Anemic tax collections add to state budget woes

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HARRISBURG -- Pennsylvania is facing an estimated budget shortfall of $1.3 billion through June 2015, according to a bleak revenue forecast issued Thursday by the state's Independent Fiscal Office.

The office calculated the shortfall by comparing the projected revenues over the next 14 months against Gov. Tom Corbett's proposed budget through the end of the next fiscal year.

Separately, the state's Department of Revenue collected $328.3 million less -- or 8.8 percent below -- what it anticipated in April, according to figures released Thursday.

April and March are typically some of the strongest revenue collection months.

"This shortfall creates major problems for the current year's budget, as well as enacting next year's budget," said a statement from the office of state Rep. Joe Markosek, D-Monroeville, the ranking Democrat on the House Appropriations Committee. That's because any shortfall in tax collections for the current fiscal year means the revenue base for next year has to be lowered as well, he said.

Budget deliberations will soon begin in earnest in Harrisburg. The state's fiscal year ends June 30 and the Legislature must finalize a 2014-15 spending plan by that date.

Mr. Corbett's 2014-15 state general fund budget proposal is $29.4 billion, an increase of 3.3 percent from the current fiscal year. The governor's critics have said too much of his plan relies on overly rosy revenue projections and taking money from one-time sources, such as delaying a large payment to Medicaid managed care providers.

Jay Pagni, a spokesman for Mr. Corbett, said Thursday that over the coming weeks, the governor will be working with the Legislature to "put forth options to help us bring the budget into balance."

Mr. Pagni declined to elaborate further other than to say "a wide range of options" could be considered in terms of both revenues and expenditures.

"We have a lot of work ahead of us," said Senate Minority Leader Jay Costa, D-Forest Hills.

For months Senate Democrats have been saying the state is leaving hundreds of millions of dollars untapped by not accepting federal funds for a Medicaid expansion in the state as permitted under the Affordable Care Act, by not modernizing state wine and spirits stores and by not having a severance tax on natural gas drillers.

"The time has come for a serious conversation on an extraction tax," Mr. Costa said.

As to why April's revenue collections were so much lower than anticipated, Secretary of Revenue Dan Meuser said the federal tax increase that took effect Jan. 1, 2013, had a larger-than-expected impact, as some taxpayers shifted capital gains and dividend payments into 2012.

Also hampering revenue was lower wage and salary growth than predicted.

Similar factors were also cited by Matthew Knittel, director of the Independent Fiscal Office, along with weaker 2013 job gains, a slower than expected housing market, and weaker income growth leading to weaker consumer spending.

The Independent Fiscal Office, independent of both the Legislature and governor, provides impartial analysis, similar to the Congressional Budget Office.

The office must publish an initial state revenue forecast every May 1; a final estimate will be released June 16.

Kate Giammarise:, 1-717-787-4254 or Twitter @Kate Giammarise.

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