The Independent Fiscal Office (IFO) and Corbett administration are at odds over how much Pennsylvania will collect in taxes and other revenue for the remainder of 2013-14 and all of the 2014-15 fiscal year — to the tune of roughly $375 million. That’s a little over 1% of what is expected to be spent in 2014-15.
The Independent Fiscal Office (IFO) and Corbett administration are at odds over how much Pennsylvania will collect in taxes and other revenue for the remainder of 2013-14 and all of the 2014-15 fiscal year — to the tune of roughly $375 million. That’s a little over 1% of what is expected to be spent in 2014-15.
The driving force behind how much Pennsylvania can expect to collect in several major types of state taxes next year is just how much wages are projected to grow. The Independent Fiscal Office (IFO) is estimating Pennsylvania wages will grow by 3.6% in 2014, up from 2.6% in 2013.
That puts General Fund revenue growth at 3% in 2014-15, not including several of the new revenues proposed by the Governor in his 2014-15 budget, as well as the recently enacted small games of chance taxes. Including small games of chance taxes, but not the one-time proposed revenues, preliminary IFO growth is 3.3%, as compared to the Corbett administration’s 3.9% in projected growth.
The IFO has also downgraded its revenue estimate for 2013-14 due to somewhat sluggish collections and now expects revenues for the fiscal year to fall $112 million short of Corbett administration estimates.
Just how much state tax and revenue collections will grow next year was the subject of a House budget hearing where IFO Director Matthew Knittel testified Monday. Knittel discussed the IFO’s outlook for the rest of 2013-14 and what 2014-15 could look like economically.
Knittel reiterated that the state faces a long-term problem where revenues increase more slowly than expenditures — particularly due to increases in pension payments in the coming years. Several of the pension reform proposals would increase the state’s structural deficit in the near term. To correct this, additional revenues need to be raised or spending reduced.
Demographic changes will put more pressure on the state budget in coming years. While the state’s population of children and working-aged adults is expected to be relatively flat, the state’s elderly population is projected to grow by 29% in coming years.
At the same time that Knittel was testifying before the House Appropriations Committee, Budget Secretary Charles Zogby was grilled by the Senate Appropriations Committee, where several senators of both parties worried about optimistic revenue assumptions in the Governor’s budget. Secretary Zogby noted it was early in the process and the administration had other ideas it was working on in case the estimates did not work out.
Budget hearings continue over the next two weeks in Harrisburg. They are often great information sources as lawmakers discuss details of the Governor’s budget with individual departments and offices. These hearings will provide more detail on the Governor’s plans regarding education, health care, human services, public safety, and environmental programs. We will be blogging the highlights as we learn more.