State eyeing $478 million surplus
HARRISBURG — There’s good news and there’s we-won’t-know-unless-it-happens news in Gov. Tom Corbett’s projections for the end of the fiscal year, which is nearing its halfway point.
The good news is Pennsylvania is projected to not need to increase taxes to balance the budget and it will end the year at midnight, June 30, with a $478 million surplus, Corbett’s budget secretary, Charles Zogby, told reporters Wednesday afternoon.
The we-won’t-know-unless-it-happens news teeters on what, if anything, federal lawmakers and President Barack Obama build to bridge the so-called fiscal cliff.
Pennsylvania is currently $59 million ahead of budget projections despite a lower-than-expected revenue haul in November; most of that caused by a $20 million drop in personal income tax collections.
Without a remedy to the pending collision of expiring tax breaks and spending cuts in Washington D.C., Zogby said the commonwealth would need to come up with another $300 million in state cuts to offset what would amount to an eight-percent drop in federal funding.
Pennsylvania would make up for those cuts by making eight percent reductions in social services, special education, community block grant, education spending for low-income students and workforce investment programs.
He said it is “probably unlikely” that state workers would be laid off to make up for that loss of funding, but it would not be out of the question.
“Potentially, furloughs and layoffs may be the outcome in some areas of these spending restraint and cost-cutting efforts,” Zogby said.
This time last year, Zogby was voicing concerns about a $500 million deficit he thought could balloon to $1 billion. It didn’t, but the Corbett administration froze spending by $160 million in January to preserve cash and the year ended $168 million in the red.
He said the administration is not considering spending freezes this year.
Despite the potential problems of a fiscal cliff snafu, rapidly increasing pension costs and downward economic projections from its own advisors, Global Insight, Zogby said he believes the administration’s profitable projections are safe.
“Overall, a picture that doesn’t create huge nervousness right now,” he said.
But state employee salary, benefits and retirement are a big concern for the governor.
Salaries for AFSCME union workers and managers are expected to increase 2.9 percent in 2013-14 to $50,086 but the value of their benefit packages, Zogby said, will jump 16.5 percent and add another $32,629 to their total compensation.
“For every salaried employee out there we’re adding to that roughly 65 percent, in terms of the cost of the benefit package, and some of the agencies were up over 70 percent,” he said.
Pension costs for school and state retirees are expected to balloon by $511 million, while welfare expenses/medical assistance will increase by $650 million, and the state’s over-populated prisons will demand $65 million more than is currently budgeted.
Zogby identified all three areas as the challenges ahead for the next budget.
Even if its financial predictions turn south and the fiscal cliff turns into a splatter in the economic valley, Zogby said Gov. Corbett still would lean away from raising taxes.
“The guidance I’m under is that we’re not looking at tax increases as a way to bridge any gap that we would have or might have whether (caused by) the fiscal cliff or anything else. Until the governor tells me differently, that’s the track I’m going to stay on,” he said.
While there are potential detours ahead in its money map, the budget secretary said the administration is more hopeful this year.
“We feel like we’re in a better place,” Zogby said.