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Pennsylvania among few states to struggle with budget deficit

| Sunday, June 22, 2014, 10:50 p.m.

HARRISBURG — With eight days remaining to close a budget deficit of at least $1.4 billion, lawmakers and Gov. Tom Corbett are seeking a solution that could include a tax increase.

State tax collections are down $532 million, or 2 percent below estimate, as lawmakers try to close the deficit and approve a budget by the June 30 deadline.

Most other states, however, report sufficient revenue in a spring survey by the National Association of State Budget Officers, released this month.

Twenty-six states had higher than anticipated revenue, and 13 states were on target with estimates. Eleven states, including Pennsylvania, reported tax collections lower than estimates.

Budget Secretary Charles Zogby has opened the door to a possible tax increase — even a gas severance tax, which Corbett has opposed for years.

But Corbett has said the Legislature first must address “cost-drivers,” such as a state pension system with a $50 billion unfunded liability.

The House on Monday may begin voting on a pension reform bill and an undisclosed spending plan, said Stephen Miskin, a spokesman for Republican leaders.

Corbett, 65, a Shaler Republican, faces a tough re-election prospect in November against Democrat Tom Wolf, 65, a York County businessman.

In 2010, Corbett ran as a fiscal steward opposed to tax increases. He entered office facing what he said was a $4.2 billion deficit; he slashed spending and balanced the budget.

Though he's working with a Republican-controlled Senate and House, “It's a real dilemma he faces. His options are limited,” said Moe Coleman, director emeritus of the Institute of Politics at the University of Pittsburgh.

Pennsylvania's shortfall could hit $1.7 billion, said Rep. Joe Markosek of Monroeville, ranking Democrat on the House Appropriations Committee. After cuts from 2011, “The state is really in pretty bad shape, particularly in education” funding, Markosek said.

Corbett's proposed budget includes a tentative $306 million increase for public schools.

Asked why Pennsylvania confronts a deficit, Corbett's press secretary, Jay Pagni, attributed it to “a combination of lower-than-anticipated revenue and costs that are a direct result of changes at the federal level, resulting in reduced reimbursements.”

Factors include changes in federal tax law and demands of implementing the Affordable Care Act, Pagni said. He cited pension obligations and increased costs for Medicaid.

The level of impact from a change in federal tax law was “totally unforeseen,” Pagni said.

Official estimates for 2013-14 “took into account the fact that the 2013 federal income tax increase on capital gains and dividends would cause some taxpayers to shift income into 2012, but the magnitude of that tax shift was a surprise,” said Elizabeth Brassell, a Department of Revenue spokeswoman. That hurt the state's personal income tax collection.

Todd Haggerty, a policy analyst for the National Conference of State Legislatures, said recovery from the economic downturn since 2008 has been slower than recoveries from previous slumps in the market.

“The trough of the Great Recession was so deep that the climb out of it has been very difficult and gradual,” Haggerty said.

Still, Rep. Dwight Evans, D-Philadelphia, questions how other states are able to meet expectations and Pennsylvania cannot.

“It's poor leadership. I don't say that lightly,” said Evans, who was former Gov. Ed Rendell's go-to guy in the House on state tax issues.

Charlie Gerow, a Harrisburg-based Republican consultant whose firm has a contract with the Corbett campaign, points to Corbett's predecessor: “The governor inherited a fiscal mess that few other governors have had to deal with. We had to get back to solvency and responsibility. We're still cleaning up the mess Ed Rendell left us with.”

Tagging Rendell, a Democrat, with the problem is misplacing blame, said Chuck Ardo, Rendell's former press secretary. “It was a mess nationally,” Ardo said. “Every state in the union was facing serious challenges.”

Corbett's campaign spokesman Billy Pittman said Corbett has reduced the size of state government, reduced state spending and saved taxpayers “more than a half-billion dollars in government innovation and efficiencies.”

Brad Bumsted is Trib Total Media's state Capitol reporter. Reach him at 717-787-1405 or Gideon Bradshaw, an intern with the Pennsylvania Legislative Correspondents Association, contributed.

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