btHARRISBURG — Pennsylvania faces a budget shortfall of $1.85 billion in the next fiscal year, in part because of measures taken to balance the current year’s state spending plan, according to a forecast released Thursday by the Independent Fiscal Office.
The current 2014-15 state budget includes $572 million in non-recurring revenues, $619 million in one-time savings and $332 million in funding shifts, resulting in a “snapback” of lowered revenues and increased spending for the fiscal year beginning July 1, 2015, according to the IFO, a non-partisan office that produces state revenue projections and budgetary analysis.
Pennsylvania state government faces a long-term fiscal imbalance, the office found. Revenues are projected to grow at an average rate of 2.7 percent per year, with most gains coming from the personal income and sales taxes. But the growth is outpaced by that of expenditures, which are projected to grow at an average rate of 4.1 percent per year, as populations in need of services expand and the state’s required pension contributions increase.
Factors contributing to the imbalance include a demographic forecast finding that, from 2010 to 2020, Pennsylvania will experience 29.4 percent growth in its population of residents aged 65 and older, while the number of residents aged 20 to 64 will remain stagnant.
On Wednesday, the state budget office borrowed $750 million from the state Treasury to avoid a negative balance in the state general fund, according to Treasurer Rob McCord. In September, when the general fund balance fell below zero, the Treasury established a $1.5 billion line of credit, and the Corbett administration borrowed $700 million to maintain normal operations, the treasury said.
Sharon Ward, director of the left-leaning Pennsylvania Budget and Policy Center, said the state’s voters won’t stand for major cuts to state services.
“State lawmakers have two choices: massive, additional spending cuts to education, colleges and health- care programs, or adoption of new revenue measures, such as a severance tax, and an end to corporate tax loopholes. Pennsylvanians resoundingly rejected new budget cuts in last week’s gubernatorial election and signaled strong support for these revenue measures,” she said. “Lawmakers would do well to listen.”
Pennsylvania’s debt rating was downgraded in July by Moody’s Investors Service, and Fitch Ratings and Standard & Poor’s Ratings Services followed suit in September.
Tom Wolf, the Democrat who won the governor’s election last week, issued a statement Thursday that seemed to warn of difficult budget decisions ahead.
“Today’s report showing a multibillion-dollar budget deficit is a stark reminder of the dire fiscal situation my administration will face,” he said. “As bad as today’s news is, what lies ahead could be worse.”
First Published: November 15, 2014, 5:00 a.m.
