards, rather than by using the existing system of voting by a secret ballot.
As a result, Pennsylvanian’s hard-working citizens would be subject to coercion, intimidation and retribution from union organizers. As a state, we must act accordingly to protect our workforce from such consequences by approving a State Constitutional amendment that would guarantee voting by secret ballot in all elections as an inalienable right within the Commonwealth, including those for union representation.
Eliminate prevailing wage laws. Pennsylvania’s prevailing wage laws are one of the most burdensome and unnecessary regulations facing Pennsylvania’s taxpayers and economy. Under the current law, any government-funded project costing over $25,000 is required to pay artificially inflated wages set by the state Department of Labor and Industry.
In addition, Pennsylvania’s prevailing wage laws require projects falling under the statute to provide for specific fringe benefits. Such requirements require employers who do not offer the specified benefits to supplement a worker’s hourly wage, thereby subjecting both the employer and the employee to additional payroll and income taxes respectively. As a result, many qualified companies forgo bidding on municipal projects, which in turn eliminates competition and increases the cost of the projects. Some Republicans in the House of Representatives put forth a good effort for even small prevailing wage bills during the 2011–12 legislative session, however, a majority vote could not be secured because of about 10 union-controlled Republicans in the southeast and southwest portions of the state.
Reform unemployment and workers’ compensation laws to be fair and consistent. In an effort to reduce the cost of doing business, eliminate fraud and spur economic development. An unemployment system should provide limited and temporary benefits to those who are unemployed through no fault of their own. It should also increase incentives for unemployed workers to re-enter the workforce. This includes a requirement for displaced workers to register for employment search services through the Commonwealth’s CareerLink system.
Workers’ Compensation benefits should be adequate – not excessive – and should be structured as to not create a disincentive to return to the workforce. Employers should have greater protection against frivolous workers’ compensation claims and the cost associated with defending such claims.
Prevent new, unfunded mandates. Unfunded mandates place a costly and often unnecessary burden on Pennsylvania’s employers. Without regulation, such mandates will further hinder Pennsylvania’s already uncompetitive business climate and prevent the creation of new jobs throughout the Commonwealth. One such unfunded mandate recently discussed by the General Assembly would mandate that employers throughout the Commonwealth provide every employee with 52 hours of paid sick time annually. While we recognize the intention to ensure a healthy workforce, such a mandate would be devastating to small businesses throughout the state. The MBA opposes this and other legislation that seeks to impose new regulations and/or mandates on the Commonwealth’s job creators.
Taxpayer resources should not be used for any political purposes. End government unions’ special privilege of taxpayer-funded “automatic collection” of dues.
Facts and Figures
  • Twenty-four states throughout the United States have enacted right-to-work laws.
  • A January 2012 Rasmussen poll revealed 74 percent of those polled said that nonunion workers should not be forced to pay union dues.
  • A 2011 Manhattan Institute poll showed that 72 percent of Pennsylvanians support right-to-work legislation.
  • The 2008 Pollina Report ranked Pennsylvania 31st in the nation in labor cost, 34th in workers’ compensation costs, and 25th in unemployment compensation costs.
  • According to the 2011 Chief Executive magazine’s Best States for Business, each of the top 10 pro-business states are right-to-work states.
  • Pennsylvania’s prevailing wage laws artificially inflate municipal project costs by upwards of 30 percent.
  • In 2012, Pennsylvania’s primary government unions spent more than $4.9 million from union dues on political activities and lobbying, a 64 percent increase from 2006.
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Lawsuit Abuse

Lawsuit abuse has a disastrous effect on the cost of doing business and the ability to create jobs. It is unfair, unpredictable and undermines a business’s ability to compete in a growing and global marketplace. Additionally, the lack of tort reform throughout the Commonwealth has played a major role in the rising cost of health care.

MBA Recommendations
In an effort to restore integrity in the state’s legal system and improve the overall competitiveness of the Commonwealth, the Manufacturer & Business Association (MBA) supports the following legislative initiatives:
Enactment of caps on non-economic damages. Currently, Pennsylvania does not impose caps on non-economic damages such as emotional distress, or pain and suffering. These damages have no direct economic loss or precise value; as a result, rewards for these damages tend to be unpredictable and excessive. By placing caps on such damages, the legislature will be able to curtail unnecessary lawsuits, and reduce unexpected and excessive costs currently faced by businesses.
Establishment of an innocent sellers provision. Businesses who sell products manufactured by others are often subject to lawsuits, despite the fact that all they did was sell a product later deemed to be defective. This practice is unfair to both the business and consumer as it leads to artificially inflated prices. 
Establishing an innocent sellers provision would help to ensure that businesses that simply sell products they do not alter would not be held liable if a product is later deemed defective.
Implementation of a loser-pays system. Attorneys often go on “witch hunts,” filing lawsuits against any and all possible defendants regardless of their association to the actual case. By establishing a loser-pays legal system for civil tort cases, we will be able to curtail frivolous lawsuits and reduce the costs of our judicial system.
End venue shopping for all lawsuits. Venue shopping is a term used to explain the act of trial lawyers taking cases to areas of the state or country where juries typically award egregiously high jury awards. Philadelphia has even been deemed a “judicial hell-hole” by the American Tort Reform Association for the number of high-award cases tried by out-of-town, even with out-of-state attorneys with defendants and plaintiffs having zero nexus in the city. In 2002, the Pennsylvania General Assembly, along with the state Supreme Court, changed the law and judicial venue rules to limit where medical malpractice cases could be tried. With the trial venue limited to either the jurisdiction of the plaintiff or the jurisdiction of the incident, frivolous lawsuits tried in Philadelphia decreased by 58 percent. The MBA strongly urges lawmakers and the Supreme Court to end venue shopping for all lawsuits.
Enact “Benevolent Gesture.” Physicians and medical professionals are most often very caring, empathetic individuals. A law enacting benevolent gesture, also called apology rule, would allow doctors and other medical staff to apologize to and empathize with the family of a person who has died, without their apology or empathy being used in court as an admission of guilt.
Facts and Figures
  • The 2012 State Lawsuit Climate study from the Institute for Legal Reform lowered Pennsylvania’s ranking to 40th, six places lower than the 2010 rank of 34th. One reason for this is a separate 2011 study that found the Commonwealth could save $1.7 billion and increase employment 1.53 percent by improving the legal climate.
  • In 2010, the U.S. Tort Liability Index – compiled by the Pacific Research Institute — rated Pennsylvania 46th out of the 50 states in terms of its overall tort system. Pennsylvania dropped from 45th in 2008, according to the biannual report.
  • In 2009, a McQuillan and Abramyan study found that an average of 52,000 cases were filed in U.S. courts between 1995 and 2005, and nearly 8,000 of those were torts.
  • Medical liability premiums in Pennsylvania are drastically higher than in surrounding states. An obstetrician in Chester, Pennsylvania pays nearly $170,000, while the same specialist in Wilmington, Delaware pays $70,000.
  • A 2006 study by Tillinghast-Towers Perrin found that the cost of suits in America topped $260 billion each year — nearly $900 for each American citizen.
  • Small businesses also face high tort costs — nearly $100 billion a year.
  • A 2011 poll conducted by the Pennsylvania Legal Reform Coalition found that 67 percent of those polled agreed that lawsuits have a “big impact” on the cost of business.
  • Pennsylvania also found that 75 percent of respondents want state-elected officials to enact legislation that would improve the legal climate in the Commonwealth.
  • Forecasts show that lawsuit-abuse reform could produce an additional 34,000 jobs in Pennsylvania.
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Transportation Infrastructure

The most important topic that no one in state government desires to discuss is transportation infrastructure funding. With the exception of Pennsylvania Department of Transportation Secretary Barry Schoch, legislators and the governor have sidestepped this issue. In the two years following Governor Corbett’s convening of the Transportation Funding Advisory Commission (TFAC), many other important issues have forced discussion about the lack of the nearly $4 billion needed to properly get roads and bridges up to standard into the corner.

According to the TFAC, there are many causes for Pennsylvania’s lack of transportation funding. First, the Corporate Average Fuel Economy (CAFÉ) standards placed on new vehicles by the federal government means most drivers have more fuel-efficient cars and are thus using less gas —and Pennsylvania is nearly exclusively dependant on the Motor Fuel Tax, as well as fees, such as the license and registration fees.

Business owners understand the necessity of good roads and bridges. Large and small businesses alike must use roads and bridges to receive supplies and get their product to market. Currently, over 5,000 bridges are deemed “structurally deficient,” and many have weight limits posted. This means larger loads must be diverted longer distances, which ultimately increases a company’s fuel costs. While businesses are willing to pay for the roads they use, they do not want another tax or fee on top of what is currently paid —they want a total reform of the system.

MBA Recommendations
In order to have reliable roads, bridges and modes of transportation for goods and services, the Manufacturer & Business Association recommends the following:
Repeal Act 44 of 2007. In 2007, the Pennsylvania state Legislature passed Act 44, which allowed Interstate 80 —the only free east-to-west interstate in Pennsylvania —to be leased and tolled. The Legislature responded to Governor Rendell’s push for more revenue and passed the bill without a public hearing or input from the business community. The enactment of Act 44 was the step that enabled the Pennsylvania Turnpike Commission to apply to the Federal Highway Administration’s program to toll established interstates. The Federal Highway Administration rejected the application. The authors of this bill wrongly assumed that the FHA would approve the tolling application, and determined that tolls from Interstate 80 would produce $450 million per year for infrastructure investment. Not only have tolls been raised every year since passage, making driving on the Pennsylvania Turnpike more costly, the Commonwealth’s transportation infrastructure system is in worse condition due to Act 44. Act 44 is also the cause for the Pennsylvania Turnpike Commission’s $7-billion debt.
Remove Pennsylvania State Police Funding from the Motor License Fund. According to TFAC, state police funding has increased 66 percent in 10 years, while PennDOT needs have only increased 20 percent. The Motor License Fund should only be used for funding transportation infrastructure.
Eliminate Prevailing Wage Laws. End the prevailing wage laws that force Pennsylvania taxpayers to pay inflated Philadelphia wages to builders and laborers on public construction projects. The Pennsylvania Prevailing Wage Law applies to all public works projects including roads, bridges, public sewers and waterlines and, in a recent development, any project that received economic development assistance from the state. The estimated inflation of labor costs on public projects is up to 40 percent.
Replace the Gas Tax. Gas-tax revenues are declining and will continue to do so as government policy and consumer preferences move drivers to more fuel-efficient vehicles. Gas consumption has been used as a proxy for road use in an attempt to create an equitable “user-fee” revenue stream. Alternatives, such as a vehicle miles tax, increased fees and public-private partnerships, should be studied and considered.
Modernize and consolidate designs and operations, when possible. The Department of Transportation (PennDOT), the Pennsylvania Turnpike Commission (PTC), and local governments should work together to modernize procedures and share best practices among agencies. Additionally, prefabrication and design sharing should be utilized for buildings, bridges, etc.
Consider the impact to small business when assessing available options. There are many options to funding transportation infrastructure, and many of these options are valid. Currently, these include: extending the validity of licenses to six years and registrations to two years; increasing registration fees to more closely resemble the national average; and uncapping the Oil Company Franchise Tax.
Facts and Figures
  • As of 2010, nearly $3.5 million is needed to adequately maintain Pennsylvania roadways.
  • If nothing is done, there will be a $7.2-billion funding gap.
  • There are 40,000 miles of state road and interstate, and nearly 25,000 bridges are managed by PennDOT.
  • Municipal governments control an additional 68,000 miles of local roads in the Commonwealth.
  • According to the Report Card for America’s Infrastructure, 50 percent of the state’s bridges are considered structurally deficient. Also, 44 percent of Commonwealth roads are considered “poor” or “mediocre,” and 34 percent of major highways are congested.
  • The 2010 Report Card for Pennsylvania’s Infrastructure from the American Society of Civil Engineers graded Pennsylvania’s bridges a C and roads a D-.
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