As pension costs loom, ‘modest’ economic growth forecast for Pa.

Pennsylvania’s agency for nonpartisan economic analysis anticipates low revenue growth and high deficits in the commonwealth’s future. Rising state expenditures will be driven by pension and health-care costs due to an aging population.

The Independent Fiscal Office is projecting just a 0.8 percent growth rate in revenue for the next fiscal year. It’s a rate IFO director Mark Knittel calls “modest.”

That’s not good news for any lawmakers hoping they’d have more money to work with during budgeting season.

Erik Arneson, spokesman for the state Senate majority leader, says lawmakers knew crafting the next state spending plan would be no easier than the last two.

“The combination of very limited projected revenue growth and the absolute knowledge that pension costs are spiking makes it a very difficult future in terms of state budgets for the next several years,” Arneson said Thursday.

Knittel says the possibility of the country going over the fiscal cliff is a big question mark lingering over the report.Another variable not factored into the report is whether the state expands its Medicaid enrollment under the Affordable Care Act.

The IFO also predicts if tax law and budget policies stay the same, the state will face a deficit next year of $468 million.In five years, the deficit is projected to reach $2.2 billion.