On Tuesday, Gov. Ed Rendell will give his final budget address to the General Assembly and taxpayers of Pennsylvania, officially kicking off what has become a political scrum season for Democrat and Republican lawmakers.
The Rendell Administration has the dubious distinction of never having a state budget approved in seven years by June 30, the constitutionally mandated “deadline” which carries no penalty for being missed.
One budget struggle stretched into December and the current budget was finally put to bed in early January. This year’s adventure should be a repeat of last year’s nasty, prolonged process and may be even more vindictive given the still souring national economic picture. It is also a safe bet with a Democrat-controlled House and a Republican majority in the Senate, the final product will wind up in a conference committee with three Republicans and three Democrats trying to get the financial sausage acceptably seasoned for passage.
The current General Fund budget at $28 billion was the hardest to reach yet, with threatened firings of state workers, at least one payless payday, the potential for not funding Penn State, Temple, Lincoln University, the University of Pittsburgh and countless nonprofit groups that are given taxpayer dollars.
Trying to fund the current budget required the state to tap every conceivable reserve, nearly to the point of looking for loose change between couch cushions. That money has been used up with the options left of cutting spending or finding more revenue.
More revenue means more taxes or fees, something the General Assembly has historically been unwilling to tackle during an election year and this is an election year for the entire House, half the Senate and a half dozen Republicans and Democrats hoping to take up residence at the Governor’s Mansion.
Last year, through June 30, the state had generated only $25.5 billion for general fund revenues and wound up with the current $28 billion budget through reserves, freezing the phase out of the Capital Stock and Franchise Tax, federal stimulus money from the Obama Administration and the legalization of table gambling. In December, the state authorized $800 million in tax anticipation notes (TANs) to meet payroll and other expenses until business and personal taxes come in March and April.
If the governor were to propose even a modest $1 billion increase in the state General Fund raising it to $29 billion for the next fiscal year, it is still difficult to see where the funding may be found, other than tax and fee hikes. Even Mr. Rendell has conceded a $500 million shortfall and general fund revenue collections were $257 million below expectations through December.
If, and a big “if”, state revenue collections remained at $25.5 billion (and they were actually $24.3 billion after tax refunds), and the Obama Administration comes through with a promised additional $2.6 billion, the state could still be as much as $1.5 billion short.
Possible tax targets include, but are certainly not limited to, a severance tax on gas drilling in the Marcellus Shale regions of the state, an end to the discount retailers receive for collecting the state sales tax and another run on taxing smokeless tobacco products.
Or, it could be decided to raise businesses taxes or the personal income tax, both of which could generate unintended consequences in the November elections.
Jim Panyard is a reporter with the Pennsylvania Independent. He can be reached at Jim@PAIndependent.com