Debt and savings are different columns in the same ledger.
Any business can tell you that. So can anyone working on their taxes right now. Like blood circulating in the body, the amount of money in and out of any operation is always in flux.
Pennsylvania’s numbers show just how true that is. The Pennsylvania Independent Fiscal Office projected this week that the state will end the fiscal year with a $3.9 billion deficit. At the same time, the rainy day fund will grow to a record $7.8 billion.
Some could see those figures as contradictory. They are not. They are related and both important, but still different.
The office also warned the gap is structural. It expects the deficit to widen to $6.7 billion next year — even before Gov. Josh Shapiro’s $53.3 billion spending proposal is factored in.
Think of the Pennsylvania Independent Fiscal Office as the state’s accountant, reviewing the shoebox of receipts, statements and assorted documentation. The tax preparer is not there to scold you. The job is to sort through the numbers and tell you what they mean.
“Structural deficit” sounds like campaign rhetoric. In this instance, it is not. It is a real accounting term describing recurring expenses that exceed recurring revenue, even in stable economic conditions.
The Independent Fiscal Office attributes the imbalance, in part, to the use of temporary transfers to balance this year’s budget, including $1.1 billion drawn from special funds, along with spending growth — particularly a 6.7% increase in health care programs for seniors — outpacing overall revenue growth of less than one-half of 1%.
Meanwhile, the Budget Stabilization Reserve Fund continues to grow through interest earnings and transfers from the general fund. Treasurer Stacy Garrity has noted the balance represents more than 53 days of operating expenses, above the national median.
Rebuilding reserves after years with little cushion was wise. A rainy day fund exists for downturns and emergencies.
But savings do not erase structural imbalance. Using reserves to close recurring gaps might buy time. It does not change the underlying math.
The math should not translate into political fights, but given Pennsylvania’s partisan merry-go-round, it will. Every state budget does — from the moment a governor proposes one until the nearly inevitable skid past the June 30 deadline to pass it.
And in a gubernatorial election year when the incumbent faces off against the state treasurer, avoiding it is likely impossible.
But government needs to be the dispassionate accountant here. The numbers are the numbers, and our needs are our needs. Our leaders need to debate how to pay what we need to pay, how to use the savings strategically and how to manage reasonable debt without drowning in it.
Shapiro’s proposal relies on nearly $4.6 billion from the reserve fund to balance next year’s budget. Lawmakers will debate that decision. What should not be debated is the arithmetic.
You can explain the numbers. You can debate the numbers. But in the end, the ledger still has to add up.
