Despite Strong First Half of Fiscal Year, Future State Revenue Challenges Remain

The state Department of Revenue had good news to share last week about Pennsylvania’s economic performance during the first half of the 2020-21 Fiscal Year. The collection announcement follows a reset from the Revenue Department of monthly revenue estimates, which includes November and December revenues in the estimation for what the remainder of the fiscal year will look like.

The state collected $3.7 billion in General Fund revenue in December, which was 14.5 percent more than anticipated – and which, according to the Independent Fiscal Office, is due mainly to higher than expected corporate net income tax collections and one-time funding transfers that were included in the November budget deal. The IFO went on to say that higher CNI collections (totaling $771.3 million) can be attributed to the non-taxable status of forgiven Paycheck Protection Program loans. The Personal Income Tax and Sales and Use Tax also raked in a combined $90.5 million last month.

Despite these gains, two of the state’s leading fiscal experts foresee challenges in negotiating a spending plan for the 2021-22 Fiscal Year. According to a story in Capitolwire, Senate Appropriations Committee Chairman Pat Browne, R-Lehigh, anticipates a $3.5 billion deficit for the budget year to come; and Budget Secretary Jen Swails estimates the state budget will finish out the current Fiscal Year on June 30 with a $3.7 million surplus. The ongoing pandemic and its financial impact on tax revenue, business profits and workers’ salaries poses the largest threat – especially given that there is no crystal ball to tell when these challenges will be behind us and the state can resume “business as usual.”

The current $35.5 billion state budget is being funded in large part with $1.3 billion in federal COVID relief aid, $2 billion in federal Medicaid and social security payments and $531 million in one-time transfers.

The Capitolwire story quotes Browne as saying that it’s important to identify the best ways to allocate state resources while continuing to support services for the elderly and disabled; and Swails saying that budgetary concerns for the approaching Fiscal Year include programs for seniors and the disabled, the replacement of one-time funding sources and the cap on using the Motor License Fund for state police funding. Notably, the second round of COVID-19 relief that recently became law does not include any direct federal aid to state and local governments.


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