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Despite Leaner, More Efficient Government, Fiscal Outlook is Worrisome

Despite a “leaner and more efficient government”, the state’s fiscal outlook continues to draw skepticism and promises of more difficult budget discussions to come, not only this year, but into the future.

The Governor and his staff this week said they would have to revisit their budget proposal, and look to refine it by as much as $800 million in anticipation of dismal April tax collections.

Budget Secretary Charles Zogby said that a number of “headwinds” are in play, noting the underperforming state tax collections, federal tax impacts, Obamacare healthcare costs, and a generally weak economy. Pennsylvania has experienced three-straight months – through March – of under-performing tax collections and April’s tax revenues are reported to be $477 million short. The Independent Fiscal Office is set to release its fiscal year 2014-15 revenue projections, and updated 2013-14 revenue collections data, Thursday afternoon.

Corbett had proposed a $925 million spending increase in February, but that was assuming a revenue total of $30.3 billion.  Zogby said it’s up to the governor and the Legislature to come up with how to address the issue.

This week Governor Corbett and several of cabinet secretaries announced that the state had successfully saved nearly $650 million from innovations and commonsense solutions over the past three years that Corbett has been in office. While this is a big chunk of change – the numbers for April undermine those benefits.

Corbett also addressed questions about recent news that Standard and Poor’s might downgrade the state’s credit rating. S&P cited the state’s pension issue, and how the government chooses to address it, is a major sticking point in determining the state’s rating.

“We’re always concerned with our credit rating and we will continue to try and work to get our credit rating where it needs to be,” the governor said. “I will say that we know, and I know, pension reform can be important, very helpful in the credit rating, so I’ve had discussions again about pension reform with the legislature.”

While it has been well known for years that the state’s pension system was in desperate need of reform, the administration and General Assembly appear to be far apart on a viable and lasting solution.