Wednesday, March 3, 2010

Pennsylvania's Budget Woes and Todd Eachus's Promise?

At the Hazleton Chamber of Commerce's most recent Red Carpet Breakfast House Majority Leader Todd Eachus was the main speaker. Jim Dino reported on the event for the Standard Speaker.

In his address Mr. Eachus made the following claim.

"We are projecting a $500,000 shortfall in the 2010-11 budget," Eachus said to a Greater Hazleton Chamber of Commerce Red Carpet Breakfast audience at Capriotti's in Tresckow. "There is an $800,000 medical assistance payment due from the federal government. If that is paid, we will be within range of our two-year budget planning process."

Eachus said the state was faced with a $3.2 billion budget shortfall. He said Senate Bill 850 attempted to remedy the problem by cutting several items out of the budget.

"But we could not simply cut our way out of the $3.2 billion budget hole," Eachus said. "We had to cut spending, but also add new revenues, and transfer money from other funds. We protected the integrity of state programs that help children, seniors and other vulnerable citizens."

So spending was cut by $1.75 billion, and another $1.6 billion in fund transfers was achieved. Eachus said the state managed to identify $1.2 billion in new revenues, including a tax on small cigars.

"We managed to approve a tax on small cigars, but other cigars and smokeless tobacco is still not taxed in Pennsylvania," he said.

Other new revenue streams are expected from the introduction of table games at Pennsylvania's casinos, as well as taxes on oil and natural gas extracted from the Marcellus Shale in northeastern and north central Pennsylvania.

One has to wonder whether Mr. Eachus checked in with the Pennsylvania Department of Revenue lately. Their figures show Pennsylvania is $477 million behind in revenues for 2009-2010 according to a report filed by the Commonwealth Foundation.

Pennsylvania Deficit Watch | March 2010

The Pennsylvania Department of Revenue reports that through the end of February, state General Fund revenues are $477 million below estimate for the 2009-10 fiscal year.

•Tax collections have been below estimate in all eight months of the fiscal year, and down month-over-month from last year for every month except October, which included $1.8 billion in transfers from other funds and one-time revenue sources.
•The 2009-10 budget (passed in October 2009) included tax increases and assumed slight revenue growth.

•In his budget address earlier this month Gov. Rendell, confirmed Commonwealth Foundation predictions that his budget spent too much--projecting the shortfall will reach $525 million by the end of fiscal year 2009-10. Based on the latest estimates, and with the two largest revenue collection months yet to come, the budget shortfall will likely surpass this total.

Eachus's claims were based on the 2010-2011 budget skipping what is happening in 2009-2010 in his "two-year planning process".

The Commonwealth Foundation report includes more information.

Gov. Rendell's plan to address the current year shorfall include proposed budget include:

•Use of remaining General Fund balance ($354 million after October transfer of $1.8 billion from other funds)

•$135 million in reductions from enacted 2008-09 budget

However, despite last year's $3.2 billion shortfall, and a mid-year pledge to make budgetary cuts, the governor and General Assembly failed to reduce spending accordingly.

Gov. Rendell's proposed 2010-11 acknowledged the long-term fiscal imbalance - namely that the current budget exhausted all the state's one-time revenue sources, such as the "Rainy Day Fund;" the federal stimulus funding disappears after the 2010-11 fiscal year; and the state faces dramatically higher state pension contributions beginning in 2012-13. However, Rendell's budget calls for more of the same:

•A $1.3 billion increase in General Fund spending.

•Reliance on an addition $850 million in federal Medicaid funding, which has yet to pass Congress.

•Delaying pension payments, pushing higher costs onto future generations.

•New Taxes:

◦Sales tax expansion to 74 currently untaxed items & lower rate - generating $531 million in additional revenue next year and $866 million the following year.

◦Reduces CNI from 9.99 to 8.99, imposes combined reporting - generating $66 million next year and $167 million the following year.

◦New tax on natural gas extraction - $161 million in 2010-11 and $260 million thereafter.

◦New cigar/smokeless tobacco tax - $42 million per year.

◦Elimination of the vendor discount for sales tax collection - $75 million per year.

If there ever was a case of smoke and mirrors Eachus's claims fall into that category. Pennsylvania is not through the 2009-2010 year yet. Eachus should be addressing this shortfall rather than pandering about his two year projections. One has to wonder how Eachus will be able to back up his claims when the state is headed for a $900 million dollar shortfall by June if the present trend continues. One must also keep in mind that the 2009-2010 budget had $1.8 billion injected to it largely from transfers and not tax revenue.

In case Eachus didn't look out the window; the economy is not recovering any time soon. In this election year Eachus will be passing out his WAM money probably starting very soon. As you can see it is money Pennsylvania does not have but obviously he is taking a cue from Paul Kanjorski and Nancy Pelosi. Then again, Kanjorsk has his own problems trying to "Rangel" out of his $16,000.00 fund-raising/public relations dilemma.

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