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Commonwealth Foundation


PA Deficit Watch

by Policy Brief
 

Pennsylvania Deficit Watch: May 2009
Update on Pennsylvania's Revenue Shortfall from the Commonwealth Foundation
05.04.09

The Pennsylvania Department of Revenue released the April revenue collections showing state General Fund revenues are $2.55 billion short for the fiscal year to date.

Governor Rendell had estimated in March that the fiscal year shortfall will reach $2.3 billion.

The April collections were $941 million below projections, nearly triple the shortfall that was expected. The state is now facing a deficit that may read indicates that may reach $3 billion for the fiscal year.

The current shortfall far exceeds shortfalls from 1990-91, 2001-02 and 2002-03, respectively–budget cycles that resulted in tax increases (including the two largest in Pennsylvania history), which in turn significantly hindered the state's economic performance.

Governor Rendell's 2009-10 budget proposes multiple sources to bridge this gap and increase spending to $29 billion next year:

Filling the 2008-09 Shortfall

Enacted budget: $28.3 billion

Estimated Revenue Shortfall: $2.3 billion; filled by:

Cuts/Freezes from Enacted Budget: $557 million
Federal Stimulus (Medical Assistance): $1.1 billion
Prior Year Lapses (money unspent in 2007-08): $91 million
Rainy Day Fund: $250 million
Transfer of Marcellus Shale Revenues: $174 million
Use of Legislative Surplus: $175 million

2009-10 Budget
Appropriations: $29.0 billion

General Fund Revenue: $26.2 billion, includes new sources:

Natural Gas Severance Tax: $107 million
Sales Tax ("elimination of discount for timely remittance"): $75 million
Cigarette Tax (10 cents per pack): $61 million
Redirect of Cigarette Tax from Health Care Provider Retention Account to General Fund: $198 million
Other Tobacco Products Tax: $38 million

One-time Revenue Sources:
Federal Stimulus: $2.4 billion (Medical Assistance, State Fiscal Stabilization)
Transfer from Health Care Provider Retention: $350 million (included in $26.2 billion revenue)
Rainy Day Fund: $375 million

However, it is not a lack of revenue, but over-spending which produced the current budget deficit:

Between fiscal years 2002-03 and 2008-09, total state spending increased 35.8% ($16.2 billion), well exceeding inflation (17.4%).

In Government on a Diet: Spending Tips 2009, a report released in February, the Commonwealth Foundation identified nearly $5 billion in potential spending reductions in wasteful spending.

Governor Rendell's revised 2008-09 budget represents a 1.64% decrease from the enacted budget, but a 2.27% increase over 2007-08. His proposed 2009-10 budget represents a 4.22% increase over the revised 2008-09 budget. It would be hard to argue we have "cut to the bone."

More examples of wasteful spending and budget facts can be found at PleaseNoMoreTaxes.org

Additional Resources

Governor Rendell's proposed 2009-10 budget and information on the 2008-09 budget can be found on the Office of the Budget website. The Commonwealth Foundation has also prepared an Excel file of the proposed and revised budgets for public discussion.

More Pennsylvania budget resources can be found at SunshineReview.org.

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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, nonprofit public policy research and educational institute based in Harrisburg.

www.CommonwealthFoundation.org

Commonwealth Foundation | 225 State Street, Suite 302 | Harrisburg | PA | 17101


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