With growth still sluggish and worries about the impact of potential federal budget cuts, the Corbett administration is wise in telling state agencies to prepare for another tough budget year.
Even though the current fiscal year is less than two months old, the administration is sending out guidelines that agencies should not assume they will receive more money in the 2013-14 fiscal year than they were allocated this year.
The guidelines also warn agencies in general not to expect the state to make up funds lost as a result of federal budget cuts.
It's a smart strategy, given the current economic climate and the reality that Pennsylvania faces higher spending in a number of areas including pension costs, Medical Assistance, prisons and debt service.
Pennsylvania is facing a 44 percent increase in payments to the Public School Employees' Retirement System, a 43 percent increase to the State Employees' Retirement System, a 7.5 percent increase in debt service, a 6 percent increase in Medical Assistance and a 3.5 percent increase for corrections.
There's not a lot the state can do to address those rising costs, especially without causing more harm later.
Part of the reason pension contributions are spiking is because some increases that should have been instituted in employer costs years ago were deferred. Now that it's time to pay the bill, the state and public school districts are feeling the pain.
PA Independent reports that the state Independent Fiscal Office estimates that Pennsylvania will have to pay more than $2.2 billion to the pension funds next year, an increase of about $600 million.
Without changes, the Independent Fiscal Office projects that state expenditures will exceed revenues in the 2013-14 fiscal year. With many Pennsylvanians continuing to find their own finances squeezed, it's not time for the state to be raising taxes. As a result, Pennsylvania will need to tighten its belt again.
It's still early, and it's possible Pennsylvania's financial picture could brighten before Gov. Tom Corbett presents his proposed spending plan around early February or before the 2013-14 budget is passed months later. It's easy to add money.
But given what we know now and the uncertainty that remains, it's wise for state agencies to plan to do with the same or less money in the next fiscal year.
