The latest financial reports for Pennsylvania don’t contain much good news.
With two months remaining in the fiscal year, the Department of Revenue is reporting a shortfall that has ballooned to more than a billion dollars—the worst budget gap since 2010. That pushes the projected structural deficit up too. It’s now over $3 billion.
Independent Fiscal Office Director Matthew Knittel said the revenues were weak in nearly every category, with “two exceptions: tobacco taxes, and insurance premium taxes.” He said that has a lot to do with the US economy having its worst quarter in three years. But there are state-specific factors too.
For one, businesses and others may have done some creative income reporting that withheld tax money from the commonwealth.
“We think that in anticipation of a potential federal income tax rate cut, people pushed money out of the year,” Knittel said. “In particular, for capital gains and for net business profits we had a very weak April payment.”
He added that spending also isn’t keeping pace with income, which has grown on-average.”For some reason, consumer spending is very weak,” he said.
The shortfalls leave the commonwealth with an even tougher fiscal hole to fill in next year’s budget, which is due at the end of June.
Governor Tom Wolf has said he believes some new revenues are crucial, while the legislature’s GOP majorities largely disagree.