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Pennsylvania's $4 billion deficit not as high as other states'

| Saturday, Jan. 8, 2011

HARRISBURG — Many other states face worse financial problems than Pennsylvania, where officials estimate the 2011-12 state budget deficit will be $4 billion, a national survey shows.

Pennsylvania's projected deficit presents a huge challenge for incoming Gov. Tom Corbett and the Republican-controlled Legislature, but outgoing Democratic Gov. Ed Rendell says it's "minuscule compared to (that in) other states."

The survey by the National Conference of State Legislatures is little consolation to Pennsylvania Republicans who must deal with problems they say Rendell helped create through excessive borrowing and spending during his administration's eight years.

Deficits for the budget year that begins July 1 in most states are projected to be as high as $19 billion in California, $15 billion in Illinois, $10.5 billion in New Jersey, $9 billion in New York and $7.4 billion in Texas, according to the conference's report issued in November.

"California wishes it had a $4 billion problem," said Arturo Perez, a budget analyst for the organization.

Combined, 35 states participating in the group's survey project $82 billion in budget gaps for the 2011-12 fiscal year. That does not count Pennsylvania, which failed to provide an overall deficit figure for the survey.

"Obviously, when you hear the stories of other states, you don't know the particulars," said Auditor General Jack Wagner of Beechview. "With Pennsylvania, we know, factually, there's a $4 billion to $5 billion deficit — possibly higher."

"Pennsylvania doesn't have a revenue problem; we have a spending problem," said Corbett's spokesman, Kevin Harley. State revenue increased 21 percent over the past eight years, but spending increased 40 percent, he said.

"If we had kept our spending level at our revenue level, we'd have a balanced budget, but we're facing this problem because Ed Rendell thought we could tax, spend and borrow our way to prosperity," Harley said.

Rendell disputes that.

The Wall Street Journal last year rated Pennsylvania one of the 10 most fiscally stable states, Rendell said. That rating actually appeared in a study by the Pew Center on the States that the Journal published in November 2009, based on data compiled that July.

Rendell said the state would be in better shape if the Legislature had agreed to tax increases he sought in the past two years.

"Yes, I've increased spending dramatically," Rendell said, but noted he "paid" for the spending increases through government efficiencies and budget cuts.

"I don't think that's totally accurate," said Wagner, a Democrat.

Corbett, a Shaler Republican, and a GOP-dominant Legislature will take control of the Capitol for the first time in nearly a decade this month. Corbett will be sworn in Jan. 18. Lawmakers must approve a budget by June 30, and House Majority Leader Mike Turzai, R-Bradford Woods, promises "an on-time, no-tax (increase) budget."

The recession and loss of billions of federal stimulus dollars affected the states, said Perez, with the conference of legislatures.

"This recession and the fallout on state revenues is unprecedented since the Great Depression," he said. "It's compounded by the loss of federal stimulus dollars. States will be very much on their own."

When unemployment rises, people spend less, state tax collections tank and pressure for state-paid social services increases.

Pennsylvania's spending compounded those recession-inflicted problems, Wagner contends.

The economy is beginning to improve, and tax collections recently rose, Rendell said. That could means hundreds of millions of dollars more for the next budget, he added.

But, said Senate Appropriations Chairman Jake Corman, after the past two years, "you look at good news with suspicion." An improved economy "may soften (the deficit) somewhat," said Corman, R-Centre County. "Instead of $4 (billion) or $5 billion it could come down to $2 billion or $3 billion.

"I can't imagine a scenario where we don't have a multibillion deficit," he said.

Rep. Mike Vereb, R-Montgomery County, a member of the House GOP leadership, said lawmakers must decrease spending "to a point where each year it is sustainable."

"Here's the bottom line," Vereb said. "The people of this commonwealth have been recipients of all the spending that went on here. They've, in some cases, become totally dependent. We're not as bad off as other states, but unless we restrain spending, that $4.5 billion is going to grow and grow."

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