Revenue Tracker: State Ends Fiscal Year With $3.25 Billion Deficit

State Budget and Tax Policy

July 2, 2009

Pennsylvania ended the 2008-09 Fiscal Year with a $3.25 billion revenue deficit, 11% short of estimated collections. General fund collections in 2008-09 totaled $25.5 billion, the lowest total collections since 2005-06.

Commonwealth of Pennsylvania General Fund Revenue, Fiscal Year 2008-09 (in $ thousands)
Estimate to Actual, Fiscal Year 2008-09
	Jan 09	Feb 09	Mar 09	Apr 09	May 09	Jun 09	FY TOTAL
Estimate	$2,435,500	$1,699,200	$4,209,400	$3,894,500	$1,900,700	$2,672,900	$28,784,400
Actual	$2,173,751	$1,502,249	$3,873,311	$2,951,980	$1,613,248	$2,257,600	$25,529,835
Monthly Difference	($261,749)	($196,951)	($336,089)	($942,520)	($287,452)	($415,300)
Cumulative Difference	($1,076,253)	($1,273,204)	($1,609,293)	($2,551,813)	($2,839,265)	($3,254,565)
Fiscal Year-to-Date Percent Difference from Estimate						-11.3%
Comparison to Fiscal Year 2007-08
	January	February	March	April	May	June	FY TOTAL
Actual FY 2007-08	$2,344,874	$1,773,896	$3,975,991	$3,709,864	$1,828,416	$2,601,667	$27,928,061
Actual FY 2008-09	2,173,751	1,502,249	3,873,311	$2,951,980	$1,613,248	$2,257,600	$25,529,835
Monthly Difference	(171,123)	(271,647)	(102,680)	($757,884)	($287,452)	($344,067)
Cumulative Difference	(706,780)	(978,427)	(1,081,107)	($1,838,991)	($2,054,159)	($2,398,226)
Fiscal Year-to-Date Percent Difference from 2007-08						-8.1%

Download the a table detailing revenue collections for the full 2008-09 Fiscal Year.

About half of the $415 million shortfall in June came from less-than-expected personal income tax collections, which were $207 million below estimate. Corporate taxes are particularly important in June due to the quarterly payment of corporate net income and capital stock and franchise taxes. Total corporate tax payments in June were $82 million, or 17%, short of estimates – indicating a continued sputtering national economy. Other ongoing signs of the anemic economy are shortfalls in sales tax (9% short of June’s monthly estimate), realty transfer tax (31%), and inheritance tax (14%).

The $3.25 billion revenue deficit over 2008-09 was made up of deficits in every major category of General Fund revenue (see Figure 1). The personal income tax, which made up 40% of General Fund collections over the year, also accounted for 40% of the total deficit. Corporate taxes accounted for both 19% of the year-end deficit and total revenue collections. Sales tax made up 32% of total revenue in 2008-09 and contributed 18% to the revenue shortfall.

Non-tax revenue, which includes licenses, fees, and interest earnings, normally accounts for a small fraction of the General Fund – between 2% and 3% of total collections. In 2008-09, non-tax revenue was significantly off the mark, due to short-term investment losses incurred as the worldwide financial markets collapsed. Like other states, Pennsylvania collects and spends money at different rates from month-to-month over a fiscal year. To earn extra money, the state invests its excess collections in short-term investments and earns interest. In 2008-09, the state experienced unexpected losses in these short-term investments, adding to the overall deficit. At year-end, non-tax collections made up only $235 million, or 1%, of total collections, but accounted for $506 million, or 16%, of the total revenue deficit.

Inheritance and realty transfer taxes, while not major contributors to the overall deficit, fell significantly short of estimate for the fiscal year (see Figure 2 for detail of revenue shortfalls by type compared to estimates from the beginning of the fiscal year). The collection of “sin taxes”, those on cigarettes, liquor, and beer, fell short of estimates over the fiscal year, but by a smaller margin than other revenues.