The Independent Fiscal Office reported Thursday Pennsylvania faces a $1.85 billion shortfall in revenue-- $171 million for FY 2014-15 and $1.679 million in FY 2015-16.
“The report finds that policymakers will face a shortfall of $1.85 billion in FY 2015-16. This includes $171 million for the current fiscal year and $1,679 million related to next year.” Knittel said. “The non-recurring revenues and one-time costs savings employed in the FY 2014-15 budget contribute significantly to this deficit.”
Among other findings, the IFO report said--
-- FY 2014-15 includes $572 million in non-recurring revenues, $619 in one-time savings and $332 million in funding shifts. These measures exacerbate the structural imbalance in FY 2015-16, as the temporary measures are not repeated. The resulting “snapback” lowers revenues and increases expenditures for FY 2015-16.
-- Pension contributions for state employees and school employees will increase from $1.7 billion in FY 2014-15 to $2.4 billion in FY 2015-16-- $700 million. Mandated employer contributions for pensions continue to drive much of the expenditure growth in the near term. However, the annual growth begins to moderate after FY 2016-17.
-- Slow tax base erosion and “normal” expenditure growth become the primary drivers of the structural imbalance. Net revenues are projected to increase at an average rate of 2.7 percent per annum and are outpaced by expenditures, which are projected to grow at an average rate of 4.1 percent per annum.
-- The Pennsylvania population is expected to grow slowly through FY 2019-20. The projections assume no change in the working age population (ages 20-64) and an increase of 2.8 percent per annum in the 65+ cohort. These demographic trends will restrain tax revenues and increase expenditures due to the rise in the service population.Click Here for a copy of the full report. Click Here for a copy of the presentation.