Big Budget Deficits Show Need for Big Changes

Pennsylvania is in a pickle unless lawmakers make fundamental changes. That’s the message of yesterday’s Independent Fiscal Office Economic and Budget Outlook report.

Each November the IFO looks at the fiscal health of the commonwealth and, to no one’s surprise, they find our current budget isn’t balanced. The IFO projects a $524 million deficit by the end of this year, plus a possible $388 million in supplemental appropriations. That means lawmakers may have to find $912 million dollars come June to balance this year’s budget, let alone create a balance budget for next fiscal year.

Based on the IFO numbers, $650 million tax hikes on vape stores, cigarettes and digital downloads did little to fix Pennsylvania’s long-term fiscal issues. The IFO provided chart below shows expected budget deficits for years to come under the status quo.

General Fund Balance Sheet

Tax hikes are not a solution to Pennsylvanian’s annual budget deficit problem. State spending will continue to exceed state revenue until we make fundamental changes to the budgetary cost drivers.

What are the cost drivers? Human Services, pensions, debt services and employee/retiree health care. In fact, long-term living and Medical Assistance, both under the Department of Human Services will increase by a projected $844 million next year.

The doom and gloom predictions can be avoided if Pennsylvania takes bold action now. Letting another year go by without true pension reform, Medicaid reform and reductions to corporate welfare programs that run up our borrowing will increase the chances of broad based tax hikes.