Pennsylvania's revenue picture remains mixed as Governor Tom Corbett prepares to roll out his 2012-13 state budget proposal in a few weeks.
Pennsylvania continues to see an increase in collections over last year, but revenues trail Corbett administration estimates so far this year. That has prompted the administration to announce midyear budget freezes this month and could impact the budget plan the Governor will present in early February.
Weak corporate collections are taking a toll, and it appears likely that Pennsylvania will end the year with a revenue shortfall, despite solid growth from 2010-11. Still, the revenue picture, in the short term, may not be as dire as that painted by the Corbett administration. The state is carrying a half a billion dollars in reserve that more than covers the current shortfall.
The Pennsylvania Budget and Policy Center has a full analysis of the revenue numbers at the midpoint of the 2011-12 Fiscal Year.
Year-to-date tax collections as of December are up $398 million, or 3.6%, over this point last year, but are falling short of Corbett administration estimates by $466 million, or 3.9%. Total revenue collections are $487 million, or 4%, below estimates.
Year-over-year growth slowed in December with monthly tax collections outpacing those a year earlier by only $6.5 million, or 0.3%. Some of this slowdown has to do with a shift in the timing of sales tax payments, but weak corporate collections are also having an impact.
Changes to the revenue estimate itself may be playing a role in the shortfall, as well. The administration projected a larger share of revenue collections in the first half of the year and a smaller share in the second half than has been the case in recent fiscal years. That may have contributed to the midyear shortfall and could set the stage for a stronger revenue showing between now and June.
Actions taken by the Corbett administration and the General Assembly have also contributed to the current revenue shortfall. The decision last year to allow corporations to accelerate depreciation costs may be costing more than originally estimated, while doing little to improve the economic outlook. That, combined with the continued phase-out of the capital stock and franchise tax in 2012, will cost the state hundreds of millions of dollars in lost revenue.
Again, you can find our full analysis of the revenue picture here.