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.”

In response to the report, Gov.-Elect Wolf said, "The budget deficit projection released today by the Independent Fiscal Office is bad news for Pennsylvania, but the depth of the financial hole being left by the Corbett Administration is still not known.

"Today's report showing a multi-billion dollar budget deficit is a stark reminder of the dire fiscal situation my administration will face. As bad as today’s news is, what lies ahead could be worse. It is critical that we understand the full extent of this budget crisis so that we can address our challenges in a responsible manner.

"Leaders from both parties need to work together to achieve meaningful solutions for the people of Pennsylvania. We have to move Pennsylvania forward and make difficult decisions in order to solve our state's financial crisis."

Mary Soderberg, Budget Deficit and Fiscal Stabilization Task Force Chair for Gov.-Elect Wolf said, "A multi-billion dollar deficit and a stagnant economy will present significant challenges for the incoming administration. Our task force is working to understand the complexity of the situation at hand, but in the end there is no question that the legislative leaders on both sides of the aisle are going have to work together to reach solutions for the people of Pennsylvania."

Josh Shapiro - Budget Deficit and Fiscal Stabilization Task Force Vice Chair for Gov.-Elect Wolf added, "The reality of the depth of Pennsylvania's financial crisis is unknown, but yesterday we learned that the deficit being handed to the incoming Wolf Administration is a multi-billion dollar hole. Making matters worse, the IFO's projections came on the same day we learned that the Corbett Administration has maxed out its borrowing for basic expenses. There are great challenges ahead, and both parties must come to the table to find new solutions to addressing this crisis."

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.

NewsClips:

PA Faces $2 Billion Budget Deficit, Credit Is Tight

Gov.-Elect Wolf To Inherit Budget Shortfall Of $1.85 Billion

$1.85 Billion Budget Shortfall Foreseen Next Year

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11/17/2014