Revenue and Expense Expectations
Revenue:
Next fiscal year’s budget anticipates revenue growth from existing taxes of 4.7% or $1.27 billion, which is a reasonable growth estimate for a recovering economy and certainly higher than the most likely growth for 2011-12.
To further enhance revenues the Governor proposes changes worth $242 million. Nearly half of the increase is from increased tax enforcement. Under his plan, the Department of Revenue would have the power to attach the bank accounts of businesses that are delinquent in their taxes and be allowed to withhold the taxes on income before it is distributed to owners of small businesses. Somehow the Governor believes that by guaranteeing the funding of such enhanced tax enforcement through 2016-17 that an additional $100 million will be raised this year. It is not clear how this program would work.
The Governor would also like to severely limit the vendor discount for the sales tax. Vendors are currently allowed to take 1% of the sales tax that they collect for the state as a reimbursement for their costs to collect and remit the sales tax to the state. The Governor’s proposal would cap that vendor discount at $250 per month. This change is expected to save $41.3 million annually.
The remainder of his revenue enhancements are various dollars that would be taken from other funds and used to balance the General Fund. They are listed below:
- $20.5 million cigarette taxes that currently goes to the Agricultural Conservation Easement Purchase Fund. The fund would be eliminated.
- $6.5 million from the gross receipts tax that was transferred to the Alternative Fuel Incentive Grant Fund would remain in the General Fund.
- $13.8 million of unused PHEAA funds.
- $38.6 million of Keystone Recreation, Park and Conservation Fund monies would be transferred to the General Fund.
Expenditures:
The Governor is proposing expenditures of $27.1 billion for the 2012-2013 fiscal year. That would be a decrease of $22 million or .08% less than was appropriated this fiscal year. In his mid-year budget briefing the Governor listed $1 billion in expenditure costs that were unavoidable. Those costs included $520 million in increased pensions costs which are funded in his budget and $400 million in increase medical assistance and long term care costs. So, the Governor’s budget is really a $1 billion decrease in most state programs.
Below is a simplified balance sheet (financial statement) that shows what the Governor believes the budget should look like:
(Dollars in Millions)
Beginning Balance: $93
Net Tax Revenues: $27,060
Funds Available: $27,153
Expenditures: $27,138
Ending Balance $14