Thursday, May 29, 2014

Budget Preview: 28 Days Before State Budget Deadline, Will Zack And Miri Get A Raise?

The deadline to have a state General Fund budget in place is July 1.  When the Senate and House return to session on June 2 they will have 28 days left before a budget should be done.
The Independent Fiscal Office said in its most recent estimates state revenues are projected to be down $608 million for FY 2013-14 and another $990 million for FY 2014-15 totaling a nearly $1.6 billion budget hole.
Actual fiscal year-to-date General Fund collections are down $424.5 million, according to April’s revenue figures.  On June 2 we should get the latest figures on May revenues which will shed more light on the deficit Senate and House Republicans and Gov. Corbett will have to deal with.
On the cutting costs side (which no one really likes to do because it offends people, especially in an election year) there is the clear need to reduce state employee and school employee pension costs which go up even more dramatically in the coming years.
Competing plans have been introduced, hearings have been held, actuarial notes prepared, analyses written, but other than killing a lot of trees, not much progress has been made.
Suggestions for filling the budget gap come in several flavors, each of them bitter to one group or another-- a new severance tax on natural gas production (opposed by 95 percent of Republicans), potentially expanding gaming in the state (could be, but will be a heavy lift on where extra revenues will go), some form of liquor privatization (which Senate and House Republicans don’t agree on and never have) and expanding Medicaid to take advantage of short-term federal funding for the program (which Democrats love, and Republicans and the Governor oppose).
Gov. Corbett last week also issued a new Executive Order outlining the ground rules for leasing additional State Park and State Forest lands which he estimates may bring in up to $75 million to fund park and forest projects.  He quickly notes neither his current budget nor his Enhanced Penn’s Woods initiative rely on this additional funding.
There’s always the chance the General Assembly will cobble together some income by raiding some special funds that are still somewhat healthy.  In years past they raided the Mcare Medical Malpractice Insurance Fund, the Storage Tank Indemnification Fund, the Keystone Recreation, Park and Conservation Fund, the Oil and Gas Fund, the Recycling Fund and more.
Of course they can also do things like delay payments to nursing homes, municipalities, school districts and other payees by three months or six months to push the payments into the another fiscal year and use other one-time gimmicks.
Shading revenue projections is another popular, honored tactic.
They also sometimes go the other way, like the serious proposal to increase the PA Film Development Tax Credit from its present $60 million a year to whatever Zack & Miri want by removing the cap on the credit.  Zack & Miri?
Yes, the PA Film Tax Credit has supported the making of some very memorable movies, like the 2008 classic Zack & Miri Make A Porno.
During budget season, folks can be very, very creative.
Last year, with a somewhat smaller budget hole, the House did not pass its first General Fund budget bill until June 12 and took final action on June 30, with the follow-on budget implementing bills coming much later.
In 2012, the Senate was the first to pass a budget bill on May 9 and the House passed the final version on June 28, with the implementing bills.
For three years, one of the Corbett Administration’s mantras has been passing an on-time budget before July 1 (or just slightly before).  We’ll see how close they come this year.
Lots of work to be done.

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