Thursday, November 4, 2010

Sen. Corman Calls October State Revenue Report "Sobering"

In his monthly report on state budget issues, Sen. Jake Corman (R-Centre), Majority Chair of the Senate Appropriations Committee, had this to say about October state revenue collections and the budget challenges facing Governor-elect Tom Corbett--

October revenue collections provide a sobering reminder that the economy is not yet out of the woods and that the recovery may in fact be slowing.
IHS Global Insight, in its October forecast, indicated that it expects growth of 2.6 percent for 2010, slowing to 2.2 percent for 2011. It also indicated that the economic impact of the fiscal stimulus is ebbing and that the economy is operating on limited underlying strength that results from private final demand.
Households and businesses remain cautious due to economic uncertainty and such caution directly impacts demand and thus the pace of the recovery.
The Governor’s certified revenue estimate for FY 2010-11 assumed an annualized growth rate of approximately 3.2 percent for tax revenues. To date, tax revenues exceed the estimate by $27.1 million or 0.37 percent. Neither the assumed or actual revenue growth, however, is sufficient to offset the fiscal troubles ahead.
The General Fund is facing an estimated structural deficit of $4 to $5 billion for FY 2011-12. What this means is that the General Fund’s revenue sources (income) are not adequate to offset projected expenditures in future years.
The loss of ARRA, FMAP and Fiscal Stabilization funds, increases in corrections costs, debt service, pension obligations and public welfare costs all contribute to the structural deficit.
Cuts to Commonwealth programs are an obvious and necessary part of solving our fiscal problems. Governor-elect Corbett has indicated that he intends to review all state programs to determine where cuts can be made or dollars saved.
The following charts show that the vast majority of General Fund resources support a scant few appropriations. More than 83 percent of General Fund expenditures are contained in the largest 38 appropriations.
It is important to recognize the composition of the General Fund expenditures because the next Governor and the General Assembly will need to focus attention on the largest cost driving appropriations in order to re-prioritize spending and address the structural deficit.
The entire report is available online.

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