HARRISBURG, Pa. - Pennsylvania's tax collections during the all-important month of April were badly lagging projections Tuesday, and legislative staff members for House and Senate Democrats said the only question was how much deeper the state government's shortfall will plunge.
The poor performance is a sobering development for Gov. Tom Corbett and lawmakers as they try to craft a budget during an election year. With two days left in April, collections were $595 million behind expectations for the month, said Ben Waxman, a spokesman for the Senate's ranking Appropriations Committee Democrat, Vincent Hughes of Philadelphia.
"Right now there is a very large deficit," Waxman said. "We don't know how bad it's going to be, but all the indications are that it's going to be quite bad."
As of April 1, the state was $170 million behind expectations for the fiscal year, meaning that the shortfall is tantamount to a $340 million gap because it reduces next year's revenue projection by a dollar-for-dollar amount.
Miriam Fox, the executive director for House Appropriations Committee's ranking Democrat, said she expects April will end with a year-to-date shortfall of $500 million to $600 million. That would put Corbett's $29.4 billion budget proposal for the fiscal year beginning July 1 out of balance by $1 billion or more.
In his budget proposal, Corbett is counting on robust tax collections, some new one-time sources of cash and delaying pension and health care payments to pump hundreds of millions of additional dollars into public schools and social services.
But Pennsylvania state government could be facing a roughly $3 billion gap in the budget year that begin July 1, 2015, counting the one-time items Corbett is using to balance his budget proposal and the state's increasing costs for things like pensions and health care, Fox said.
"If you stop and think about it, the implications are very severe," Fox said.
On Monday, credit rating agency Standard & Poor's warned that it could downgrade Pennsylvania's rating in the coming months if it does not see significant strides to structurally balance the budget and address long-term pension liabilities.
On the other hand, Standard & Poor's said it could revise Pennsylvania's negative outlook to stable if it sees enough progress on those tasks. It said its current negative outlook reflects its view that the state's financial flexibility is diminished by growing cost pressures, slow economic growth and sparse reserve cash.
It also noted that Pennsylvania faces a revenue shortfall in the current fiscal year and that Corbett's proposed budget relies on one-time gap closing measures.