Press Release: Pennsylvania CPAs Say State Needs to Increase Efficiencies and Revise Tax Structure

Unemployment Rates Peaked But Recovery Slow

Philadelphia - December 20, 2011 - To bring the state's budget in line and accomplish long-term sustainability, Pennsylvania CPAs believe that the government should not only cut expenses, but better utilize performance audits to understand operating costs. According to a recent Pennsylvania CPA poll, respondents also identify the tax structure as a top priority for attracting and maintaining businesses and identify ways to accomplish this goal.

Pennsylvania's Budget Crisis

Pennsylvania is facing a $3 billion to $5 billion deficit in the coming year. According to a poll conducted by the Pennsylvania Institute of Certified Public Accountants (PICPA) 46 percent of poll respondents support performance audits as their top recommendation for cutting state costs. Rudy Bilich, CPA and PICPA president explains, "Performance audits could identify areas of waste, duplication of effort, and other inefficiencies that get in the way of allowing agencies to provide much-needed services to Pennsylvania taxpayers and help them accomplish their stated missions."

Providing a business-friendly environment is critical to the fiscal viability of the state, and according to CPAs polled, tax structure is a top priority when business owners make a decision on whether to stay or establish a business in a state. With this in mind, CPAs were asked to select the top two priorities for tax reform and/or improvements and 54 percent support continuing the phase-out of capital stock and franchise tax while 41 percent support lowering corporate net income tax rates. To help close the budget gap, a top CPA suggestion is to privatize the Wine and Spirits stores.

When CPAs were asked what the top issues are facing Pennsylvania, outside of the budget crisis, financial issues still were the top concerns including state employee and school district employee pensions (34 percent), government efficiencies (19 percent), and health care affordability (15 percent). According to Bilich, "There is a non-partisan PICPA Fiscal Responsibility Task Force charged with developing recommendations for a long-term sustainability plan for the state. The task force will present a white paper to the governor-elect and new legislative body in early January." Many of the recommendations will provide guidance on implementation of these suggestions.

Small Business

Pennsylvania CPAs believe the unemployment rate has peaked, but that it may take several years to get back to the prerecession unemployment rate. The majority of Pennsylvania CPA poll respondents note that more than half of their businesses will keep staffing levels the same and that financing is still tight for many small businesses.

According to poll results, 52 percent of respondents believe that unemployment has leveled off, but that recovery will be slow. Exactly half of the respondents (50 percent) believe it will take three to four years to reach the prerecession unemployment level of 4.7 percent. Bilich says, "This is not surprising. Sixty-six percent of respondents see their businesses and the clients they serve maintaining current staffing levels in the coming year. Job growth is predicted by only 22 percent of respondents and 7 percent say they will experience job reductions. Combine this result with respondents' experiences with lack of financing for small businesses, and the logical conclusion is that the recovery process will be slow." According to poll respondents, 63 percent do not believe small businesses currently have access to adequate credit to sustain and grow their business. The following difficulties were observed by respondents in the past year: 51 percent were unable to borrow additional funds from an existing bank, 32 percent found that their bank was no longer lending in the company's industry sector, and 30 percent were unable to establish a lending relationship with a new financial institution. Only 20 percent had no problems obtaining financing.

CPAs were asked to select the top two financial problems faced by businesses and responses indicate that health care costs are the top-of-mind issue for business owners, with 65 percent of respondents identifying health care costs followed by contract demands of labor unions which was a distant second place concern with 33 percent. Respondents and their clients are addressing the rising health care costs via several options. Respondents were able to select two alternatives and the top response was increasing premium portion paid by employees (54 percent) followed by evaluation of different health care plans (42 percent). Only 4 percent thought that ceasing health care coverage would be pursued.

Compared with other states, the overall regulatory business climate in Pennsylvania is judged to be adequate by 57 percent of the PICPA members responding, while 25 percent say the climate is good. In neighboring Ohio, CPAs responding to a similar poll conducted by the Ohio Society of CPAs judged their state as adequate by 47 percent of respondents and good by only 10 percent.

PICPA CPA Poll

PICPA conducted this poll in mid-November 2010, to gauge its member's views on Pennsylvania and national economic issues, Pennsylvania business concerns, and the regulatory and economic outlook. CPAs in public accounting are involved in advising small business clients, and can provide a broad perspective on the local business environment while those in leadership roles in business and industry have intimate knowledge of their business operations and plans. Respondents included partners and owners in public accounting firms as well as CPAs serving as presidents, CEOs, and CFOs in business and industry. Partners/owners in public accounting firms represented 66 percent of responses while 23 percent were leaders in corporate/business environment and 9 percent were from the nonprofit sector.

PICPA is a professional association of more than 20,000 members who work in public accounting, industry, government, and education. PICPA members not only meet statutory and regulatory requirements as CPAs, but also embrace the highest standards of professional and ethical performance and comply with a strict Code of Professional Conduct. Founded in 1897, PICPA is the second-oldest state CPA organization in the United States.