The Phony “Surplus”

The Pennsylvania Department of Revenue released May General Fund tax collection data, and many lawmakers are clamoring to spend this “surplus”. But the idea there is any “surplus” is bogus. For starters, the $500 million tax collection exceeds estimates is a windfall, not a surplus. A surplus represents money left after all spending.

But even if there is any surplus left at the end of the fiscal year, it is a completely contrived notion. Consider these facts:

  • The 2010-11 budget was balanced using temporary stimulus money, transferring funds from other accounts, and other one-time gimmicks. The state is spending far more than it is collecting in revenue.
  • Governor Corbett’s proposed $27.3 billion budget for 2011-12 already consumes an expected surplus, spending almost $500 million more than projected revenue.
  • Pennsylvania is paying unemployment compensation by borrowing from the federal government. The state already owes $3.8 billion, and continues to go deeper into debt.
  • The surplus has been created by not paying and delaying requirement payments into state pension plans. The actuarial note accompanying Act 120 notes:

    However, it should be noted that the employer contribution collars (in effect through 2015) represent a departure from the norms of actuarial funding practice. The effect of the bill as amended would be to suppress the employer contributions to both PSERS and SERS resulting in significant underfunding of both retirement systems.

In other words, the surplus has been created by accounting gimmicks—effectively the state is not paying its bills. Any surplus must be used to pay off our obligations, not fund pet projects.