When a lot of folks, both media and pundits, talk about the Pennsylvania state budget, and the fiscal crisis facing Governor-elect Tom Corbett, they mention a “$28 billion budget.” But this is only the General Fund budget.
In reality, the Pennsylvania state budget is about $66 billion. Outside of the General Fund, are many other funds. Transportation funding—through the Motor License Fund largely made up of the state gas tax and vehicle fees—is outside the General Fund. So is the Lottery Fund. The Unemployment Compensation Fund, which has acquired $3 billion in debt, is another separate fund. In total, there are 11 “special funds” and 139 “other funds”. And all federal funds coming to the state (excluding a portion of stimulus funding known as “State Fiscal Stabilization”) are in addition to the General Fund.
Spending by some of these funds are determined in the budget process, others set by law—but all can be reviewed.
Why is this important to note?
Facing a fiscal crunch[*], lawmakers must look at all $66 billion in state spending, not just the General Fund, and set priorities. For example:
- In 2007, the legislature set aside a portion of sales tax revenue for a special mass transit fund, moving money out of the General Fund (if you only looked at the General Fund, this would appear to be a spending cut, though it was nothing but an accounting change). At the time, lawmakers decided to create a “dedicated funding stream.” But the incoming legislature and administration should ask, “Should we spend $400 million on mass transit, or is that better used elsewhere?”
- The 2004 bill to legalize slot machine casinos, as most people know, created the Property Tax Relief Fund. But it also, to the surprise of many voters, created a fund for economic development, and one to subsidize horse racing. Again, lawmakers need to ask “Should gambling taxes be used for economic development and horse racing projects?”
[*]I was tempted to put, “facing a deficit” but this is also a misnomer. A “deficit” occurs in the current year, or past years, and is the amount spent minus revenue. Pennsylvania had a deficit of about $1.5 billion in 2008-2009, and may end up with a deficit this year. The federal budget is running a deficit of course. There is also the term “shortfall”, which is tax revenue compared with expected revenue (in 2008-09, the “shortfall” was $3.2 billion, but with stimulus money, the “deficit” was only $1.5 billion).
What the state faces next year is a gap between anticipated revenue and expected spending, which is usually current spending, plus more. Or a gap between revenue (barring any tax changes) and what some folks want to spend. This, of course, is quite different than an actual deficit.