State IFO projects Pa.’s smooth budget year is coming to an end

(AP Photo)

(AP Photo)

Pennsylvania’s revenue watchdog is predicting state lawmakers will have to fill a sizable budget hole for the next fiscal year.

That means after an easy, pre-election budget deal this year, the smooth sailing may be over.

IFO Director Matthew Knittel said revenues for this year are still coming in strong — maybe even higher than initially predicted.

But even so, thanks to the one-time funds used in the last state budget, there will be gaps to make up.

Knittel said even with no spending increase, the state’s largely tax-averse lawmakers will have to scrounge up almost $1.5 billion.

He noted a lot of the biggest costs are mandatory expenses for federal programs, like Medicaid. And he said it won’t be easy to pay for everything without more revenue.

“There’s not obvious cuts that we can see,” he said. “I think it will be a challenging budget year.”

Knittel also noted these projections assume there won’t be a recession — something he thinks is pretty likely to happen sooner rather than later.

“On the surveys we’ve seen regarding recessions, the majority of economists — I’d put it at two-thirds — do think a recession or a slowdown if you will is more likely than not over the next three years,” he said.

He advised lawmakers “exercise caution” and make sure they have enough resources to pay for services in a weaker economy.

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