State can’t hide its deficit as ‘structural’
A couple of months from now, when Gov. Tom Wolf delivers his 2020-21 budget address to the Legislature, as the General Assembly is beginning preparations to launch its annual budget-preparation exercise, Pennsylvania residents again will be hearing terms such as “incoming revenues, expenditures, supplemental appropriations” and “fiscal estimates.”
Those are among the most recognizable budget-time terms, along with the troubling word “deficit.”
Webster’s dictionary defines “deficit” as “an excess of expenditure over revenue.” But this state, for years, has been living with a shortfall dubbed “structural deficit.”
Although lawmakers pass a budget every year that purportedly is balanced, tucked away somewhere inside is a structural shortfall that has defied resolution, for the most part, due to what Philadelphia Inquirer columnist John Baer on March 19, 2017, described as “gutless governing that annually punts.”
Rather than implementing tough, honest strategies for resolving that deficit, the Legislature routinely shifts funds within the state’s “fiscal house,” perhaps even consciously opting to overestimate some projected income.
Baer used the description “phony onetime revenues, some that never happen,” to help present his opinion. Based on what has happened on the state budget front over the past decade or so, the description is one that many state residents who have followed the divisive budget exercises of the past still can appreciate for the message it delivers.
Pennsylvania has one of the lowest credit ratings among the 50 states; that isn’t because it has handled budget challenges correctly.
In the Dec. 1 Mirror, Capitolwire reported that “despite decent — and in some cases robust — revenue collections and projections, Pennsylvania’s structural deficit remains, and the state’s increased spending appetite isn’t making budgeting easier.”
Capitolwire went on to say, “for FY2020-21, expenditures are projected to increase by
4.8 percent, which incorporates all currently assumed supplemental appropriations that will be needed for the current fiscal year.
“Last year, Gov. Tom Wolf’s administration requested nearly $750 million in supplemental appropriations to balance the FY2018-19 state budget, though state revenues were more than $800 million in excess of estimate, allowing excess revenues to account for the supplementals.”
Even people not experts in governmental fiscal management can grasp the message that if the state is using all higher-than-anticipated revenue collections just to pay for extra spending, it isn’t attacking the nagging structural-deficit problem effectively or at all.
In November 2016, the Pennsylvania Independent Fiscal Office issued a five-year projection dealing with the health of the state’s economy and budget. That projection made the point that if the state didn’t rein in spending, experience an uptick in incoming revenue or both, a deficit of $3 billion might exist by Fiscal Year 2021-22.
However, like 2018-19, incoming revenues during this 2019-20 fiscal year have been exceeding predictions, leading to reports over the past month or so that the structural deficit will be in the $1 billion range, perhaps a bit higher, but not like dire speculations of three years ago.
As state budget work gets underway in a couple of months, pay attention to the numbers associated with estimates, revenue collected, expenditures and appropriations. Also, pay attention to any mention of “structural deficit.”
That term is a big window into the state’s true fiscal health.