By Stacy Brown | PA Independent

HARRISBURG — Pennsylvania should see moderate economic growth as unemployment figures remain mostly the same this year, according to projections by the state’s new Independent Fiscal Office.

 

"When you look at the 2012 economy and whether it is half empty or half full, I think it's half full in Pennsylvania," said Jason Novak, research and policy support manager for the Federal Reserve Bank of Philadelphia. "I think the state is doing well (considering) the national economy."

 

Novak joined other financial experts and state officials at a conference Wednesday at the Rachel Carson State Office Building here to provide an assessment of economic, demographic, revenue and expenditure trends, which they said will affect Pennsylvania's fiscal condition over the next five years.

 

"We applied some analysis for the general public, so that they would understand how the economics, both national and at the state level, are affecting the state's budget and their personal circumstances," said Independent Fiscal Office Director Matthew Knittel, a former senior economist with the U.S. Department of Treasury.

Knittel said the Great Recession is expected to continue to restrain economic growth and state unemployment figures are expected to hold at its current 7.9 percent throughout the year.

Fiscal office projections, which used the current fiscal year as a base as well as revenue from taxes and other sources, showed that real economic growth would remain modest at 1.6 percent for the commonwealth for 2012.

 

While the growth is modest, the state should expect to see some businesses move in.

 

Real economic growth measures the rate of change a nation's and state's gross domestic product experiences from one year to another.

Real growth should peak in the state in 2014 at 3.2 percent, while unemployment should dip to 7.1 percent in 2014, according to projections.

 

The projections come one month after state Budget Secretary Charles Zogby said Pennsylvania was facing economic problems that have led to a $500 million shortfall by the end of the fiscal year in six months.

"Our office thinks what Zogby (predicted) is plausible," Knittel said. "We're still looking at that and everything, and we don't expect any big surprises."

 

Zogby's forecast and a projected increase in population could create other budget pressures on the state.

Knittel also said general fund revenue, which currently sits at $193.3 million, will increase 1.6 percent by fiscal 2014 and increase by 4 percent for fiscal year 2017. The state's fiscal year runs from July 1 to June 30.

"The state's tax base will continue its long-term contraction due to demographic factors," Knittel said.

 

Based on demographic and economic forecasts, the trends will increase the number of residents eligible for medical assistance, placing additional stress on the state budget, he said.

 

The Independent Fiscal Office was created by legislation in 2010 to certify revenue and set spending levels for the state. It will operate in an advisory role, much like the Congressional Budget Office at the federal level.

 

The office must prepare preliminary revenue estimates by May 1 and final estimates by June 15 for the next fiscal year as well as an annual assessment of the state's current fiscal condition and a projection of its fiscal condition for a subsequent five-year period.

The state earmarked $1.9 million in the operating budget to finance the new office and plans to spend about $1 million annually to operate it.

 

For more projections and information about the Independent Fiscal Office, click here.