Rendell: Falling revenues to force cutsThursday, November 20, 2008HARRISBURG -- State officials are putting out the warning: The state's budget situation is bad and getting worse, and lower-than-expected revenues will force painful reductions in state spending.
"We're expecting a shortfall of somewhere between $1 billion and $2 billion" by June 30, the end of the current fiscal year, Gov. Ed Rendell said yesterday.
That was the highest estimate of a shortfall he's made so far, although other state officials have put the looming deficit even higher.
For the first four months of fiscal 2008-09, which began July 1, revenues were $565 million below what had been expected, as tax receipts and state investments fell off sharply due to the ongoing recession.
The governor already had ordered his departments to reduce spending by 4.25 percent, which he estimated will save $311 million. That would trim the 2008-09 budget to about $28 billion.
He has imposed a hiring freeze, a ban on out-of-state travel and a ban on buying new vehicles. He has asked state agencies that he doesn't control to cut their spending, for an additional $39 million in savings.
Next, Mr. Rendell said, he'll order a second round of budget cuts. He also will ask Republican and Democratic legislators to reduce their spending.
He said it won't be easy or enjoyable, as many people's favorite state programs are trimmed or eliminated. Specific details on the cuts are still to come.
"We will do everything we can to do as little harm as possible, but the budget cuts are coming," he said. "I don't want to hear any whining. The cuts will be painful. People have to get ready."
He vowed to do everything he can to avoid "a general, broad-based tax increase" next year as a way to balance the state budget, but with revenues declining so sharply, nothing is off the table.
He said he doesn't want to raise taxes because "that would be hurtful when we are trying to recover economically." Avoiding a general tax increase "is my goal. Can I guarantee we will reach that goal? No. We will work like heck to reach that goal, but right now I can't guarantee anything."
The House Appropriations Committee held a special hearing yesterday on the growing budget deficit, but didn't suggest specific spending reductions.
"We are facing a very difficult road ahead," said Rep. Mario Civera, R-Delaware, minority chairman of the panel. "The economy is showing no signs of improvement, so we must adhere to a much greater level of fiscal restraint. Controlled spending is more critical than ever. Tax increases should not be an option."
At the House hearing, James Diffley, an economic expert with Global Insight, said the current recession is deepening and looks like the worst downturn since 1980-82. The collapse of the housing market, the plight of U.S. car companies and growing job losses are huge problems, he said.
He expects national economic output to decline for four quarters in a row, into mid-2009, which is an exceptionally negative scenario.
There are a couple bright spots for the state budget. There is the $750 million Rainy Day Fund for use in case of emergencies, but state officials don't want to raid it unless absolutely necessary. Also, the state netted $200 million from selling leases for drilling for natural gas in areas of Marcellus shale in the state.
Bureau Chief Tom Barnes can be reached at tbarnes@post-gazette.com or 1-717-787-4254.
While I don't expect the State to cut much into the education budget, the article makes it clear that budget shortfalls are not confined only to those states that have a housing crisis. More than ever, we have got be careful with how we spend our money.
James
