Here’s some good news for Democrats Governor Josh Shapiro as he prepares to present his first budget proposal to a joint meeting of the House and Senate next month:
By the time the 2022-23 fiscal year books close on June 30, the state will likely have a projected budget surplus of more than $8 billion. according to a novel report.
And if you include the condition Rainy day fund Data shows that in the savings account, the total amount reaches about $13 billion.
Now the bad news: it probably won’t last. The same study shows that if current trends continue, the Commonwealth will face a cumulative budget deficit of almost $13 billion by fiscal year 2027–2028.
Analysis by Pennsylvania Budget and Policy Centerprogressive think tank in Harrisburg, suggests a number of reasons for this seemingly sudden change in the state’s financial situation.
These include the end of federal stimulus funds that filled Pennsylvania and other states’ coffers during the height of the Covid-19 pandemic, flat funding for dozens of state programs in the 2020-2021 fiscal year, and a gap that will result in state revenues being reduced due to the tax rate cut Pennsylvania corporate income tax.
“Pennsylvania’s fiscal health is almost paradoxical. We have a huge surplus of over $13 billion. However, starting next year, we will probably have recurring budget deficits and a critical need for additional state spending, especially for full and fair financing of education in primary and secondary schools,” the director of the advisory team, Mark Stierwrote in the email.
“The huge surplus creates a temptation for politicians to avoid making difficult decisions,” he added. Trails further. “But it also provides an opportunity to use the surplus and modest addition to current income to meet the state’s needs in the long run.”
(Capital-Star photo by Marley Parish)
“Full and fair financing of public education”, Trails mentioned above is a reference to the multi-billion dollar dilemma facing Pennsylvania Commonwealth Court judge fell into the hands of decision-makers earlier this month when she proposed the state school financing system is unconstitutional.
In Order on 786 pagespresiding judge Renée Cohn Jubelirer stated that “the possibilities for reform are virtually limitless”, but restricted itself to presenting a policy prescription, leaving it to the legislative and executive authorities to consider on their own.
The cost of leveling the playing field will be enormous, to say the least. The case will likely end up in the state Supreme Court before all is said and done Capital-Star previously reported.
The analysis shows that in the face of these demands, the state cannot avoid the challenge.
In fact, “a cool look at Pennsylvania’s fiscal health shows us that to address long-term structural deficits and meet the needs of Pennsylvanians, the state will need to raise revenues at some point,” the report’s authors wrote.
Translation: Tax augment. But not for everyone.
“To do this without harming the state economy or economically struggling Pennsylvanians, the additional revenue should come from those who can most afford it, the wealthiest among us, and the multistate and multinational corporations that, despite recent reforms, continue to pay little or no state corporate taxes,” wrote the authors of the report.
And that means those who can afford it should shoulder more of the burden, analysts concluded.
“Pennsylvania continues to have one of the most unfair tax systems in the country,” the report authors wrote. “…Low-income Pennsylvanians pay state and local taxes at more than twice the tax rate as a share of their income (14%) than the top 1% of income earners in Pennsylvania (6%). Not only is this terribly unfair, but it is a fundamental reason why our taxes do not raise enough revenue to pay for the services that Pennsylvanians want and need.”
The work ahead will be a “test of statesmanship” that “distinguishes political leaders who strive for greatness from those who merely seek office.”
And “while the state budget paradox may tempt our political leaders to avoid long-term budget problems, it may also enable them to deal with these problems for many years without unduly burdening Pennsylvania taxpayers,” the report’s authors wrote.
