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A Decade That Changed the Nation

STUDY: Fiscal Conditions Improving in Pennsylvania

 

Pennsylvania’s revenue growth was slightly above average, and the state has improved its overall financial stability by increasing the size of its rainy day fund, a new report revealed.

Pennsylvania, like Illinois, New York and Texas, experienced slower revenue growth in fiscal 2019 after rapid growth a year earlier, which lowered the aggregate growth rate, according to the National Association of State Budget Officers (NASBO).

“Pennsylvania’s spending and revenue figures reported in the survey for FY2019 and FY2020 indicate stable growth somewhat more modest than national averages,” said Kathryn Vesey White, NASBO’s director of budget process studies.

In February, Gov. Tom Wolf introduced a $34.1 billion general fund spending plan, a 2.79 percent increase from a year earlier. State lawmakers subsequently passed a general fund budget of slightly less than $34 billion, an increase of 1.8 percent over the previous year’s budget.

“Fiscal conditions continue to vary by state due to differing demographic trends, regional economic performance, revenue structures and other factors,” White said. “Like the vast majority of states, Pennsylvania saw its general fund revenues come in ahead of budget projections in FY 2019, as reported in the survey.

“Pennsylvania does have a rainy day fund, known as the Budget Stabilization Reserve Fund,” White added. “Like many states, Pennsylvania depleted its rainy day fund during the Great Recession. However, after achieving greater fiscal stability recently, Pennsylvania took action this year to make a $317 million deposit into the commonwealth’s rainy day fund, bringing the balance in FY 2020 to $340 million.”

Earlier this year, Republican leaders in the state legislature touted their conservative fiscal policies for helping increase the state’s revenues.

Pennsylvania was one of six states that reported on changes to their budget processes or authorities in the 2020 fiscal year. The Keystone State now develops performance-based budget plans for each agency.

Under the budget, most state employees received a 3 percent salary increase effective in July. The state is also giving a 2.25 percent step increase in April 2020 for those employed by the commonwealth as of April 2019.

On the tax front, an additional 2 percent state tax on casino table games was extended until Aug. 1, 2021. Also, the state, as of Dec. 13, eliminated the inheritance tax for property transferred to a child 21 years old or younger.

In another tax move, starting July 19, vendors who do not have a physical presence in Pennsylvania but whose sales attributed to the state exceed $100,000 must register to collect and remit state sales tax.

Separately, Truth in Accounting gave Pennsylvania score of 85 (B) for financial transparency, and overall, the Keystone State ranked No. 16.

More recently, an “underlying structural imbalance” in Pennsylvania’s budget could have long-lasting ramifications for the state, the Independent Fiscal Office (IFO) said in a recent report. The state could experience an “imbalance” of $409 million in the current fiscal year, a shortcoming that could increase to more than $1.3 billion in 2022-23.

 

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