Morning Must Reads: The Debut of Pennsylvania’s Independent Fiscal Office

Yesterday, Pennsylvania's new Independent Fiscal Office (IFO) held a conference to release its economic and budget outlook for the next five years (PDF).

The event included presentations from staff at the Philadelphia Federal Reserve, IHS Global Insight, the Bureau of Economic Analysis and the National Conference of State Legislatures.

Several of the presentations noted that Pennsylvania’s job growth weakened over the summer primarily due to substantial layoffs of teachers and other state and local workers. The director of the IFO, Matthew Knittel, very cautiously predicted that state and local layoffs are at an end.

For Matthew Knittel, the IFO’s director, the question is: has the state moved past that end-of-year period of weakness?

He said it appears so — the third-quarter poor showing was due to state and local government layoffs, which appear to have stopped.

“The most recent data that we see now going through December suggests that the layoffs at the state and local level have abated,” said Knittel.  “So we think they’ve stopped hemorrhaging jobs.”

The keyword in Knittel's statement is "hemorrhaging." Job losses in local governments are most certainly going to continue over the next 12 months, and that's before we even consider the potential impact of another round of state budget cuts. The 10,000 dollar question is whether the local job losses will approach the roughly 20,000 job losses experienced in the 12 months ending in November. Later today, we will get a full tally of the local job losses in 2011 as the Commonwealth releases the December 2011 job numbers for Pennsylvania.

Speaking of more potential job losses for teachers and other public-sector workers. Commercial property owners are swamping the City of Philadelphia with appeals over their property taxes putting at risk millions in tax revenue that would otherwise go to the city and the school district. 

Hundreds of Philadelphia's biggest commercial property owners have appealed their current property taxes, creating painful financial uncertainty for a city and school district already battered by budget cuts.

The owners, including the landlords of nine of the city's 10 most valuable properties, are trying to benefit from a ruling last summer by an obscure state board that could trim property-tax collections this year, possibly by as much as $80 million, based on pending appeals on nonresidential tax bills.

Still unclear is the actual financial impact on the city and the school district, which will receive 56 percent of the property taxes this year. But a decision due Thursday from the Bureau of Revision of Taxes could clarify the situation.

Everyone's favorite rhetorical device, the iPod/iPhone/iPad famously notes: "Designed by Apple in California Assembled in China." This sums up well U.S. manufacturing policy in the last 30 years. An article in The Allentown Morning Call suggests increasingly even design is at risk of offshoring.

Science-based jobs are heading to China and other countries in Asia as American businesses outsource more and more research and development work, the National Science Board reported Wednesday.

The share of research and development performed by the Asian affiliates of U.S. companies, not including those in Japan, nearly tripled, to 14.4 percent, between 1997 and 2008, an expansive study by the board found...

"This information clearly shows we must re-examine long-held assumptions about the global dominance of the American science and technology enterprise," National Science Foundation Director Subra Suresh said.

Air Products and Chemicals, one of the Lehigh Valley's two Fortune 500 companies, is an active participant in the trend. Just last month, the Trexlertown company, which employs 3,400 workers in the area and 18,900 worldwide, announced a research and development agreement with the University of Science and Technology Beijing.

Did somebody mention high tech, research and development, and layoffs in the Lehigh Valley?

Semiconductor maker LSI Corp. laid off an undisclosed number of Lehigh Valley workers this week as part of a companywide reduction of about 200 positions, a spokesman said Wednesday...

[Greg] Thomas [LSI spokesman] did not disclose the specific number of Lehigh Valley workers laid off, but said the reductions were global and targeted the networking business that includes positions such as engineers and marketing personnel.

LSI makes semiconductors for hard disk drives, network storage systems and telecommunications equipment. The company has a global workforce of 4,500, including about 780 workers in its Allentown and Hanover Township, Lehigh County, facilities, which provide customer support and research and development.

Two great unknowns with respect to economic growth and tax revenue are car sales and new residential construction. 

The director of the IFO, in his presentation about the state budget, noted that surging car sales in Pennsylvania had driven up sales tax revenue. He held out hope that the aging vehicle fleet in the U.S. would mean continued robust growth in new car sales in the months and years ahead.

In the presentation by IHS Global Insight, the Commonwealth's economic forecaster is predicting robust economic growth in 2014 and beyond when they hope the housing market returns to health. The key in their view (see slide 16) is a reversal of this trend:

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