Press Release
Pennsylvania Deficit Watch: June 2010
Following May’s tax collections, the Pennsylvania Department of Revenue reports that state General Fund revenues are $1.2 billion below estimate for the 2009-10 fiscal year.
- Tax collections have been below estimate all eleven months of the fiscal year to date.
- In his budget address in February, Gov. Rendell confirmed Commonwealth Foundation predictions that his budget spent too much.
- In March, Gov. Rendell’s advisers issued a statement saying they expected state revenues to recover before the end of the fiscal year, which has not occurred.
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% | $1,983.51 | ($37.19) | -1.84% |
January | $2,173.80 | ($261.74) | -10.75% | $2,121.86 | ($120.20) | -5.36% |
February | $1,502.20 | ($196.95) | -11.59% | $1,489.64 | ($102.26) | -6.42% |
March | $3,873.30 | ($336.09) | -7.98% | $3,904.04 | ($242.96) | -5.86% |
April | $2,952.00 | ($942.50) | -24.20% | $2,920.08 | ($390.22) | -11.81% |
May | $1,613.30 | ($287.50) | -15.13% | $1,804.50 | ($124.90) | -6.47% |
June | $2,300.00 | ($415.00) | -15.29% | |||
FY Total | $25,572.30 | ($3,254.29) | -11.29% | $24,646.36 | ($1,234.70) | -4.77% |
* October 2009 includes $1.8 billion in non-tax revenue, largely from transfers from other funds May 2010 Includes one-time revenue from table games licenses |
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. 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.
- In March, the Rendell administration put out a statement expressing optimism they could still balance the PA state budget without 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
In addition to the $1.2 billion revenue short shortfall, the state budget faces other looming threats:
- In April, the Commonwealth Court ruled that using the surplus from the MCare Fund was illegal and must be repaid, thus creating another $800 million hole in the Pennsylvania state budget.
- The 2009-10 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; Gov. Rendell’s proposed $29 billion budget for 2010-11 relies on $2.8 billion in stimulus funding.
- The state faces dramatically higher state pension contributions – to the tune of a projected $3 billion increase at the state level alone beginning in 2012-13.
Rather than addressing these crisis, Rendell’s proposed Pennsylvania state 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.
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For more on the Pennsylvania 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.