Another Revenue Shortfall in March Could Put 2013-14 Spending in Jeopardy

Pennsylvania tax collections in March fell short of estimate by nearly $100 million (or 2.3%) — 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% below monthly revenue targets.

Pennsylvania still has a revenue surplus for the fiscal year, but it has shrunk from a high of $171 million in December to $36 million in March. I have a more detailed analysis, including all the numbers, at the Pennsylvania Budget and Policy Center's web site. Below are the highlights.

March marks the third month in a row, and the fourth of the last five months, in which revenue collections fell short of estimates. This is troubling as Governor Tom Corbett’s budget proposal assumes there will be a $232 million revenue surplus in 2012-13 to be used in 2013-14. In the past several years, strong second half collections have fueled revenue surpluses that enabled the General Assembly to reduce cuts proposed by the Governor. That may not be possible this year. 

Almost every major state tax category fell short of estimate in March. Sales tax collections, in particular, are well below estimates, having fallen short every month of the 2012-13 fiscal year. Again, for more details on the numbers, see my full analysis.

On a more positive note, fiscal year General Fund collections as of March are $764 million, or 3.9%, higher than they were in March 2012. This shows that the economy is continuing to expand. However, coming out of recession, tax collection growth is often higher, in the 5% to 6% range, than it is currently. Some of this more tempered growth is due to corporate tax cuts, particularly the phase-down of the capital stock and franchise tax. 

The Governor is proposing additional corporate tax cuts in his 2013-14 budget. If enacted, these new tax cuts will further undermine future revenue growth and come at the expense of schools, colleges, health care and infrastructure, which are absolutely necessary for our economy to grow. 

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