The state began the 2022-23 fiscal year, which started July 1, without an enacted budget but with a $5.6 billion surplus, according to the Department of Revenue. Total state tax revenue for the 2021-22 fiscal year came in at more than 13 percent above estimate. Corporate taxes totaled $7.3 billion for the year, nearly 30 percent above estimate, and sales taxes (of which businesses in PA pay roughly half) receipts came in at nearly $14 billion for the year, 8.7 percent more than anticipated. Billions of unspent federal dollars from the American Rescue Plan remain uncommitted as well.

The legislature and Governor remain locked in on closing out an agreement on a budget for the current fiscal year, along with accompanying legislation that will hopefully include historic reforms to the state’s tax code. The PA Chamber has been leading efforts to reduce the state’s corporate net income tax, which remains the highest flat rate in the country. Legislators in both the House, Senate and  Governor’s Office have made reducing the CNI a priority. Additional reforms to the state tax code, including allowing deferral on state income tax liabilities on like-kind exchanges and allowing deductions for small business purchases of qualifying equipment, are also part of negotiations.

The House and Senate recessed on July 1 but, as of this writing, are scheduled return to session this week as they work on finishing up the budget and getting final legislation to the Governor. Though the state budget is now officially late, the short-term impact is expected to be minimal, particularly as past court decisions obligate the state to continue to pay employees, keep prisons open, make debt payments and reimburse Medicaid costs. House Majority Appropriations Chairman Stan Saylor told the Associated Press this week that “everybody’s doing the best they can to get over the hump and get this done, but I think we’ll have a good product when we’re done.