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May 25, 2014

'Economics' of state gubernatorial campaigns

HARRISBURG — Gov. Tom Corbett’s re-election campaign hailed April’s jobs numbers. Pennsylvania’s unemployment dipped to 5.7 percent — its lowest since 2008 and well below the national average of 6.3 percent.

“The people of Pennsylvania elected me to Harrisburg on my promise of less taxes and more jobs, and we continue to see that promise ringing true through another positive jobs report,” Corbett said in a statement.

The governor failed to mention, critics say, that Pennsylvania’s unemployment rate was already far better than the national average — 8.2 percent compared to 9 percent — when he took office.

“I don’t know how you brag about that,” said economist Stephen Herzenberg, with the Keystone Research Center in Harrisburg.

Taking credit — or shifting blame — for unemployment is one example of how the economy and Corbett’s performance guiding the state out of the Great Recession are emerging as key issues in the gubernatorial election.

Many levers that influence the economy are out of a governor’s control, note economists and political observers. But two major Corbett policies almost certainly bear on the state’s fortunes — his refusal to tax the gas industry and his successful lobbying to pass a $2.3 billion transportation funding plan in the Legislature this year.

Corbett’s opponent, former revenue secretary and millionaire businessman Tom Wolf, is already working to turn the economy against him.

“Tom Corbett’s record is one of failure, and Pennsylvania middle-class families are struggling,” Wolf spokesman Jeff Sheridan said days after Wolf won the Democratic Party’s nomination with 58 percent of the vote in a four-way race.

“Tom Wolf knows how to create jobs; he has built a successful business twice, created hundreds of jobs, and his vision for Pennsylvania will put us back at the top in job creation, grow our workforce, and invest in education,” said Sheridan.

Corbett and his allies, meanwhile, attack Wolf’s record as a member of the Rendell administration, in which Wolf was revenue secretary.

Phil Cox, executive director of the Republican Governors Association, greeted Wolf’s nomination with a statement dismissing the Democrat as “a job-killing liberal with a lousy record on economic growth.”

Corbett’s campaign paints him as just the opposite — a job creator. That image got a boost Thursday when the governor traveled to Pittsburgh to pick up the endorsement of the Laborers District Council of Western Pennsylvania. The council serves workers in 33 counties including locals in Erie, Butler, Somerset, Johnstown and New Castle.

Corbett’s transportation plan was the single biggest policy that won him the endorsement, said Philip Ameris, the laborers council’s business manager and president.

Industry estimates suggest the plan saved 12,000 jobs and could create 50,000 more, though many are outside construction.

The laborers council didn’t endorse Corbett four years ago. But, Ameris said, the governor convinced the union’s leadership that he gets things done.

“I don’t know how we can turn our back on people” who’ve helped the union, said Ameris. “What he says he’s going to do, he does.”

Effects of the transportation bill are rippling through the state. A survey released this week by the Associated Pennsylvania Constructors, a trade group, said 84 percent of firms expect to hire as a result of the highway plan. Seventy percent of the surveyed companies expect to purchase more equipment to handle the work.

Another trade group, the Keystone Chapter of the Associated Builders and Contractors, is spending $5.2 million to build a 31,000 square-foot training facility to address an expected labor shortage, said spokeswoman Sharon Militello.

While labor and trade groups welcome government spending, the broader economic impact may not be so positive, said Matthew Rousu, an economics professor at Susquehanna University.

The cost of those government projects comes at the expense of Pennsylvanians who pay more for gas and fees that support the transportation bill, Rousu said.

Corbett’s encouragement of the natural gas industry, by refusing to support a production tax on natural gas wells, has had a far broader impact on Pennsylvania’s economic recovery, he said.

Rousu estimated Corbett’s gas policies make a difference in the state’s unemployment rate of about one-half to 1 percent.

To be sure, the gas boom in Pennsylvania is aided by New York’s resistance to it. New York implemented a statewide moratorium on fracking, the process of releasing natural gas from underground shale using pressurized water, sand and chemicals.

New York’s unemployment rate is 6.7 percent, higher than both Pennsylvania’s and the country’s.

“There is no question rural New York would be better off economically” if gas drilling were allowed, Rousu said.

Herzenberg, at the Keystone Research Center, disagrees.

The gas industry simply doesn’t have a big enough footprint, he said, to make a significant impact on the state’s overall job picture.

The center says that gas industry and Corbett exaggerate the jobs impact of gas drilling. Corbett has repeatedly claimed the gas industry supports more than 200,000 Pennsylvania workers. But most of those were employed before the gas boom, according to an analysis by The Associated Press.

The state Department of Labor estimates that gas-related jobs have only increased by about 31,000, the press service found.

The jobs picture in the state’s gas-drilling region is fuzzier.

Eleven Pennsylvania counties had more than 100 active gas wells during the latter part of 2013, according to the state Department of Environmental Protection.

Those counties added a combined 23,600 jobs over the past five years — about 3.6 percent job growth — according to data compiled by the Labor Department. That beat the state’s overall average; employment in Pennsylvania increased about 2 percent.

But things aren’t so clear cut on the local level.

Five years ago, local unemployment matched or exceeded the state average in five of 11 counties with the most gas drilling activity. Today, despite thousands of drills dotting the landscape, seven of 11 counties have unemployment rates equal or higher than the state’s.

Fayette County had 175 active gas wells in the latter part of 2013. The county also had 7.8 percent unemployment in March, the latest data available.

“Fayette County’s unemployment rate is the result of a number of things,” County Commissioner Angela Zimmerlink said. “Gas drilling jobs have helped but not to the extent others were anticipating.”

Part of the equation may be other factors that affect overall employment in Pennsylvania, Herzenberg said.

State funding cuts earlier in Corbett’s term contributed to the elimination of 20,000 teaching jobs, which surely dented the unemployment rate, Herzenberg said.

“It’s possible the impact of those job cuts has diminished over time,” he said.

John Finnerty reports from the CNHI Harrisburg Bureau for The Meadville Tribune and other Pennsylvania newspapers owned by Community Newspaper Holdings Inc. Email him at jfinnerty@cnhi.com and follow him on Twitter @cnhipa.

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