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Pennsylvania House Budget Proposal Would Drastically Reduce Economic Development Funding

By Colin McEvoy on May 16, 2017

The Pennsylvania House passed a budget proposal that would drastically cut funding to the state's Office of International Development, and completely eliminate the Pennsylvania First grant program. (image courtesy Wikimedia Commons)

The Pennsylvania House passed a budget proposal that would drastically cut funding to the state’s Office of International Development, and completely eliminate the Pennsylvania First grant program. (image courtesy Wikimedia Commons)

The Pennsylvania legislature is currently considering a state budget proposal that, if approved, would drastically reduce the state’s role in economic development programs crucial for business relocation and retention efforts in both the Lehigh Valley and across the Commonwealth.

The state House passed a budget last month, along party lines, that reduces funding for the Department of Community and Economic Development by almost $70 million, from the present $145.5 million to $75.6 million.

The House Republican budget is considered an alternative to Gov. Tom Wolf’s budget and a “first step” in the Legislature’s budget process. It passed the House 114-84 with four of the majority Republicans joining all 80 Democrats in voting no. It has not yet been finalized, and substantial negotiations and changes are expected before a final budget is passed in late June.

But the current budget would significantly scale back funding for the state’s international business development office, and completely eliminate the Pennsylvania First program, which has supported several major business projects in the Lehigh Valley in recent years.

“If this budget were to pass, it would have an immediate effect on the ability of the Lehigh Valley and all regions of Pennsylvania to compete with neighboring states and the world in attracting and retaining companies to the Commonwealth,” said Don Cunningham, President and CEO of the Lehigh Valley Economic Development Corporation (LVEDC).

“We all recognize the state has financial challenges but gutting economic growth efforts, if penny wise, is certainly pound foolish,” Cunningham said. “States like New York, New Jersey, and Ohio have increased their economic development efforts and funding. This budget starts to get close to removing the state from its critical role in attracting and retaining companies.”

The current budget proposal reduces the state’s Office of International Business Development (OIBD) by more than 10 percent. The OIBD previously had the largest network of international offices of any state in the U.S., with 26 international offices covering more than 75 markets.

International investment has been growing in the Lehigh Valley, and LVEDC has previously partnered with OIBD to foster foreign direct investment in Pennsylvania and the Lehigh Valley, including an international business recruitment tour through Western Europe that directly resulted in the French company Norac opening its first American facility in the region.

“Pennsylvania has been a leader in this area and a terrific partner,” Cunningham said. “Regions the size of the Lehigh Valley don’t have the resources to recruit international companies. If the state continues to reduce or eliminate its role, we will feel it in the Lehigh Valley.”

The Pennsylvania First program is comprehensive funding tool to facilitate increased investment and job creation within the commonwealth. Eliminating it would result in $20 million budget savings, but would dramatically reduce the region’s and state’s ability to compete when it comes to business location decisions.

Multiple companies that have invested in the Lehigh Valley in recent years have received Pennsylvania First grants, including:

  • Reeb Millwork Corporation, a Fountain Hill-based manufacturer, received a $400,000 Pennsylvania First grant to support its $38 million expansion project
  • Paychex, a provider of payroll, human resources, retirement, and insurance services, received a $300,000 Pennsylvania First grant for its $1.3 million expansion project in South Whitehall Township
  • Norac, a French manufacturer of natural bakery snacks, received a $186,000 Pennsylvania First grant for their manufacturing facility in Forks Township
  • Central Garden & Pet Company, a manufacturer of pet and garden products, received an $80,000 Pennsylvania First grant for their project relocating its garden distribution facility from Massachusetts to Lower Nazareth Township
  • Nihon Kohden, a Japanese manufacturer of medical electronic equipment, received a $75,000 Pennsylvania First grant for their East Coast facility in South Whitehall Township
  • Tyber Medical, a manufacturer of orthopedic and spinal implants, received a $50,000 Pennsylvania First grant for their relocation project from New Jersey to the Lehigh Valley
  • Fuling Plastics, China’s largest manufacturer of plastic tableware and kitchenware, received a $150,000 Pennsylvania First grant for its project establishing its first American facility in Upper Macungie Township

If the House’s budget proposal is approved, Pennsylvania will have reduced economic development funding by more than 80 percent in the last decade, down from a DCED budget of more than $663 million ten years ago.

“Unfortunately, while Pennsylvania has been cutting its investment in economic growth, neighboring states have been doing the opposite,” Cunningham said. “Our primary competition in the Lehigh Valley comes from New York and New Jersey, which have introduced new economic development programs, increased spending, and launched aggressive marketing and recruitment programs.”

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