Some Basic Reforms Would Boost PA’s Fortunes

If you ask people why they move – outside of family considerations – they usually give you three reasons. First, housing affordability. Second, job availability and wages. Third, weather.

We can’t do anything about Pennsylvania’s weather, but we can start to tackle the other two considerations without spending a dime, and end decades of stagnation.

This week, legislators in Pennsylvania returned to Harrisburg to tackle the state budget process.

They’ll consider Gov. Josh Shapiro’s $44 billion budget proposal, weaving in their own ideas and putting a framework in place to implement a wide range of spending policies.

With Democrats in control of the House and Republicans holding the Senate, the budget negotiations will look different than the recent past. Legislators will need to make compromises with one another as they consider the governor’s proposals.

There seems to be some agreement to accelerate corporate tax cuts already in place. These new cuts could bring down the corporate tax rate to 4.99% by 2026 instead of 2031. And plans to fund schools, training, and workforce development generally enjoy bipartisan support.

But how can legislators create jobs, kick-start growth, and make Pennsylvania more economically equitable without increasing spending or messing with the tax code? Here are some areas where an immediate impact could be made.

Zoning Reform

Last month, Senate Republicans held a hearing on zoning and land use reforms. Ideas included getting rid of parking minimums on new buildings, ending restrictions on lot size, allowing for accessory dwelling units, and preventing overly restrictive local regulations that drive up costs and restrict the supply of housing. As housing throughout the country has gotten more expensive, other states have begun to discuss and adopt similar reforms with the goal of increasing housing supply and making it easier for different types of housing to be built.

Housing needs vary widely throughout Pennsylvania, but a clear, statewide land-use reform plan can help get more people into homes and reduce housing costs. Some areas of the state are depopulating and have a relatively low barrier to entry, but they lack “step-down” housing for an aging population – units providing limited supported-living services – because localities have not legalized smaller housing options like accessory dwelling units (ADUs).

Other locations have seen home prices skyrocket as more residents seek to relocate there and municipalities make it nearly impossible to build certain types of housing, especially multifamily units.

Housing is a locally decided issue, but it is a statewide problem, which makes it ripe for some kind of preemption. If localities are not able to solve their housing issues, the state loses tax revenue and must spend more on social services because much of our other health and welfare needs are tied to housing security. Pennsylvania has had a fair-share housing standard for years, but in places of high demand it has not produced the amount and diversity of housing that the commonwealth needs.

Pennsylvania also invests in multi-modal public transit, from buses to subways. The commonwealth can get more value out of the money it spends by expanding transit-oriented development around public transit stations.

Lawmakers should make it less expensive to build and more accessible for people to afford new housing and step-down housing in their communities by repealing parking minimums, legalizing ADUs, eliminating minimum lot-size restrictions, and enforcing fair-share housing guidelines.

Occupational Licensing

Too many professions require licenses, and too many employees are overburdened by licensing requirements. The licensing process creates an artificial scarcity of workers and makes it hard for people who want to start and build careers in Pennsylvania. Lawmakers have made progress on licensing reform in past sessions, and they can easily wipe away barriers in the coming weeks.

There’s a guide for reform already in place for lawmakers. Former Gov. Tom Wolf issued a comprehensive report on occupational licensing in Pennsylvania and proposed eliminating 13 licenses, including those for campsite-membership salespersons and hair braiders. This month, Gov. Shapiro and the legislature can make it easier for Pennsylvanians to enter the workforce and act on the recommendations from the previous administration.

Non-Competes

At the federal level, a movement is underway to ban non-compete clauses that prevent workers from engaging in activity similar to their previous employment. In recent decades, non-compete clauses have been used for more categories of employees. By requiring non-compete clauses too broadly, we make it harder for people to leave their current employer and build new businesses.

Some states restrict or ban non-compete clauses – including, surprisingly, highly regulated California. Some research suggests that a severe restriction on non-compete clauses allowed Silicon Valley to flourish. Because of the restrictions on non-competes in California, workers for decades have had the freedom to leave their employers and test their ideas on the open market.

Pennsylvania should follow suit and ban non-compete clauses, with some limited exceptions. There are several pieces of legislation introduced that narrowly ban non-competes for certain professions or income levels. The legislature should follow other states and the federal government and largely do away with the practice of non-competes. Doing so will allow for greater economic mobility and creativity and could be a catalyst for the commonwealth to shake off the lingering stasis from the departure of heavy manufacturing. Pittsburgh has already been fashioned into an emerging tech hub, with synergy from its universities and a creative economy; with increased ease of movement of employees and ideas, the region can continue to flourish.

Conclusion

These ideas should not come at the expense of funding important priorities like education. As the commonwealth court recently found, Pennsylvania dramatically underfunds its K-12 education system, and the inequities affect the most vulnerable students.

But while the legislature and the Shapiro administration work on the hard questions of appropriations, taxes, and funding prioritization, some simple reforms can help Pennsylvanians right away without moving a single dollar on a spreadsheet.

While we can’t improve Pennsylvania’s weather, we can make it more appealing for people to live, learn, and build a life here through a few simple policy fixes.