State gambling with taxpayers’ financial future
When the Pennsylvania Legislature finally finished funding the state’s 2017-18 budget in late October — nearly four months beyond the constitutionally mandated June 30 deadline — it seemed certain that a window for fiscal problems “down the road” was left open.
On Nov. 16, that concern was proven to be correct. That was the day on which the state’s Independent Fiscal Office, as part of its annual long-term economic and budget outlook presentation, delivered the estimate that the Keystone State will be facing as much as a $990 million budget imbalance for the 2018-19 fiscal year, which begins next July 1.
That estimate represents a confirmation that state lawmakers still are playing virtual Russian Roulette by continuing to assemble annual spending plans without enough recurring revenue to adequately fund them.
Meanwhile, that figure of $990 million assumes that nothing will happen to derail that estimate, which seems overly optimistic, based on the state’s fiscal situation over the past decade.
The estimate presumes that incoming tax revenue will consistently meet projections.
Tax revenue hasn’t consistently done that; there have been months when incoming revenue has fallen far short of what was projected.
IFO also said the shortfall projection also assumes no additional public policy changes, but it would be foolish to place bets that there won’t be any such budget impacts, considering all that’s happened in this state in recent years, including regarding federal mandates.
Pennsylvania remains in a precarious fiscal environment, but tough, potentially controversial remedial decisions aren’t likely next year, with gubernatorial and legislative offices on the election ballots.
A state income tax increase for the 2018-19 fiscal year? No chance — and that’s not necessarily bad, considering other revenue-raising options that so far have been rejected, including a severance tax on the natural gas drilling industry.
Gov. Tom Wolf already has indicated plans to recommend only a cost-to-carry budget for next fiscal year, meaning that the budget will include only mandatory spending.
If such a budget comes to pass, the IFO says the nearly $1 billion budget imbalance could be reduced to $600 million, but even that has no wiggle room for shortfalls in incoming tax revenue.
All considered, the better bet on what actually might occur is IFO’s estimate that the commonwealth’s budget imbalance will balloon to $1.87 billion for Fiscal Year 2019-20 and reach $2.19 billion by Fiscal Year 2022-23.
Recall that, entering the current fiscal year last July 1, the state faced a budget shortfall of $2.2 billion. The only reason the state is operating under a “balanced” budget is because $1.5 billion was borrowed from the Tobacco Settlement Fund.
Will the budget-funding scenario for 2018-19 include re-borrowing that amount of money or more from the Tobacco Fund, assuming that the state is able to pay back the borrowed money before June 30?
Besides uncertain monthly tax revenues, there’s also no guarantee that all of the incoming-revenue projections revolving around the commonwealth’s expansion of gambling will be realized.
The coming election-year “smile and be happy” budget-preparation exercise will be just another delay-the-day-of-reckoning from the misguided “Susquehanna River Banks Production Company.”
When the day of reckoning finally is unavoidable, nobody’s likely to be smiling.
And if the $990 million shortball estimate proves too low six or seven months from now, the fiscal charade that’s been dominating Pennsylvania for so long will be much more difficult to disguise as “serving the people.”