State 2014-15 Budget Hides $2 Billion Structural Deficit
Wednesday, July 9, 2014
Posted by: Gregg Robertson
HARRISBURG – The $29.1 billion budget that the General Assembly placed on Governor Corbett’s desk is a ticking time bomb that hides a $2 billion (or more) structural deficit that will explode sometime next year. Then they left town for the summer.
The Governor threatened this spring to not sign the budget unless the General Assembly dealt with pension reform and the privatization of the state liquor system. Neither of those got done.
So there the budget sits – tick, tick, tick… The Governor has three choices: sign the budget, let it become law without his signature, or veto it. He has until July 11 to decide.
How to Make a Budget Bomb
So here is the mixture of explosives that went into this time bomb:
- A projection that revenues will increase by 3.5%. Most consider this a very optimistic forecast, given that state revenues increased by 0% from 2013 to 2014.
- $600 million in “found” cash.
- $2 billion in one time transfers from off budget funds, special funds or one-time cash windfalls.
- $400 million in delayed payments to health care providers.
Lame Duck Governor?
The cynics around the Capitol think that what this all means is that Governor Corbett, with six months to go on his first term, is considered a lame duck by the General Assembly. Recent polls put Corbett down by twenty-one points to his challenger, Tom Wolf. A lot can happen between now and November, but it’s not looking good for the incumbent governor.
So the General Assembly, not wishing to raise taxes in an election year and finding themselves with a massive hole in the 2014-15 budget, made the political decision to not take tough votes on pension reform or state liquor system reform and patch together a budget that would get them through November. They’ll let the new Governor Wolf deal with it.
Next Move is Up to the Governor
On July 10, the Governor signed the budget, while "blue-lining" $63 million from the General Assembly's $320 million appropriation. He also blue-lined an additional $7.2 million in pet legislative projects. The Governor has the authority to reduce any appropriation line item in the budget, which is known as blue lining. The General Assembly has surplus fund of $150 million, so this move by the Governor would reduce that fund by about half.
In addition, the Governor called upon the General Assembly to come back to Harrisburg to deal with pension reform. He did not rule out calling a special session of the General Assembly this summer, but did not call for one at this point. He did say he would be taken further action, but did not specify what those actions might be.
Some Good Budget News
On the positive side, the budget on the Governor’s desk does have an increase for the Department of Agriculture from $124 million to $127 million, which should allow them to maintain their current staffing levels.
On the other hand, Penn State Extension has no increase, receiving the same appropriation as last year of $46.2 million.
NOTE: This article was updated on July 10, 2014 after the Governor's budget signing speech.