Finally, the Commonwealth of Pennsylvania has a new state budget.
The 101-day budget crisis ended with a new spending plan of $27.8 billion, a mere $500 million less than the previous year’s budget which ran up a $3.2 billion deficit. Given that the new budget projects a zero percent growth in revenues, it would be logical to assume another multi-billion dollar budget deficit will ensue.
Some in the legislature understand what has happened. House Republican Leader Sam Smith summed it up well: “With more than a billion dollars in new or increased taxes, billions in federal stimulus dollars, and now by draining the Rainy Day Fund and the Health Care Provider Retention Account and raiding the Tobacco Endowment Fund, we are positioned on a giant funding cliff if the economy doesn’t swing back strongly in a year.”
The situation, in fact, is even more dire than Mr. Smith portrays. According to state Representative Sam Rohrer, House Republican Finance Chairman, it is unwise to use fiscal year 2008-2009 as a revenue benchmark because September of 2009 marked the 17th consecutive month where revenue collections were below estimates. In fact, revenue for the 1st quarter of the new fiscal year (July, August and September) fell $140 million below estimates.
Using historic fiscal data, Mr. Rohrer says a more realistic revenue projection during the current fiscal year would be $24.3 billion in tax collections. That is $3.5 billion less than the spending contained in the recently approved state budget. Much, but not all, of this deficit will be plugged by stimulus money and one time revenue sources. But, even with that, a massive budget deficit again looms for next year. Given these figures, it would have been more responsible for the General Assembly to have pared spending in the current fiscal year to the $24.3 billion level.
It would be bad enough if that were the only fiscal problem facing the commonwealth. But, it is only the tip of the iceberg. A looming melt-down in the state’s pension system threatens to make the general fund deficit look like chump change.
The Commonwealth Foundation has been conducting a series of public meetings across the state to raise the profile of the pension problem, an arcane issue that fails to attract much media coverage, but will soon have a profound effect upon taxpayers.