Pennsylvania faces a projected $1 billion fiscal 2010 shortfall as sluggish revenue collections will require further spending reductions and potential layoffs.
General fund revenues of $22.8 million for July through April are $1.1 billion, or 4.6%, below budgeted projections, according to the Department of Revenue. Fiscal 2010 ends June 30.
Gov. Edward Rendell yesterday said that he would begin revising the $29 billion spending plan for fiscal 2011 that he presented in February and the House passed last month.
“We obviously don’t have enough time in this fiscal year to make up for this revenue loss and it will be folded into next year’s budget,” Rendell said during a press conference on April revenue figures. “So I will work with the legislature to revise the budget I presented and we’re going to go about this in a number of ways.”
The Democratic governor said the administration and the General Assembly must first cut spending on top of the $2 billion of expenditure reductions that the state implemented during the past two years to reflect declining tax receipts. He did not specify the amount of spending cuts or the number of potential layoffs.
Rendell again pushed for a severance tax on natural gas extraction in the Marcellus Shale region and a tax on cigars and smokeless tobacco, which he says would generate $160 million and $41.5 million per year, respectively. He tried to implement the two taxes last year during the crafting of the current-year budget.
Ending a 1% vendor tax discount would offer another $73.5 million while terminating separate business reporting, which allows corporations to shelter profits from taxation, would generate another $66 million, Rendell said. He proposed the two initiatives in his budget address in February as part of his effort to create a fund for fiscal 2012 to help the state after federal stimulus funds run out and anticipated pension contribution increases kick in.
The governor, who will end his second term in January, said the state should implement those tax changes and use the funds now to help balance the budget. He also urged a one-time transfer from legislative funds to the general fund.
“There is a need to cut spending, absolutely, and we’ve got to do that,” Rendell said. “There’s a need to use some one-time transfers to use some of that legislative balance money, and there is a need to have revenue options now, not to save them for the stimulus reserve fund ...and if the Legislature fails to enact those revenue enhancements, then we’re going to have to obviously up-tempo the level of cuts and the level of layoffs and furloughs. I hope not to be in a position to do that.”
Pennsylvania will not have to pay back $275 million of Medicaid funds to the federal government and the state will pay $150 million less in 2009 tax refunds. In addition, the administration is looking to a hospital assessment program that would generate $125 million.
Republican Senator Jake Corman, who chairs the Appropriation’s Committee, said he believes the state’s fiscal 2010 deficit will come in at $1.3 billion, slightly larger than Rendell’s estimate. He is asking the governor to resubmit a fiscal 2011 budget proposal in light of declining revenues.
The GOP caucus, which controls the upper chamber, has long been opposed to a broad-based tax increase, such as an income tax or sales tax hike. In addition, Republican members have yet to support a Marcellus Shale levy or a tax on smokeless tobacco as they believe it would discourage business growth.
“We really need to start over,” Corman said yesterday in a press conference. “Start from scratch and figure out a way to put this budget together on time before June 30 and [that also] reflects the revenues that we have as opposed to what was projected back in February.”
Rendell today will address a special session of the legislature on a $472.5 million transportation funding gap for fiscal 2011. That spending is separate from the general fund, but was part of the governor’s budget package in February.
