The Independent Fiscal Office Wednesday published its evaluation of Gov. Wolf’s FY 2017-18 budget proposal that includes more than $1 billion in new taxes as well as a hike in the state’s minimum wage from $7.25 to $12/hour.
The IFO found the Governor’s projections of expected revenue from the expansion of the state Sales Tax ($490 million vs. $435 million) and enactment of a severance tax on natural gas production ($294 million vs. $223 million) would generate $126 million less than the Governor’s estimates.
On the severance tax, the IFO noted the Governor’s proposal would put the effective tax rate at 9 percent, nearly double the next closest tax rate.
Projected revenues from changes to the net operating loss deductions and combined reporting the IFO found would generate $63 million less than the Governor’s estimates ($81 million vs. $18 million).
On the proposed hike in the minimum wage, the IFO estimated the direct economic impact on the budget would be closer to $40 million than the $95 million estimated by the Governor. $25 million of the IFO’s estimate could take several years to fully materialize, the IFO said.
In addition, the IFO estimated 53,700 people would lose their jobs and the $12 rate would be higher than all the states surrounding Pennsylvania. (New York is on track to phase in a $12 rate.)
The IFO noted there was no information available on whether the minimum wage increase would occur in one year or multiple years. The IFO warned of “labor market disruptions” if the increase was not phased in.
The net bottom line, according to the IFO, is Gov. Wolf’s budget comes up about $275 million short of being balanced, according to the revenue estimates.A copy of the IFO report is available online.