.

Costs Increases Proving Tough Challenge for State Budget Plan

Pennsylvania’s administration is facing a tough budget year for 2013-2014, with an estimated $1.3 billion in cost increases.

By Melissa Daniels | PA Independent

HARRISBURG — Figuring out next year’s state budget may be the Corbett administration’s toughest balancing act yet.

While facing unavoidable personnel cost increases and potential federal cuts, the state is promising taxpayers it won’t increase general fund taxes, or create new ones.

Pennsylvania Budget Secretary Charles Zogby said Wednesday that while the state is not ready to announce a spending figure for next year, it knows it has to come up with at least half a billion dollars.

Known cost increases for next yet tally around $1.3 million, though the administration estimates it will have $813,000, or 3 percent growth, in revenue.

“In an environment where you’re not raising taxes, not generating more revenue, the dynamic of this is that you have to go back into the general fund to find half a billion dollars in savings to come out at level,” Zogby said.

Around $511 million of those cost increases is pension costs, with another $650 million coming from medical-assistance costs.

Past budgets already saw “cost containment” in many departments, meaning spending the same or less than previous years. Given that, Zogby said the 2013-2014 budget will be much more difficult than the previous two.

Already the state has asked departments to prepare budget proposals that keep spending flat, which equals almost 8 percent in cuts across the board in order to compensate for increased personnel costs.

“Most of the folks that come through my door aren’t asking me for less,” Zogby said. “I think in many respects the 13-14 budget is going to be the most difficult budget that we’ve had thus far in what have been two very difficult budgets.”

Zogby acknowledged that this reality may result in more layoffs. The state’s workforce has shrunk by about 1,800 workers in Gov. Tom Corbett’s administration, Zogby said.

The state also has told departments it won’t make up for any federal dollars that departments lose.

“We’re simply not going to be in a position to just simply backfill federal dollars,” he said.

But this rule of thumb becomes murky considering the so-called “fiscal cliff.” If congressional leaders in Washington, D.C., fail to make a deal, around $300 million in federal cuts would slice through Pennsylvania programs, including social services block grants and special education funding.

Zogby said there may be exceptions based on what happens. Come spring, when the state knows what lawmakers in Washington have done, “there may be decisions made in individual areas to break from that general rule,” Zogby said.

The bottom line, though, is that the state won’t fill in any lost federal dollars.

Adding to the financial stress is the accuracy of assumptions. Within the state, there’s differing opinions on how much revenue the state will have to work with to fund its myriad obligations.

While the governor assumes 3 percent growth for next year, the state’s Independent Fiscal Office estimated .8 percent growth for 2013-2014.

If the IFO’s prediction were to come true, Zogby said, it would create “several hundred million less in revenue that again could wreak havoc on our general fund budget, exponentially complicated an already complicated and difficult task.”

Budget officers will continue to crunch numbers during the winter, leading up to Corbett’s February budget proposal.

As for this year, the state does not anticipate any shortfalls resulting in spending freezes, as it experienced last year. Fiscal year-to-date general fund revenue collections total $9.8 billion, which is about $59 million above projections, according to the Department of Revenue.

If that path continues, it could help ease the burden of next year’s budget gap.

The state estimates will have an end-of-the-year balance of $478 million, which is about $185 million on top of a projected year-end balance of $293 million. Around $85 million of that will come from revenue, and about $100 million comes from “prior-year lapses,” or money that was budgeted and never spent.

Some already have ideas on how to put that money to use.

Democratic leaders in the state House and state Senate on Tuesday said Corbett should be willing to spend the existing $293 million balance in the current budget to invest in education, transportation, jobs and welfare.

They also pointed to another $819 million in potential revenue that the state could collect if it ended a series of corporate tax breaks and phase-outs favored by Corbett.

Together, that would give Pennsylvania about $1 billion in additional revenue for next year.

“Democrats have been proposing alternative savings in lieu of trying to raise taxes, and I think it’s important to do that,” said Senate Minority Leader Jay Costa, D-Allegheny.

Contact Melissa Daniels at melissa@paindependent.com

Eric Boehm contributed to this report.

— Edited by Kelly Carson, kcarson@watchdog.org

Proud2BParkland December 08, 2012 at 03:01 PM
With all these budget challenges, our state lawmakers took their COLA salary increases, didn't they? Disgusting.
Robert Sentner December 08, 2012 at 03:50 PM
Not all of them.
KilgoreTrout December 08, 2012 at 04:00 PM
Corporations are using the Delaware Loophole to cheat the state out of $500 million a year. Other states have closed the loophole decades ago. Ask yourself why Harrisburg permits this to continue. Corporations use Passive Investment Companies manipulate corporate taxes. This would go a long way to helping with budget problems.

Boards

More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something