States Eyes Surplus For 2013-’14

Bucks County Courier Times

There’s good news — and there’s we-won’t-know-unless-it-happens news — in Gov. Tom Corbett’s projections for this fiscal year, which is nearing its halfway point.

The good news is that Pennsylvania is projected to not need to increase taxes to balance the budget and will end the fiscal year on 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 $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 an 8 percent drop in federal funding.

Pennsylvania would make up for those cuts by making 8 percent reductions in social services, special education, the community block grant program, education spending for low-income students, and workforce investment programs, Zogby said.

It is “probably unlikely” that state workers would be laid off to make up for that loss of funding, but Zogby said that wouldn’t 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.

At 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 ended the year $168 million in the red.

Zogby said the administration isn’t considering spending freezes this year.

Despite the potential problems of the fiscal cliff, rapidly increasing pension costs and downward economic projections from Global Insight’s state government advisers, Zogby said he believes the administration’s profitable projections are safe.

“Overall, (I see) a picture that doesn’t create huge nervousness right now,” he said.

Still, state employee salaries, benefits and retirement plans 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 and their benefit packages will jump 16.5 percent and add another $32,629 to their total compensation, Zogby said.

“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 (per employee),” he said.

Pension costs for school district retirees and state government retirees are expected to balloon by $511 million, while welfare expenses/medical assistance will increase by $650 million, and the state’s overpopulated prisons will demand $65 million more than is currently budgeted, Zogby said.

He identified all three areas as the challenges ahead for the next budget.

Even if its financial predictions are wrong 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,” he said. “Until the governor tells me differently, that’s the track I’m going to stay on.”

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