State budget chief upbeat
Albright reveals surplus may be possible this year
HARRISBURG — Gov. Tom Wolf’s top budget official provided an upbeat assessment of the state’s finances this week despite a recent warning of difficult budget times ahead.
In what turned out to be his final mid-year budget briefing, Budget Secretary Randy Albright said, “We are very confident that not only will we end the year with a balanced budget, but we will end the year — we will leave — with a modest surplus.”
Albright ended the briefing Tuesday with a surprise announcement that’s he’s leaving his post at year’s end after nearly 34 years of working in state government. Gov. Tom Wolf then appeared on the scene to announce that Jen Swails, a top budget office official, will succeed Albright in the appointive post. No Senate confirmation is needed for Swails who has overseen budgeting for human services programs.
Albright’s briefing at the mid-point of the current fiscal year offers a preview of themes that Wolf will likely address in his Feb. 5 budget address for Fiscal Year 2019-20.
The briefing documents show a $264 million increase in total state tax revenue collections through the end of November as a result of strong growth in corporate net income, sales and personal income taxes. But Albright said an undetermined amount of that revenue surplus would need to go for supplemental appropriations to meet higher costs for human services and long-term care programs and overtime costs in the Department of Corrections in Fiscal Year 2018-19.
The agency has racked up employee overtime costs due to lockdowns at state correctional institutions last summer to deal with drug smuggling problems and the transition of inmates to the new SCI Phoenix.
Referring to increased spending for Medical Assistance, Albright said, “It’s an aging, elderly population that is the cost driver there.”
Lawmakers will have to weigh supplemental requests based on available revenue, said John O’Brien, spokesman for House Appropriations Chairman Stan Saylor, R-York.
Albright’s fiscal outlook is much more optimistic than that presented by the state Fiscal Independent Office last month in its five-year Economic & Budget Outlook.
The IFO indicated that next year’s budget could have a gap of up to $1.7 billion between available revenues and anticipated spending. The IFO attributes this potential imbalance to the use of more than $1 billion in one-time funding sources in the current budget and anticipated increases in spending on health and human services programs.
The one-time revenue sources include the transfer of $342 million in Tobacco Master Settlement Agreement payments to offset program costs by the state Department of Human Services.
“Overall, we are much more optimistic about how the budget year shapes up,” said Albright referring to his office having higher revenue forecasts and ongoing cost containment efforts.
While speculation is starting in Wall Street financial circles about a national recession next year or in 2020, Albright was decidely more bullish.
“Our most recent economic forecast assumed the robust growth that we are currently seeing in our state’s economy,” he said referring to a projected 4.7-percent growth in the gross domestic product this year and next year.
“We are in already a period of almost unprecedented sustained economic growth since the great recession,” added Albright. “History tells us that can’t go on forever. At some point there is likely to be, if not a recession, an economic slowdown. We need to prepare for that, but the good news as we stand in front of you today is at least that forecast is far enough out in the future that we don’t believe it will directly impact either the current year or the proposed (Fiscal Year 2019-20) budget year.”
Albright said the governor’s second term priorities include creating a fairer state business tax climate. Wolf has previously proposed linking a reduction in the Corporate Net Income tax rate with the ending of business tax loopholes without legislative success. But Albright said he would leave it to the governor to outline any specific proposals for a severance tax or natural gas production or other tax changes in his Feb. 5 address.
The Republican leaders who control the agenda in the House and Senate have said any new tax proposals, including one for a severance tax, would get a cold shoulder from lawmakers.
On other budget-related issues, Albright said the cost for restarting the General Assistance program after a seven-year lapse could be much lower than anticipated.
$150 million annually on GA cash payments to some 60,000 individuals when the Corbett administration ended the program in 2012. The state Supreme Court overturned that decision last year.
Albright said it could cost less than $25 million to revive the program based on the 3,000 eligible claims received so far by DHS. Since 2012, the picture has changed as Pennsylvania expanded the Medical Assistance program and the economy improved, said Albright.
Despite the court ruling, GOP legislative leaders are questioning the governor’s authority to reinstate the program. Albright said he discussed the matter during a meeting Monday with the executive directors of the four legislative appropriations committees.
One bright spot in Pennsylvania’s fiscal picture is a 9 percent increase in state tax collections due to recent action to close tax loopholes for digital downloads and marketplace sellers, said Albright.
Meanwhile, the advent of casino-run sports betting is expected to add $81 million to state coffers this year, Albright said.