As Budget Hearings Begin, IFO Says Minimum Wage Hike Would Cost 33,000 Jobs, While Dem Lawmakers Decry ‘Poverty’ Wages

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Pennsylvania state lawmakers kicked off three weeks of budget hearings on Monday, and the initial talks focused on a couple of proposals put forward by Gov. Tom Wolf.

The Democratic governor’s plan to raise the minimum wage sparked discussion along party lines in the state House Appropriations Committee. Democrats championed Wolf’s plan to immediately boost the minimum wage from $7.25, the federal rate, to $12 and then gradually increase it to $15, saying it will raise families out of poverty.

Republicans, who hold a 19-seat majority in the House, raised questions to Matthew Knittel, the director of the state’s Independent Fiscal Office. The IFO, a nonpartisan agency, offers revenue projections to state lawmakers for budgetary issues.

Knittel, citing a report from last year, said nearly 2 million Pennsylvania workers currently make less than $15 an hour, and that includes tipped employees who previously were excluded from past wage hike proposals.

While he told committee members that a minimum-wage increase would lead to additional tax revenue and less need for state assistance, it also would lead to a slight reduction in jobs. A $12 minimum wage would lead to about a 3 percent decrease, or approximately 33,000 jobs, in the workforce.

Rep. Jim Struzzi, R-White Township, said such a drastic hike would cause problems in his rural district, where high school and college students seek work with small local businesses.

"A number of jobs we have are filled by young people looking for a basic start," he said.

However, Rep. Matthew Bradford, the Democratic chair, said that Pennsylvania needs to do what 29 other states and the District of Columbia have already done. The Norristown lawmaker called the $7.25 rate, which took effect nearly 10 years ago, a "poverty" wage.

"It is not commensurate with the dignity that we all propose work should come with," he said.

Knittel offered a compromise solution.

"We could have multiple minimum wages to differentiate between rural and urban communities," he said.

Early on, Republican members asked Knittel about Wolf’s plan to implement combined reporting for corporate filers. Proponents claim the move would keep businesses from shuttling profits out to subsidiaries or parent companies based elsewhere.

Rep. George Dunbar, R-Jeannette, questioned how projections from Knittel’s office could vary so wildly from Revenue Secretary Dan Hassell. Hassell, according to Dunbar, has estimated combined reporting would bring in more than $1 billion in new revenue.

Knittel projected the increase to be roughly a third of that, but contended he wouldn’t rule out Hassell’s outlook completely. He also noted the revenue would depend on how net-operating losses are treated.

"We’re, I think, more conservative because we’re looking at the experience of other states," Knittel said.

In his opening remarks, Rep. Stan Saylor, the committee’s Republican chair, thanked Wolf for dropping plans to raise personal income and sales taxes, but he grew skeptical of the governor’s $34.1 billion spending plan. The proposed budget represents an increase of $927 million from this fiscal year.

"This proposal relies on a revenue assumption that may be a little rosy," said Saylor, R-Red Lion.

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