Pennsylvania tax collections in March fell short of estimate by nearly $100 million (or 2.3 percent) — in what is typically the commonwealth’s biggest month for tax collections. The total shortfall, after accounting for non-tax revenue, was $69 million, or 1.6 percent below monthly revenue targets.
This marks the third month in a row, and the fourth of the last five months, in which revenue collections fell short of estimates. Three-quarters of the way through the 2012-13 fiscal year, the state still has a cumulative revenue surplus, but it has shrunk from a high of $171 million in December to $36 million in March. In numbers released for March, the state collected $4.2 billion in general fund revenue for March, which was $69.4 million less than anticipated, or about 1.6 percent.
“It’s not really time to panic, but I think those people who thought we were going to be able to have more money and be able to spend more are going to be disappointed,” said Nathan Benefield, director of policy analysis for the Commonwealth Foundation for Public Policy Alternatives, a conservative think tank based in Harrisburg.
“I think the bigger concern is not so much coming in above or behind,” he said. ‘But this year’s budget as well as the proposed budget are kind of more of what they have projected collecting in revenue. And with what it is coming in, it makes it even more unlikely that they will have a surplus for people to spend next year.”
Fixing the problem, according to Benefield, is simple. “We need to bring spending back in line with our revenues and we need to do that sooner rather than later,” he said.
Benefield said the shortfall is a result of disappointments in both the sales tax and payroll tax. “I think you can make a connection with the payroll tax that happened earlier this year. The projections were made last June and the economy wasn’t great then, and they were already figuring in slow growth in the economy then but there’s even been a shortfall the past few months even with the sales tax,” he said. “It’s all because people have less take-home pay to spend because of the payroll tax increase.”
According to the Department of Revenue, sales tax receipts totaled $677.7 million for March, $51.3 million below what they estimated. Overall, year-to-date collections are down $244.5 or 3.6 percent less than anticipated.
When it comes to next year, Benefield said he doesn’t see a “huge change.” “I don’t think you’re going to see a huge boom in the economic growth anytime soon,” he said. And even those who sit left-of-center see it in a similar way.
“I think it’s the economy,” said Michael Wood, research director, Pennsylvania Budget and Policy Center, a left leaning Harrisburg political think tank. “The national economy hasn’t been growing and Pennsylvania’s economy hasn’t really been growing either since the budget was originally passed last summer.”
Overall, Wood said the state had been hoping for more than $230 million in a revenue surplus, however they will only get about $20 million — that is if the numbers hold.
“April and May are the last two big months of revenue collections, and unless they come with stronger than expected income tax, it’s going to be somewhat difficult,” he said.
But as for the shortfall, Wood said when you look at the overall picture it’s not a huge amount of money.
“In terms of the budget it’s only about one percent so to be able to fill the gap with that $200 million that they are talking about, the administration probably has the ability to move money from one place to another and make minor reductions in funding to fill that gap,” said Wood.
Wood said the bigger problems lawmakers will now have to tackle is how to handle 2014. “The economy is not growing as quickly as anticipated last year and that has an impact on the revenue estimates for next year,” said Wood. “They are likely to be smaller than they were back even than in February when the governor put his budget out.”
Wood also added that cuts often trickle down and will affect other areas of the budget. “Not to mention, growth for next year was really great anyway,” said Wood. “So if you scale back those expectations, that means less money for public schools, health care and other things and that has an impact on the overall economy.”