Tax Windfall Isn’t Changing PA Deficit Projection
The state’s Independent Fiscal Office is not revising its estimated commonwealth spending gap of $1.6 billion for the current and upcoming fiscal years.
That’s in spite of a spike in revenues observed in the IFO’s latest report.
Tax collections have yielded $594 million more than the agency expected, but the lion’s share of that money is from corporate net income taxes, and it’s still a mystery why the haul is so large.
“It’s very, very unusual,” said IFO Director Matthew Knittel of the $334 million collection in corporate net income taxes. “Especially the final payments we just got in the door, in March and April – they’re much, much larger.”
The unexplained revenue increase is good news for the commonwealth in the short-term, but it doesn’t really help people crafting a state budget. The working assumption is that this large revenue haul won’t happen again, Knittel said.
The other big spike in revenue came from the state’s seizure of unclaimed property (e.g. bank accounts, uncashed checks, insurance policies). Lawmakers just passed a law letting the state take those abandoned items within a shorter time-period. Instead of waiting five years, the state can swoop in after the property goes unclaimed for three years.
That change contributed to the collection of $220 million. Not only is it considered one-time revenue – it might be disappearing revenue. Knittel said many people are expected to come looking for their property eventually, and the state will have to give it back, meaning this year’s gain could be next year’s loss.
So, the IFO’s projected deficit going into the next fiscal year is holding steady at $1.6 billion.
“I could characterize it as somewhat less than we thought,” said Knittel. “More than that, I’d be uncomfortable.”
The Wolf administration is projecting a larger spending deficit of $2.3 billion. The governor’s office doesn’t count leftover funds from prior years.