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February 4, 2013 | By | Posted in General News

Number crunchers offer different PA deficit estimates

By Melissa Daniels | PA Independent

HARRISBURG — Long gone are the days when state budgets had cushy rainy day funds to plump up annual spending plans.

PA BUDGET: Number crunchers agree the state will end the 2013-14 year in the red but have wildly different estimates of how much.

In this day and age, state budget conversations often include references to the fat that’s already trimmed, the bone that’s already exposed.

In Pennsylvania, Gov. Tom Corbett is scheduled to make his budget proposal on Tuesday, kicking off the budget season. The state is required by law to get next year’s plan done by June 30, the end of the fiscal year. Behind the scenes legislative leaders and government officials have already started looking at where the state stands.

Some early forecasts say that without considering Corbett’s recommended changes, the state will begin the 2013-2014 fiscal year with more costs than it can afford. But just how deep that hole is depends on who’s crunching the numbers.

On Friday, Senate Appropriations Chair Jake Corman, R-Centre, said the state will begin the year with a structural deficit.

State budgets wind up with a structural deficit when revenues do not come in high enough to meet the state’s current level of spending. While a state can have a deficit if it spends more than it receives in any given year, structural deficits in budgets are the result of long-term obligations.

Corman’s office estimates that revenues will grow 1.92 percent. Accounting for spending required by law in areas like healthcare and corrections, the state would have a $550.2 million structural deficit at the end of the year, according to his office. The scenario assumes no policy changes to counteract the deficit.

But Corman’s office is about a half-billion dollars too optimistic, if an estimate from the state’s Independent Fiscal Office holds. The office says in a five-year outlook report the structural deficit will hit $1.05 billion at the end of 2014 and assumes revenue growth of about .08 percent.

The Corbett administration estimates a $496 million difference between revenue growth and mandated cost increases, closer to Corman’s estimate.

Meanwhile, Randy Albright, budget analyst with the Senate Democrats, said it is too soon to start anticipating deficit numbers. But his number crunchers are expecting to end the year with a surplus, he said.

States have been plagued by deficits, as spending obligations outpaced revenues that were still recovering from pre-recession levels. Solving the problem comes down to spending cuts, borrowing money or selling off assets.

But Pennsylvania’s budget crunchers emphasize it’s early yet.

At this stage in Pennsylvania’s budget game, any projections that try to pin down deficits are subject to plenty of change, said Scott Sikorski, Corman’s legislative director.

“These numbers are a snapshot in time and a static look,” said Sikorski. “To put it another way, these numbers may very well change before June and may be different than what the governor forecasts, depending on what is in his budget.”

Mark Ryan, IFO deputy director, said his office’s estimates are meant to show potential outcomes, not point-in-time estimates.

“In practice, policies do change over time, but this assumption allows us to isolate the impact of the relevant economic and demographic trends,” Ryan said.

On May 1, the IFO will release its first formal estimate at fiscal year 2013-14 revenues.

As for the administration’s own estimates, Budget Secretary Charles Zogby gave a forecast in early December at a mid-year budget briefing.

Zogby said the state anticipated ending 2012-13 with a $478 million surplus. But that wouldn’t change the lopsided projections for the year ahead.

Budget officers considered general fund revenues growing 3 percent, or by more than $800 million. But officials also forecasted about $1.3 billion in increased costs. Half the increase, about $650,000, is connected to health care costs including Medicaid. Another $511,000 stems from increased pension costs. (See page 16 in this report.)

Zogby said that all state departments were told any lost federal funding would not be replaced with state tax dollars and that layoffs were a possibility.

At that time, Zogby called the 2013-2014 budget potentially “the most difficult” the Corbett administration has handled to date.

Contact Melissa Daniels at melissa@paindependent.com.

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Melissa Daniels is a reporter for PA Independent. She can be reached at 717-350-0962 or Melissa@PAIndependent.com

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