Tax collections in 2009 topped “boom” years of 2005 and 2006

With Pennsylvania facing a $1 billion budget deficit for the second consecutive year, the Rendell Administration has been quick to blame a decline in state revenues and to call for “revenue enhancements” to close the gap.

But tax collection statistics kept by the U.S. Census Bureau tell a different story, with Pennsylvania taking in more revenue from taxes in 2009 than during the “boom” years of 2005 and 2006.

The Commonwealth collected $22 billion in taxes in 2002, the year before Mr. Rendell took office. In 2005, tax revenue collections exceeded $27 billion and passed $30 billion in 2007. Despite the beginnings of the recession in 2008, tax revenues increased again in Pennsylvania, reaching $32 billion that year before falling back to $30 billion for 2009.

On Monday, both Mr. Rendell and Revenue Secretary Mary Soderberg painted the state’s ongoing economic problems as, essentially, a cash flow issue.

“Despite the very strong indications that the economy is bouncing back…our revenues continue to deteriorate,” said Mr. Rendell on Monday.

“Revenues continued to deteriorate during the major tax collection month of April. We will have to develop options to address the shortfall to be able to enact a balanced budget,” said Ms. Soderberg.

In reality, the state’s taxpayers shelled out more money during 2009, in the midst of a recession, than they did in 2005 and 2006, when the economy was in much better shape. In fact, 2009 state tax revenue was nearly $8 billion, or 35 percent, higher than it was in 2002, and nearly $3 billion, or 10 percent, higher when compared with 2005.

According to Revenue Department projections, Pennsylvania anticipates collecting more than $26 billion from taxpayers during the current fiscal year, though that number was revised down to 25.5 billion in February. With two months remaining, the state has collected $22.8 billion in taxes, but Mr. Rendell said Monday “revenue enhancements” are needed, such as new taxes on business income, natural gas extraction, and sales of cigars and smokeless tobacco.

Even if the state ends the year a billion dollars short of projections, taxpayers will have spent as much money as they did in 2004, generally considered a good financial year.

“The revenue shortfall is more of a problem in terms of what they projected to bring in. It’s a problem when you think you’re going to get $29 billion and you get $27 billion. I don’t think the number itself is so important,” said Mike Wood, research director for the Pennsylvania Budget and Policy Center.

“Like anything else over the last five or six years, costs have gone up, and until the fall of 2008 revenues were matching that growth” said Gary Tuma, spokesperson for the governor’s office.

Mr. Tuma said increases in spending on prison and medical assistance are partly to blame, and the state has no control over those costs.

“There’s been a history of when there’s good years, we increase spending. And when there’s bad years, we increase spending,” said Nathan Benefield, research director of the Commonwealth Foundation. “If we had kept spending in line with the rate of inflation and population growth, we would have a surplus today.”

Republican members of the state House joined the call for increasing revenues on Wednesday, though they want to do so without the addition of new taxes.

“The General Assembly and the governor must use fiscal restraint and a needs-based budgeting philosophy during the current budget cycle. We need to look for new non-tax ways to generate funds for the state,” said Rep. Sheryl Delozier (R-Cumberland). Proposals included more efficient and disciplined use of taxpayer money for the state vehicle fleet, tax collections, and Medicaid.”