Weak tax collections will test Corbett tax pledge

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— It became clear late last year that Gov. Tom Corbett's administration would need to be creative if it were to produce an election-year budget plan that scrounged up more money for key constituencies, including public schools, and afforded a new round of business tax cuts.

It did. The plan released in February assumed a rosy economic outlook and called for moves like delaying $570 million in payments for pension obligations and health care services.

Since then, Pennsylvania has experienced the worst collapse of tax collections since the Great Recession. Now, Corbett, a Republican running for a second term, is under pressure to sign off on another tax increase, something he pledged not to do when he ran for office.

For now, Corbett has not publicly agreed to any plan to fill the budget gap with a tax increase. But his aides also have not ruled it out.

“I don't know if we're going to get there, and it's not really something we've discussed," said Charles Zogby, Corbett's budget secretary.

Zogby, however, is blunt that if more money isn't found somehow, then there will be no new money for the agenda Corbett spent much of the spring touting: new public school grants and college scholarships, shorter waiting lists for human services.

“The current revenue picture would suggest that none of those would be done, and indeed we're going to need to go back into the budget and make real cuts if there is no desire to look at alternatives to fill in the shortfall," he said.

As if to underscore how discombobulating the situation is, lawmakers are getting the latest start on budget legislation in at least a decade. Nothing has come up for a vote yet, even in committee, and an initial House Appropriations Committee vote is not expected for at least another two weeks.

The new fiscal year begins July 1.

The problem is this: Tax collections are about $600 million behind expectations. That's a shortfall tantamount to $1.2 billion in Corbett's original $29.4 billion budget proposal because it reduces next year's revenue projection by a dollar-for-dollar amount.

Other problems include several teetering assumptions in Corbett's budget, such as his plan to delay legally required payments in public employee pension funds.

It's hard to blame budgetmakers for stumbling: This year is just the third in at least 15 years that Pennsylvania's revenue collections are lagging both the previous year's collections and official projections, and the other two instances were both in the wake of recessions.

Overall, year-to-date tax collections are about $1.2 billion above where they stood four years ago. By contrast, annual costs for public employee pensions alone have risen by $1.6 billion, and are expected to add $600 million more to the tab next year.

If budgetmakers have figured out the next step, they aren't saying.

The governor's office gave leaders of the Legislature's Republican majorities — Democrats are being ignored by the administration — a look at how it would fill the gap with across-the-board spending cuts and cash transfers from a slew of grant programs.

Some of those raids could be politically sensitive, hitting programs that typically aid volunteer fire companies, parks, libraries, museums and historic sites.

Corbett's office isn't exactly embracing that plan.

“The governor would prefer to have a budget that makes progress on key priorities," Zogby said.

When it comes to discussing alternatives, Corbett and top Republican lawmakers are so far keeping their deliberations private.

But Democrats are applying pressure on Republicans to bring billions of federal health care dollars to Pennsylvania by expanding Medicaid under the 2010 federal health care law, raising taxes on the state's booming natural gas industry and sales of tobacco products and paring back plans for business tax cuts.

“We will be putting all those scenarios on the table and discussing all of them," said House Appropriations Committee Chairman Bill Adolph, R-Delaware.

As to whether Corbett has told him he will oppose a tax increase, Adolph said, “We have not had that conversation."

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  • Mar 22, 2018


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