Democratic Gov. Tom Wolf and the Republican-controlled Legislature are facing a potential shortfall of nearly $3 billion through next summer, based on new projections by the state Legislature’s Independent Fiscal Office.
With an approved state budget this year of $31.5 billion, the projected deficit is among the state’s largest post-recession gaps as it struggles to keep up with rising costs for health care for the poor, prisons, state police and overdue pension obligation payments.
Matthew Knittel, the director of the Independent Fiscal Office, said Thursday that year-over-year tax collections are virtually flat halfway through the fiscal year.
“We’re really not getting any kind of economic growth through January,” Knittel said. “So it’s very puzzling.”
Forecasts for other states have also been gloomy, although Knittel said Pennsylvania’s may be slightly worse because the state’s population isn’t growing and is slightly older. Pennsylvania’s corporate tax collections are also reflecting an overall national weakness in corporate profits, Knittel said.
In November, the Independent Fiscal Office had forecast a gap of $2.2 billion in the cost to maintain current program spending through July 1, 2018. The office’s new projection this week revised projected tax collections downward by nearly $600 million. That puts the overall gap at $2.8 billion.
The Legislature’s huge Republican majorities have rebuffed Wolf’s efforts the past two years to balance the deficit with a broad tax increase in sales or income. In recent weeks, Wolf has vowed to produce a balanced budget plan that relies heavily on cuts and savings measures, but not an increase in sales or income.
The repeated use of one-time stopgaps to plug deficits drew five credit downgrades from 2012 through 2014, leaving Pennsylvania among the lowest-rated states and paying higher rates to borrow money.