New Castle News

April 30, 2014

Our Opinion: State fiscal projections require tough decisions

By Staff
New Castle News

NEW CASTLE — When Gov. Tom Corbett introduced his proposed budget earlier this year, it was more generous than those of the past.

The reasons are complex and varied, but the fact this is an election year and hardship is a difficult sell to many voters was undoubtedly a factor.

But to craft a credible budget plan, Corbett had to rely on what appear to have been overly rosy revenue projections and a variety of maneuvers that require legislative actions that may not pan out.

One well-publicized example of this is Corbett’s claim that federal approval of his overhaul of Medicaid will save the state $125 million. At this point it’s unclear if this plan will fly.

And then there was money anticipated from allowing bars to offer small games of chance. The state anticipated about 2,000 businesses participating in this program and sharing the wealth with Harrisburg. So far, only four bars have signed on.

Optimistic projections, however, tend to collide with reality at some point. And that’s what’s happening now. It was reported yesterday that revenue collections with two days left in April were $595 million less than anticipated for the month.

This marked an expansion of an ongoing trend, where money wasn’t coming in to commonwealth coffers as fast as state officials had predicted. And it appears that the investment industry is now taking serious notice.

Standard & Poor’s is warning that it may lower Pennsylvania’s credit rating if the state fails to address the growing gap between revenues and expenditures. That would make it more expensive for the commonwealth to borrow money.

So Harrisburg politicians are facing pressure to do the sort of thing they hate to do: Make painful fiscal decisions in an election year. And in the short term, the only two options are to cut spending or generate more revenue (a nicer way of saying raise taxes).

Any review of Pennsylvania’s budgetary situation must include the commonwealth’s rising pension obligations. Last year, Corbett attempted an aggressive pension reform plan that met widespread resistance and went nowhere. This year his budget plan basically involves a reshuffling of the pension deck and delaying the inevitable.

There are a variety of fiscal options available. What’s not clear is if there is any plan that will win enough votes in the Legislature. Democrats in particular — who have been largely shut out of the decision-making process by a Republican majority — won’t be inclined to make it easy on the GOP.

Adversity, however, can create opportunity. Pension reform, liquor privatization and other moves become more likely. But can Harrisburg act prudently and effectively? This is a good test.