Press Release
Pennsylvania Deficit Watch: February 2010
Following January’s estimate, Pennsylvania General Fund revenues are $374 million below estimate for the 2009-10 fiscal year, according to the Department of Revenue.
- Tax collections have been below estimate in all seven months of the fiscal year, and down month-over-month from last year for every month except 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.
- Governor Rendell, in his mid-year budget briefing in December, confirmed Commonwealth Foundation predictions that his budget spent too much–projecting the shortfall will reach $450 million by the end of fiscal year 2009-10. Based on the latest estimates, the budget shortfall will likely surpass this total.
| 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% | |||
| March | $3,873.30 | ($336.09) | -7.98% | |||
| 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% | $14,482.12 | ($374.36) | -2.52% |
| * October 2009-10 includes $1.8 billion in non-tax revenue, largely from transfers from other funds | ||||||
Governor Rendell’s proposed plan to fix the revenue gap, which would carry over a balance of around $90 million to the next fiscal year, includes:
- Use of remaining General Fund balance ($354 million after October transfer of $1.8 billion from other funds)
- $100 million in freezes from discretionary grants
- $70 million from a 1% across-the-board cut to discretionary items
- $50 million in lapses from surplus program funds
However, despite last year’s $3.2 billion shortfall, and a mid-year pledge to make budgetary cuts, the governor and General Assembly failed to reduce spending accordingly.
With Pennsylvania facing another budget revenue shortfall, now is the time to reduce spending to match tax revenue.
- The Pennsylvania Constitution (Art. 8, Sec. 13) requires a balanced budget, but the state ended the 2008-09 fiscal year having spent about $1.5 billion more than revenue — resulting in a prolonged budget impasse and forcing tax hikes and use of one-time revenue sources to pay for the overspending.
- The 2009-10 budget exhausted all the state’s one-time revenue sources, such as the “Rainy Day Fund” leaving no cushion to handle a revenue shortfall.
- With federal stimulus funding disappearing after the 2010-11 fiscal year, and facing dramatically higher state pension contributions beginning in 2012-13, budget deficits will be even larger in coming years.
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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, nonprofit public policy research and educational institute based in Harrisburg.