Take a wait and see approach on Pennsylvania’s budget
For the past two fiscal years, Pennsylvania taxpayers have had cause for cautious optimism about the Keystone State’s financial condition for the short and longer terms, going forward.
During numerous months of those fiscal years, which run from July 1 through June 30, incoming revenue exceeded budget projections, sometimes significantly.
It is important to note, however, that the annual months-long Pennsylvania budget-preparation processes have been more harmonious over the past two fiscal years than for a number of years prior, despite the commonwealth’s nagging structural deficit.
Lawmakers and the governor’s office have found sources of money — temporary or otherwise — to help the state “get through” the ensuing 12 months without fiscal crises, unlike in some prior years when credit agencies downgraded the state’s rating.
Still, some might have swallowed hard when they saw recent reports about Pennsylvania’s current financial situation.
Those taxpayers might have gotten the initial impression that the state is about to revert to a replay of the years when assembling a budget dragged on well beyond the June 30 adoption deadline.
Reports indicate that December general fund revenue collections were $91.5 million short of estimate — eye-opening, indeed. The troubling revenue showing for the month more than halved the excess revenue that the state had built up during the first five months of Fiscal Year 2019-20.
Some Pennsylvania residents might have wondered whether the commonwealth’s economic situation really stacks up against the rosy economic news being pitched by the federal government; last month, personal income tax collections checked in at only $18.9 million — less than two-tenths of 1 percent — above expectations.
The point worthy of emphasis now is that it is premature for concern over the state’s money fortunes for 2020-21. There still are nearly six months left in the current fiscal year, and much positive incoming-revenue news could evolve during those months.
There also are some logical reasons why the December numbers might have fallen significantly below projections, one of them connected to the personal income tax.
Federal tax law changes made in 2017 might be one culprit. Prior to the tax law changes, taxpayers had an incentive to pay their last calendar-year quarterly payment in December in advance of the January due date. However, due to the tax law changes, the inducement might no longer be as strong.
The fiscal report for January should answer that and a number of other questions emanating from the December report.
Although it is premature for pessimism about the future, it is not premature for state residents to begin watching for new predictions tied to 2020-21 budget-preparation, which will gear up in about a month.
Even now it can be said confidently that not even a whisper regarding a state income tax increase is likely during this legislative election year and, based on the past, prospects are zero for a severance tax on the Marcellus Shale gas-drilling industry.
The five “road maps” to how upcoming budget-preparation will proceed will rest with details — good or bad — in the January-through-May monthly revenue reports.
The December report wasn’t good, but it didn’t ensure doom.