The Pennsylvania Department of Revenue reports that through the end of March, state General Fund revenues are $719 million below estimate for the 2009-10 fiscal year.

• Tax collections have been below estimate all nine months of the fiscal year to date. March represents the first time collections exceeded the prior year's since October, which included $1.8 billion in transfers from other funds and one-time revenue sources.
• The 2009-10 budget (passed in October 2009) included tax increases and assumed slight revenue growth.
  
• In his budget address in February, Gov. Rendell, confirmed Commonwealth Foundation predictions that his budget spent too much--projecting the shortfall will reach $525 million by the end of fiscal year 2009-10, which has obviously been exceed with the March shortfall.
  

Historical General Fund Budget Shortfalls: Projected vs. Actual Revenues (Monthly)
(in millions of dollars)
	2008-09			2009-10
	Actual	Difference	Percent	Actual	Difference	Percent
July	$1,746.20	($0.08)	0.00%	$1,650.89	($2.11)	-0.13%
August	$1,668.90	($117.50)	-6.58%	$1,605.50	($19.90)	-1.22%
September	$2,343.70	($163.80)	-6.53%	$2,050.36	($118.64)	-5.47%
October*	$1,649.00	($283.40)	-14.67%	$3,519.06	($19.54)	-0.55%
November	$1,640.90	($93.10)	-5.37%	$1,596.92	($56.78)	-3.43%
December	$2,109.00	($156.63)	-6.91%	$1,983.60	($37.20)	-1.84%
January	$2,173.80	($261.74)	-10.75%	$2,075.90	($120.20)	-5.47%
February	$1,502.20	($196.95)	-11.59%	$1,489.60	($102.30)	-6.43%
March	$3,873.30	($336.09)	-7.98%	$3,947.00	($243.00)	-5.80%
April	$2,952.00	($942.50)	-24.20%
May	$1,613.30	($287.50)	-15.13%
June	$2,300.00	($415.00)	-15.29%
FY Total	$25,572.30	($3,254.29)	-11.29%	$19,964.70	($719.66)	-3.48%
* October 2009-10 includes $1.8 billion in non-tax revenue, largely from transfers from other funds

Gov. Rendell's plan to address the current year shortfall included in his proposed state budget include:

• Use of the remaining General Fund balance ($354 million after October transfer of $1.8 billion from other funds)
• $135 million in reductions from the enacted 2009-10 PA budget
• Prior to releasing the official March collections, the Rendell administration put out a statement expressing optimism they could still balance the PA state budget without a tax hikes, this is based on:
  • An additional $275 million from the federal government for Medicare Part D reimbursement
  • $50 million due to lower than expected refunds from tax returns
  • Better collection months, relative to estimate, in the remaining months
    

However, last year, despite a $3.2 billion shortfall, and a mid-year pledge to make budgetary cuts, the governor and General Assembly failed to reduce spending accordingly.

Gov. Rendell's proposed 2010-11 Pennsylvania state budget acknowledged the long-term fiscal imbalance - namely that the current budget exhausted all the state's one-time revenue sources, such as the "Rainy Day Fund;" the federal stimulus funding disappears after the 2010-11 fiscal year; and the state faces dramatically higher state pension contributions beginning in 2012-13. However, Rendell's budget calls for more of the same:

• A $1.3 billion increase in General Fund spending.
• Reliance on an addition $850 million in federal Medicaid funding, which has yet to pass Congress.
• Delaying pension payments, pushing higher costs onto future generations.
• New Taxes:
  • Sales tax expansion to 74 currently untaxed items & lower rate - generating $531 million in additional revenue next year and $866 million the following year.
  • Reduces CNI from 9.99 to 8.99, imposes combined reporting - generating $66 million next year and $167 million the following year.
  • New tax on natural gas extraction - $161 million in 2010-11 and $260 million thereafter.
    
  • New cigar/smokeless tobacco tax - $42 million per year.
    
  • Elimination of the vendor discount for sales tax collection - $75 million per year.
    

With Pennsylvania facing another budget revenue shortfall, now is the time to reduce spending to match tax revenue.

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For more on the PA State Budget, visit CommonwealthFoundation.org/budget

The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, nonprofit public policy research and educational institute based in Harrisburg.