State Starts New Fiscal Year with $400 Million in the Bank But Nothing in the Rainy Day Fund

After a less than stellar May, General Fund tax collections bounced back strongly in June — exceeding estimate by $170 million, or 6.5%. This narrowed the 2011-12 revenue shortfall to $163 million, or less than 1% of total estimated collections for the year.

As a result, the state ended the year in a much better fiscal situation than projected back in February, when Governor Tom Corbett released his budget plan. Counting the dollars the state had in the bank, Pennsylvania actually started the fiscal year with a $400 million fund balance.

The recently enacted budget acknowledged this but only to a point. The Legislature increased General Fund spending in 2012-13 by $655 million from the Governor’s  proposal — restoring funding in a number of important areas: higher education, accountability block grants, and half of the 20% cut proposed for county services included in the now-rejected Human Services Development Block Grant. Lawmakers also found funding for another round of business tax breaks.

However, June collections indicate more could have been done — for General Assistance recipients, environmental programs, and child care. Lawmakers also passed on setting aside any of the additional revenue in the Rainy Day Fund.

Click here for the Tale of the Tape.

The revenue surplus in June was led by corporate tax collections — coming in $180 million higher than the monthly target, or 38%. After falling short of estimates for seven of the first eight months of the fiscal year, corporate taxes ended June with a small surplus of $39 million, or 0.8%.

Personal income tax collections were also surpassed estimate in June by $26 million, or 2.7%. For the fiscal year, PIT collections were $199 million, or 1.8%, below expectations — not a surprise given the slower-than-expected decrease in the unemployment rate and general sluggishness in the economy.

Sales tax receipts were $46 million, or 5.5%, lower than expected in June. This pushed yearly sales tax collections slightly below estimate ($16 million, or 0.2%).

All major categories of taxes grew in 2011-12. In total, they exceeded 2010-11 levels by $688 million, or 2.6%.

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