Media Statement: IFO’s Economic & Budget Outlook for FY 2014/15 to 2019/20
From Sharon Ward, director of the Pennsylvania Budget & Policy Center:
“The Independent Fiscal Office today warned of a significant and growing budget shortfall that must be addressed by the Governor and General Assembly as a first order of business in 2015. That yearly shortfall is expected to grow from $1.85 billion next year to nearly $2.6 billion by fiscal year 2019-20.
“The IFO attributes this large gap next year to one-time revenues and expenditure shifts used to balance the current year budget that will not be available in 2015-16.
“The report also warned of significant long- term erosion of the tax base, attributable to major reductions in corporate taxes, including the elimination of the Capital Stock and Franchise tax.
“State lawmakers have two choices: massive, additional spending cuts to education, colleges and health- care programs, or adoption of new revenue measures, such as a severance tax, and an end to corporate tax loopholes. Pennsylvanians resoundingly rejected new budget cuts in last week’s gubernatorial election and signaled strong support for these revenue measures. Lawmakers would do well to listen.
“There is no escaping the facts. Pennsylvania has already had its bonds downgraded twice this year. State Treasurer Rob McCord announced this week that the commonwealth is once again borrowing from a line-of-credit established by the Treasury, and he called the state’s fiscal health ‘precarious.’
“The legislature needs to build a responsible state budget for 2015-16 that doesn’t rely, as this year’s budget does, on one-time revenue gimmicks, sleight of hand and wishful thinking. Otherwise, Pennsylvania’s next bond rating downgrade will be to junk bond status.”