HARRISBURG (TNS) — New and bleak numbers from the state Independent Fiscal Office could harden partisan views on Pennsylvania’s long-term financial health as another budget season approaches, with projections for deficits that start this year at $3.4 billion and escalate to $6.7 billion in five years.
The numbers from the fiscal office are in its five-year Economic and Budget Outlook. They generally mesh with its July projection that the state general fund will end fiscal 2024-25 well in the black, but reach the end of 2025-26 in the red.
Gov. Josh Shapiro and the politically divided state Legislature will start talking about the next budget soon after lawmakers return to Harrisburg in January. The Nov. 5 election did not affect lawmaking power in Harrisburg. Republicans still hold a clear majority in the Senate, Democrats hold a slim one-seat majority in the House, and Shapiro — a Democrat — wields the power to sign or veto spending bills that reach his desk.
Republicans have said repeatedly that when ongoing spending surpasses revenue in a budget, there is a “structural deficit.” In an interview last week, Senate Majority Leader Joe Pittman of Indiana County said it was clear that one exists in Pennsylvania.
“If somebody doesn’t believe there’s a structural deficit, then they never took a math class,” Pittman said. “Last year, we spent a billion dollars more than we brought in in revenue. This year, we are slated to spend $3 billion more than we are bringing in in revenue. That’s a structural deficit.”
In the short term, he said, things are solid financially “because of some of our wise budgeting practices in years past.” But the best way to fix the structural deficit, he said, is to restrain spending.
Senate Minority Jay Costa of Allegheny County, the top Democrat in the Senate, balked at using the phrase “structural deficit” for Pennsylvania’s situation.
He pointed out that state revenue in the first four months of the fiscal year — July through October — has run more than $77 million above projections. And, he said, the Independent Fiscal Office is “wrong more often than it is correct.”
Costa said it was premature to start a conversation about the budget with an in-the-red assumption.
Starting-line assumptions in budget negotiations could affect how lawmakers’ consider proposed new programs, and one of those is the proposed legalization of recreational marijuana.
For years, some lawmakers have talked about the possibility.
Rep. Napoleon Nelson, D-Montgomery and chair of the Pennsylvania Legislative Black Caucus, told an audience in July that taxing and profiting from a product “that provides not only medical benefit but can be used responsibly by regular folk” makes sense. His caucus wants legalization to include exoneration and record expungement for previous marijuana law offenders.
A recent legalization bill from Reps. Aaron Kaufer, R-Luzerne, and Emily Kinkead, D-Allegheny, had the potential — according to one summary — of producing at least $420 million a year in revenue.
Rep. Andrew Kuzma, R-Allegheny, rejects both the policy and its financial incentive. “We can’t keep legalizing our vices to make up for too much spending,” he said.
And outgoing Rep. Rob Mercuri of Allegheny, who earlier this month lost his bid for a seat in Congress, said some options that are being floated to state lawmakers to increase revenue are “unsavory to many Pennsylvanians.”
Pittman believes there are some “very high hurdles” to legalizing recreational marijuana and said he doesn’t think lawmakers can “hang our hat” on tax revenue from selling it.
The projections from the IFO foresee growing deficits:
for 2024-25 of $3.4 billion;
for 2025-26, $4.5 billion;
for 2026-27, $5.2 billion; and
or 2029-30, $6.7 billion.
The projections also show the state general fund should end the current fiscal year at about $3 billion but — coupled with the projected deficits — end subsequent years with ever-growing negative numbers in the billions.
