CPAs Views of Current Economic Conditions. Results from a Survey of New Jersey and Pennsylvania Certified Public Accountants

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1 CPAs Views of Current Economic Conditions Results from a Survey of New Jersey and Pennsylvania Certified Public Accountants Prepared for New Jersey Society of Certified Public Accountants Pennsylvania Institute of Certified Public Accountants Prepared by Center for Opinion Research Franklin & Marshall College November 2014 Franklin & Marshall College Floyd Institute for Public Policy

2 Table of Contents Executive Summary... 3 Overview of Findings... 4 United States and State Economic Conditions... 4 State Differences on Selected Survey Items... 8 Pennsylvania... 9 New Jersey Trends in Economic Conditions Attachment A

3 Executive Summary Overview of Methods The purpose of this survey is to identify the economic, business, and political trends affecting the economies of Pennsylvania and New Jersey according to the certified public accountants (CPAs) residing within each state. This summary provides the responses of 418 Pennsylvania CPAs who are members of the Pennsylvania Institute of Certified Public Accountants and 414 CPAs who are members of the New Jersey Society of Certified Public Accountants. The sample of Pennsylvania CPAs and New Jersey CPAs has an estimated sample error of ± 3.6%. The data for the survey was gathered September through November, 2014 by the Franklin & Marshall College Center for Opinion Research. The survey was conducted using an on-line survey platform. The survey instrument, including the responses to each survey question, is included as Attachment A. The survey questions were designed by the staff of the Center for Opinion Research in conjunction with each state s CPA organization. The questions are designed to assess perceptions of the business climate within each state. Survey respondents are CPAs in public accounting. Survey invitations were sent to 3,219 CPAs in Pennsylvania and 3,627 in New Jersey. The survey s major findings about the US government s fiscal health and state economic conditions are summarized below. The results of the survey s other findings appear later in this report. Half (50%) of Pennsylvania and New Jersey CPAs believe the economic conditions in the US are about the same as they were one year ago (PA 5, 45%). A majority (5) of Pennsylvania and New Jersey CPAs predict increases in business revenues for the next 12 months (PA 57% increase, 4 increase). A majority (6) of Pennsylvania and New Jersey CPAs expect little change in the workforce for the next 12 months (PA 6, 65%). A large majority of CPAs in Pennsylvania and New Jersey agree that numerous factors have had a negative affect on United States economic growth during the past year, including: federal regulations (PA 80%, 7), the Affordable Care Act (PA 80%, 7), entitlement spending (PA 7, 7), United States tax policy (PA 7, 7), the global economy (PA 6, 7), and the federal deficit (PA 6, 6). Although CPAs in both states also agree that high unemployment has a negative affect on the U.S economy (77%) significantly more CPAs in New Jersey (8) feel that it has a negative affect on the U.S economy than CPAs in Pennsylvania (PA 7). 3

4 Overview of Findings United States and State Economic Conditions Most Pennsylvania and New Jersey CPAs believe that economic conditions will be better or about the same one year from now. Pennsylvania and New Jersey CPAs believe economic growth is being hindered by multiple factors, including the implementation of the Affordable Care Act, entitlement spending, and the global economy. CPAs in New Jersey view the global economy as the greatest hindrance to economic growth in the United States; whereas CPAs in Pennsylvania identified the Affordable Care Act as the greatest hindrance (see Table 1). Table 1. Pennsylvania and New Jersey CPAs Assessments of Economic Growth Do you believe the economic conditions in the United States will be better, worse or about the same one year from now? What do you believe is the greatest hindrance to economic growth in the United States? Total N=832 n = 418 n = 414 Better one year from now 29% 29% 29% Worse one year from now 2 25% 20% About the same one year from now 49% 46% 5 Affordable Care Act Entitlement spending 15% 17% 1 Global economy 15% 1 16% Federal regulations 1 16% 1 Federal deficit United States tax policy 1 10% 1 High unemployment 9% 6% 1 Private sector lending Spending cuts A majority of CPAs in both states agree that numerous factors have also negatively affected United State economic growth in the past year (see Table 2). 4

5 Table 2. Pennsylvania and New Jersey CPAs Assessments of Factors Negatively Affecting Economic Growth How has each of the following affected United States economic growth during the past year: negatively affected, no affect, positively affected? % Negatively Affected Total N=832 n = 418 n = 414 Federal regulations 77% 7 80% High unemployment 77% 8 7 Affordable Care Act 76% 7 80% Entitlement spending United States tax policy Global economy 70% 7 6 Federal deficit Private sector lending 4 46% 40% Significantly more CPAs in New Jersey than Pennsylvania (1) believe the economic conditions in the United States are worse than one year ago. About half of CPAs in both states (PA 5, 45%) believe the economic conditions are about the same as they were one year ago, and similar proportions (PA 46%, 5) are expecting economic conditions will be about the same one year from now. 5

6 Half of Pennsylvania and New Jersey CPAs are predicting increases in business revenues for the next 12 months, although many predict no change in the workforce in the coming year. Pennsylvania and New Jersey CPAs believe that salaries will increase or remain unchanged in the coming year (see Table 3). Most (86%) respondents believe that the implementation of the Affordable Care Act is affecting their companies business decisions. Among these companies, most (7) are increasing employee cost share and co-pays of existing plans, evaluating current insurance (69%), and reducing employee benefits (6). A majority (56%) of Pennsylvania and New Jersey CPAs believe the next economic bubble is most likely to occur in student debt. Table 3. CPAs Assessments of Business Growth Total N=832 n = 418 n = 414 Revenue next year Substantially increase Marginally increase 50% 56% 4 Not changed 40% 35% 4 Marginally decrease 9% 7% 1 Substantially decrease 0% 0% 0% Workforce next year Substantially increase 0% 0% 0% Marginally increase 2 26% 15% Not changed % Marginally decrease 1 9% 19% Substantially decrease Salaries next year Substantially increase 0% 0% 0% Marginally increase 47% 5 40% Not changed 46% 4 5 Marginally decrease 6% Substantially decrease 0% Benefits next year Substantially increase 6% 7% 6% Marginally increase 2 25% 19% Not changed Marginally decrease 3 27% 3 Substantially decrease 7% 7% 6

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8 State Differences on Selected Survey Items CPAs assess most state economic and business conditions differently depending on which state they practice in (see Table 4). New Jersey CPAs are more likely than Pennsylvania CPAs to say that economic conditions in their state are worse than a year ago; they are also more likely to believe their state s business climate is poor and that their state s tax structure is worse than most other states. More Pennsylvania CPAs believe the implementation of the Affordable Care Act is affecting their business decisions. CPAs in Pennsylvania and New Jersey share similar feelings about future economic conditions in their states, with about half saying they will be about the same one year from now (see Table 4). Table 4. Response to Selected Survey Items by State Do you believe the economic conditions in [State] are better, worse or about the same as...* Do you believe the economic conditions in [State] will be better, worse or about the same... Do you believe the business climate in [State] is excellent, good, only fair, or poor?* Is the tax structure in [State] better or worse than most other states?* n = 418 n = 414 Better than one year ago 29% 16% Worse than one year ago 19% 3 About the same as one year ago 5 5 Better one year from now 25% 1 Worse one year from now 26% 26% About the same one year from now 49% 56% Excellent 0% Good 3 19% Only fair 5 5 Poor 7% 2 Better 30% Worse 45% 87% About the same 25% 1 Is the implementation of the ACA affecting your company s business decisions?* * Significantly different, p. <.01 Yes 8 8 No 1 16% 8

9 Pennsylvania Over half (5) of Pennsylvania CPAs believe the economic conditions in Pennsylvania are about the same as they were one year ago and nearly half expect them to be about the same one year from now (49%). In 2014, slightly more Pennsylvania CPAs foresee a decline in the economic conditions one year from now than said so in 2013 (26% worse 2015, 2 worse 2014). An increased sense of improvement is shown in 2014 compared to 2013 in regards to the revenue growth that CPAs have seen during the past year as well as their expectations for next year (see Table 5). Table 5. Revenue and Employment Growth and Expectations for Growth, Pennsylvania CPAs PA Revenue this year Substantially increased 5% Marginally increased 56% 47% 39% Not changed 25% 26% 2 Marginally decreased 1 19% 2 Substantially decreased 5% Revenue next year Substantially increase Marginally increase 56% 5 45% Not changed 35% 3 36% Marginally decrease 7% 1 16% Substantially decrease 0% Workforce this year Substantially increased 0% Marginally increased 2 19% 15% Not changed 59% 5 49% Marginally decreased 19% 2 30% Substantially decreased Workforce next year Substantially increase 0% Marginally increase 26% 26% 2 Not changed 6 55% 59% Marginally decrease 9% 16% 15% Substantially decrease 9

10 Pennsylvania CPAs perceptions of the business climate in the state continues to improve; in 2014, two in five (4) believe the business climate in the state is excellent or good, which is up from one in three (3) in 2013, and one in four (26%) in Still, half of CPAs (50%) believe the state s business climate hinders economic growth. Half of Pennsylvania CPAs feel the influence of unions in pricing and contractor selection has the most negative impact on Pennsylvania businesses (see Table 6). Table 6. What state regulation has the most negative impact on Pennsylvania businesses? Influence of unions in pricing and contractor selection 50% Complexity of the state tax code for businesses 2 Restrictions on which contractors can be chosen for state and municipal projects Regulations on environmental protections State treatment of distressed municipalities 5% Consumer protection regulations such as protection from fees and penalties Other 5% Significantly more CPAs in Pennsylvania (30%) feel that the tax structure in their state is better than in most other states when compared to CPAs in New Jersey (). Pennsylvania CPAs believe that reforming state government pensions and reducing the corporate net income tax rate would provide the greatest economic expansion in the state and that expanding the base of items subject to sales and use tax is least likely to help improve economic expansion (see Table 7). Table 7. Which of these recommendations do you think would provide for greater economic expansion and job growth potential in Pennsylvania? Which is your second choice? Which is your third choice? Top Second Third in Top Three Reform state government pensions and benefits 36% 25% 1 75% Reduce the corporate net income tax rate % 59% Implement extraction fees on Marcellus Shale gas drilling 17% Consolidate school district operations 6% 1 20% 39% Reduce state spending Increase private-public partnerships 5% 10% 1 25% Reduce the personal income tax Reduce subsidies to state-supported colleges and universities Expand the base of items subject to the sales tax and use tax 0% 5% 10

11 Eighty-eight percent of CPAs in Pennsylvania say that the Affordable Care Act has affected their company s business decisions. Nine in ten (87%) CPA businesses are increasing employee cost share and co-pays of existing plans, four in five are re-evaluating their current insurance (80%), four in five (7) are reducing employee benefits, and half (45%) are determining a business s ability to obtain coverage through state exchanges due to the Affordable Care Act. 11

12 New Jersey Half (5) of New Jersey CPAs believe the economic conditions in New Jersey are about the same as they were one year ago, and over half (56%) expect them to be about the same one year from now. In 2014, fewer New Jersey CPAs say economic conditions are better compared to last year than said so in 2013 (16% better 2013, 2 better 2013), although over half said they are about the same in 2014 (5) and in 2013 (5). A sense of stability and improvement is shown in the revenue growth that CPAs have seen during the past year as well as their expectations for next year, as seen in Table 8. Table 8. Revenue and Employment Growth and Expectations for Growth, New Jersey CPAs Revenue this year Substantially increased Marginally increased % Not changed 35% 29% 2 Marginally decreased 20% 2 3 Substantially decreased 5% Revenue next year Substantially increase Marginally increase 4 46% 4 Not changed 4 37% 3 Marginally decrease % Substantially decrease 0% Workforce this year Substantially increased 0% 0% 0% Marginally increased 10% 1 1 Not changed 55% 55% 49% Marginally decreased % Substantially decreased Workforce next year Substantially increase 0% 0% Marginally increase 15% 2 20% Not changed 65% 5 59% Marginally decrease 19% 16% 17% Substantially decrease 12

13 Only one in five (19%) New Jersey CPAs believe the business climate in the state is excellent or good, and most (7) believe the state s business climate hinders economic growth. Nearly nine in ten (87%) New Jersey CPAs feel that the tax structure in New Jersey is worse than in most other states. New Jersey CPAs also rank the state s tax climate as one of the top factors contributing to the state s high unemployment rate along with companies leaving the state (see Table 9). Table 9. What factor contributes most to the state s high unemployment rate? What is the second most important factor? Top Second One or Two New Jersey tax climate % Companies leaving the state 4 25% 65% Health care costs 10% 16% 26% Government regulation 16% 2 Poor national economy 7% 10% 1 Eighty-four percent of CPAs in New Jersey say that the Affordable Care Act is affecting their company s business decisions and three in ten (30%) identify implications of health care reform as their greatest concern in regards to operating their business in New Jersey over the next twelve months. Eighty-three percent of New Jersey CPA say businesses are increasing employee cost share and co-pays of existing plan, four in five are re-evaluating current insurance (80%), four in five (79%) are reducing employee benefits, and about half (45%) are determining a business s ability to obtain coverage through state exchanges due to the Affordable Care Act. 13

14 New Jersey CPAs are in relative agreement that reducing property tax rates and reforming state government pensions and benefits would improve economic expansion in the state, but raising the marginal rate on income tax above $1 million and expanding the tax base would not (see Table 10). A majority of New Jersey CPAs oppose legislation to raise the marginal tax on income above $1 million because: they feel it will prompt wealthy residents to leave the state (6), they believe the state should focus on shrinking government (6), and New Jersey residents are already the most highly taxed citizens in the nation (60%). Table 10. Which of these recommendations do you think would provide for greater economic expansion and job growth potential in New Jersey? Which is your second choice? Which is your third choice? Top Second Third in Top Three Reduce property tax rates 35% 25% 19% 79% Reform New Jersey s estate and inheritance taxes 16% Cut gross income tax across the board 15% 19% 1 5 Reduce New Jersey s Corporate Business Tax (CBT) 20% 15% 17% 5 Expand the tax base 7% 1 27% Raise the marginal rate on income above $1 million 6% 2 Nearly eight in ten (8) CPAs in New Jersey report the state s estate and inheritance taxes have prompted their clients to leave the state. Seven in ten (7) report they have made a recommendation to a client to relocate due to the state s estate and inheritance taxes. A large majority (8) of New Jersey CPA s agree that New Jersey s estate and inheritance taxes affect the middle class just as much as they affect the wealthy. Trends in Economic Conditions Figure 1 shows the trend in responses to six questions asked in previous surveys. After a significant increase from 2012 to 2013, the number of CPAs in Pennsylvania and New Jersey who feel the economic conditions in the United States are better than last year remained consistent between 2013 and In 2014, significantly fewer New Jersey CPAs believe the economic conditions in their state are better than they were one year ago than believed so in There is a significant decline in the number of CPAs in New Jersey who feel that the fiscal health of their state s government is excellent or good in 2014.The number of Pennsylvania CPAs who believe the tax structure in their state is better than in most other states has significantly increased from 2012 to

15 Figure 1. Trends in CPAs Attitudes Toward Economic Conditions by State 15

16 Attachment A: Marginal Frequency Report 16

17 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 U.S. Economic Conditions and Fiscal Health Do you believe the economic conditions in the United States are better, worse, or about the same as they were one year ago? 3 35% Better than one year ago 1 20% Worse than one year ago 5 45% About the same as one year ago Do you believe the economic conditions in the United States will be better, worse, or about the same one year from now? 29% 29% Better one year from now 25% 20% Worse one year from now 46% 5 About the same one year from now What do you believe is the greatest hindrance to economic growth in the United States? 1 16% Global economy 2 1 Affordable Care Act 17% 1 Entitlement spending 1 1 Federal deficit 16% 1 Federal regulations 6% 1 High unemployment 10% 1 U.S. tax policy Private sector lending Spending cuts How much has each of the following affected U.S. economic growth during the past year? PA Affordable Care Act Federal regulations U.S. tax policy High unemployment Entitlemen spending Federal deficit Global economy Private sector lending Negatively affected 80% 80% % No affect % 2 30% 20% 39% Positively affected 6% 5% 1 2 High unemployment Federal regulations Affordable Care Act Global economy Entitlemen spending U.S. tax policy Federal deficit Private sector lending Negatively affected % No affect 16% 2 19% % 27% 35% Positively affected 9% 6% 5% 1 1

18 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 State Economic Conditions, Fiscal Health, and Business Climate Do you believe the economic conditions in [Pennsylvania/New Jersey] are better, worse, or about the same as they were one year ago? 29% 16% Better than one year ago 19% 3 Worse than one year ago 5 5 About the same as one year ago Do you believe the economic conditions in [Pennsylvania/New Jersey] will be better, worse, or about the same one year from now? 25% 1 Better one year from now 26% 26% Worse one year from now 49% 56% About the same one year from now Do you believe the business climate in [Pennsylvania/New Jersey] is excellent, good, only fair, or poor? 0% Excellent 3 19% Good 5 5 Only fair 7% 2 Poor Do you believe the business climate in [Pennsylvania/New Jersey] encourages economic growth, hinders economic growth, or has little effect on economic growth? 20% 1 Encourages economic growth 50% 7 Hinders economic growth 30% 1 Has little effect on economic growth How would you describe the fiscal health of [Pennsylvania a/new Jersey] state government: excellent, good, only fair, or poor? 0% 0% Excellent 15% Good 56% 49% Only fair 29% 4 Poor Is the tax structure in [Pennsylvania/New Jersey] better orr worse than most other states? 30% Better 45% 87% Worse 25% 1 About the same 2

19 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 State-Specific Items: PA Whichh of the following recommendations do you think would provide for greater economic expansion and job growth potential in Pennsylvania? Second choice? Third choice? PA Reform state government pensions and benefits Reduce the corporate net income tax rate Implement extraction fees on Marcellus Shale gas drilling Consolidate school district operations Reduce state spending Increase private-public partnerships Reduce the personal income tax Reduce subsidiess to state-supported colleges and universities Expand the base of items subject to the sales tax and use tax as 1 as 2 as 3 36% 25% % 17% 1 1 6% 1 20% % 10% 1 0% in Top 3 75% 59% 4 39% 3 25% 5% What state regulation has the most negative impact on Pennsylvania businesses? PA 50% Influence of unions in pricing and contractor selection 2 Complexity of the state tax code for businesses Restrictions on which contractors can be chosen for state and municipal projects Regulations on environmental protectionss 5% State treatment of distressedd municipalities Consumer protection regulations such ass protection from fees and penalties 5% Other Pennsylvania faces a structural budget deficit estimated at nearly $2 billion. Which of the following should the state use to close the deficit? Secondd choice? Third choice? PA Privatize liquor stores Impose a severance tax on Marcellus Shale drillers Legalize marijuana Lower businesss privilege tax Maintain the capital stock & franchise tax Raise personal income tax rate Raise the corporate new income tax rate Other as 1 as % 4 1 5% 9% 10% 10% 0% 1 as % 10% 9% in Top 3 69% 67% 27% 25% 2 20% 29% Red tape in Pennsylvania s state and local government agencies: PA 36% Is worse than ever 16% Is difficult, but improving 3 Same as beforee 0% Better than ever 9% Has not impacted my company 3

20 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 State-Specific Items: Whichh of these recommendations do you think would provide for greater economic expansion and job growth potential in New Jersey? (Choose three) as 1 as 2 Reduce property tax rates Reform New Jersey s estate and inheritance taxes Reduce New Jersey s Corporate Business Tax (CBT)) Cut gross income tax across the board Expand the tax base Raise the marginal rate on income above $1 million 35% 16% 20% 15% 7% 6% 25% 2 15% 19% as 3 19% 2 17% 1 1 in Top 3 79% % 2 With regard to operating your business in New Jersey over the next 12 months, what is your greatest concern? 30% Implications of health care reform 19% Regulatory requirements 15% Consumer spending 1 The state s budget deficit and credit ratingg 10% State and local taxes 6% The unemployment rate 5% Other New Jersey s unemployment rate is well above the national average. What factor contributes most to the state s high unemployment rate? What is the second most important factor? Companies leaving the state New Jersey tax climate Health care costs Government regulation Poor national economy as % 7% as 2 25% 3 16% 16% 10% in top 2 65% 65% 26% 2 1 Do you believe New Jersey s estate and inheritance taxess have prompted one of your clients to leave the state? 8 Yes 17% No Have you ever advised a client to consider relocation duee to New Jersey s state and inheritance taxes? 7 Yes 29% No 4

21 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 Do you agree or disagree with the following statement? New Jersey s estate and inheritance taxes affect the middle class just as much as they affect the wealthy. 55% Strongly agree 29% Somewhat agree 10% Somewhat disagree 6% Strongly disagree New Jersey s Transportation Trust Fund is scheduled to run out of money for road and bridge repairs in February Do you agree or disagree with the following statement? New Jersey s gas tax should be raised to fund the state s Transportation n Trust Fund.. 17% Strongly agree 39% Somewhat agree 17% Somewhat disagree 27% Strongly disagree Do you favor or oppose legislation that raisess the marginal tax on income above $1 million from the current 8.97% to 10.75%? 16% Strongly favor 1 Somewhat favor 1 Somewhat oppose 4 Strongly oppose Why do you favor raising the marginal tax rate above $1 million? n=150 6 New Jersey s wealthiest taxpayers can afford a temporary increase in their tax burden. 37% It s not fair to ask low-to-moderate income families and seniors to sacrifice while higher- income residents get a tax break 36% The tax is a necessary fix to the state s budget deficitt Some other reason Totals may equal more than 100% because multiple answers were accepted. Why do you oppose raising the marginal tax rate above $ 1 million? n=283 6 The increase will prompt wealthy residents and businesses to leave the state. 6 New Jersey need to focus on shrinking government, not imposing more taxes. 60% New Jersey residents are already the most highly taxed citizens in the nation. 47% Lower taxes on individuals and businesses are key to economic growth. 7% Some other reason Totals may equal more than 100% because multiple answers were accepted. 5

22 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 Organizational/Client Growth Outlook Over the past year, has your clients revenuee substantiallyy increased, marginally increased, not changed, marginally decreased, or substantially decreased? Substantially increased 56% 4 Marginally increased 25% 35% Not changed 1 20% Marginally decreasedd Substantially decreased Over the next 12 months, do you expect your clients revenue to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? Substantially increasee 56% 4 Marginally increase 35% 4 Not change 7% 1 Marginally decrease 0% 0% Substantially decrease Over the past year, has your clients workforce substantially increased, marginally increased, not changed, marginally decreased, or substantially decreased? 0% 0% Substantially increased 2 10% Marginally increased 59% 55% Not changed 19% 3 Marginally decreasedd Substantially decreased Over the next 12 months, do you expect your clients workforce to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? 0% 0% Substantially increasee 26% 15% Marginally increase 6 65% Not change 9% 19% Marginally decrease Substantially decrease Over the next 12 months, do you expect your clients salaries to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? 0% 0% Substantially increasee 5 40% Marginally increase 4 5 Not change Marginally decrease 0% Substantially decrease 6

23 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 Over the next 12 months, do you expect your clients benefits to substantially increase, marginally increase, not change, marginally decrease, or substantially decrease? 7% 6% Substantially increasee 25% 19% Marginally increase 3 3 Not change 27% 3 Marginally decrease 7% Substantially decrease Whichh of the following issues facing [Pennsylvania/New Jersey] is most likely to hinder future economic growth? Which is the second most likely to do so? PA as 1 Pension funding for public employees 37% Rising health care costss 2 Unfunded infrastructure costs 5% Regulatory burdens 7% Deficiencies in basic education 6% High taxes 6% Loss of educated workers (brain drain) A declining tax base 6% Other 0% as 1 High taxes 35% Pension funding for public employees 1 Rising health care costss 1 A declining tax base 1 Regulatory burdens 10% Unfunded infrastructure costs 5% Loss of educated workers (brain drain) Deficiencies in basic education Other 0% as % 15% 7% 6% 7% 5% 0% as 2 16% 16% 20% 1 1 5% in Top % 20% % in Top % 2 1 9% 7% Is the implementation of the Affordable Care Act affecting your company s businesss decisions? 8 8 Yes 1 16% No 7

24 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 Whichh of the following decisionss are affected by the implementation of the Affordable Care Act? PA n=365 80% 45% 7 87% 1 n=356 79% 4 80% 8 Evaluating current insurance Determining a business s ability too obtain coverage through state exchanges Reducing employee benefits Increasing employeee cost share and co-pays of existing plans Other How often do you field the following types of questions from your clients? PA Frequently Occasionally Rarely Never N/ /A Tax planning Retirement plans for owners Employee benefits costs Cash management Retirement plans for employees Classifying individuals as employees or contractors Succession planning/selling a business Employee compensation Developing a business loan Accounting methodologies Management estimates used in financial reporting New accounting pronouncements Bankruptcy 80% 37% 36% 3 27% % 1 17% 1 0% 15% 49% 50% 46% % 35% 2 1 9% 1 19% % % 3 39% 60% 9% % Frequently Occasionally Rarely Never N/ /A Tax planning Retirement plans for owners Employee benefits costs Cash management Classifying individuals as employees or contractors Succession planning/selling a business Retirement plans for employees Employee compensation Developing a business loan Management estimates used in financial reporting Accounting methodologies New accounting pronouncements Bankruptcy % 1 17% 16% 9% 1 49% 47% 49% 50% 50% 50% % 3 26% 26% 16% 17% % 27% 2 35% 36% 37% 50% 5% % 5% 5% 8

25 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 In which of the following sectorss is the next economic bubble most likely to occur? 5 5 Student debt 2 29% Stock market 1 1 Credit card debt Mortgage debt Other Have you ever provided clients with advice about how to handle student loan debt? 50% 5 Yes 50% 46% No What advice do you most commonly provide to your clients about ways to handle student loan debt? Second most common? Third most common? PA n=209 Pay off loans with the highest interest first Develop a budget and adhere to it Consolidate loans for one lump sum monthly payment Find roommates to share expenses Move back home Other as 1 as 2 as 3 27% 15% 5% % 1 9% 0% 5% 0% 0% 0% in top 3 46% 4 3 6% n=226 Pay off loans with the highest interest first Develop a budget and adhere to it Consolidate loans for one lump sum monthly payment Move back home Find roommates to share expenses Other as 1 as 2 as 3 in top 3 27% 1 47% 1 19% 9% 4 9% 1 10% 3 9% 0% 0% 5% 0% How many partners does your firm have? PA 40% 46% Individual practitioner 3 29% 2-5 partners 7% 1 7% partners partners More than 25 partners What is your primary area of expertise? PA 5 59% Tax 19% 16% Audit 1 16% Generalist 5% 5% Business Advisory Forensic/Businesss Valuation Other 9

26 PICPA, SCPA Member Survey Marginal Frequency Report September 16- November 10, 2014 PA N= 418 N=414 What type of clients do you typically serve? PA 7 69% Smalll Business 7% 9% 6% 5% 0% 1 Nonprofits Manufacturing Service Industry Personal Financial Planning International School Districts Other Open-Ended Please provide any additional comments, suggestions, or concerns you have about the economic, business, and political trends affecting your local economy. (Verbatim Responses) 10