Budget Secretary Charles Zogby delivered the state’s mid-year budget briefing Wednesday, comparing the state’s budget woes to the movie Groundhog Day. “Same old story,” he said.
And while mid-year revenue collections are above estimates, an estimated structural deficit of $1.85 billion heading into the 2015-16 budget season may signals the need for even more severe cuts, increased taxes, or both.
Zogby said that in the first five months of the fiscal year 2014-15, revenue collections are $109 million, or 1 percent, above estimates and when including the planned profit transfer from the Pennsylvania Liquor Control board, revenues are $189 million above estimate.
State revenues remain ahead of year-to-date estimates, largely due to $251.6 million of one-time, non-tax revenues used to balance the budget earlier this year.
Add in growing mandated spending areas, a list of adjustments to be made to the budget post-enactment, and a changing economic forecast that now indicates a decrease in Real GDP and an increase in U.S. Consumer Expenditures and U.S. Wages and Salaries for 2014-15, and the financial picture becomes slightly more dire with the Independent Fiscal Office estimating a deficit of $1.85 billion going into the 2015-16 FY budget.
“There’s been a lot of chatter in the media about a deficit that the incoming governor is facing,” Zogby said. “I talk all the time about the fact that our mandated cost growth is outstripping our revenue growth and each and every budget that we’ve done in this administration we’ve had to reconcile those two and bring them into balance.”
Going into the gubernatorial election, Corbett would not agree to a “no tax pledge”. Wolf campaigned on additional taxation of natural gas, closing loopholes and tax credits, increasing sales taxable items, and changes in the personal income tax. But his team has declined to say whether he would propose raising broad-based taxes at this time.
Josh Shapiro, co-chair of the Wolf Budget Deficit and Fiscal Stabilization Task Force said yesterday, “Give the governor-elect the opportunity to understand the scope of the problem and put his solutions forth. That’s what this transition period is all about and what the early days of his administration will be about.”
Wolf has made big promises in regards to funding education, and many Democrats feel that prior cuts to other service areas were already too severe. Ultimately the Republicans, who control both the House and Senate, will have a large hand in crafting the budget. This crisis may force the legislature to finally pull the trigger on pension reform and liquor privatization, but the Governor-elect has not supported major efforts on these two issues.
In advance of – and following – Zogby’s mid-year briefing, Wolf’s Budget Deficit and Fiscal Stabilization Task Force and transition leaders charged the Corbett Administration with putting the state in this position.
In their “Four Things to Remember Ahead of Mid-Year Budget Briefing” statement, Wolf’s Task Force framed the situation they’re inheriting by noting that the budget was built on one-time revenue sources, the state is projected to be cash-flow negative during the first quarter of 2015, the state has maxed out its line of credit, and has slipped to last place in job creation.
Corbett made similar complaints about the situation he was inheriting from Gov. Ed Rendell; Rendell complained about his predecessor Gov. Mark Schweiker. And Zogby drily noted that the campaign is over. It’s now time to begin a new round of attempts to solve the budget problems.
Click here to view a copy of the mid-year budget briefing.