Filled with cash, P. could see how their surplus goes down the drain Analysis | The state

Despite record inflation and economic problems caused by COVID-19, Pennsylvania is in a good financial position thanks to higher-than-expected revenue and high coronavirus dollars – and Governor Tom Wolfe wants you to know that.

Wolff’s time in office is nearing completion, his office regularly advertises state revenue collections that exceeded expectations for 2022. In a recent interview with City & State, Wolfe said he would become the first governor since Dick Thornburg in 1987. pass the budget surplus to his successor, adding that the state will still have enough money to increase education funding before he leaves office.

While Republicans are quick to claim they were repelling Wolff’s efforts to raise taxes, Wolfe took credit for helping improve the state’s finances, noting that the state invested in its rainy days fund and accepted increased funding for education during his time in office.

“The closet was bare. We did not pay the bills and took money from things from which the state should never have taken money, such as education. We don’t do that anymore, and we can afford to do even more than we do, ”Wolf said.

According to Treasury of Pennsylvania, the state has more than $ 2.8 billion in its budget stabilization reserve fund, better known as the Rainy Days Fund. Wolff said he has no plans to transfer money from the fund.

Wolf Administration announced in early May that fees to the State General Fund since the beginning of the year have reached $ 40.7 billion, which is $ 4.5 billion above the estimate. And Wolf’s administration said that if the budget proposed by him is approved in full, the state will still have a budget surplus of $ 3.3 billion.

Republicans are reluctant to agree to Wolf’s budget requests. In his 2022 executive budget proposal, Wolf is asking state lawmakers to increase funding for basic education by $ 1.25 billion, as well as $ 300 million for the state-level Level Up initiative. Wolff said budget reserves can pay for these and many more increases.

“This is a really important message because I don’t want to raise taxes, I want to lower taxes. I want to help people, ”the governor added. “We can do this by actually investing and making sure our schools work well, that they have opportunities, that their roads don’t create all sorts of problems for the suspension system in their car. We can do all this because we have the financial means to do it, and it’s really important. “

But as consumers struggle with rising prices due to inflation, Republicans who control the General Assembly believe the state should be wary of spending extra money and federal aid.

House Speaker Jason Gottesman told the House of Representatives earlier this month that the U.S. economy reduction of the first quarter emphasizes “the need to be careful when drawing up a fiscally responsible spending plan”.

“The benefits of any surplus dollars and other federal funds must be carefully designed to mitigate the impending economic downturn and the associated income shortfall, especially when the artificial means by which the federal government supports the economy no longer exists,” Gottesman said in a statement. “We are trustees of taxpayer dollars, and Pennsylvania residents depend on us to use their money wisely and to their advantage.”

A new report from Walker AllianceThe nonprofit, founded by former Federal Reserve Board Chairman Paul Walker, found that states that use federal aid dollars for recurring spending, including Pennsylvania, “risk a so-called fiscal cut as soon as the money runs out.”

“In particular, the allocation of one-time payments to replace revenues could jeopardize budgets if federal funding is exhausted,” the report said.

According to the mid-year presentation of the state budget from December 2021, the state has spent $ 4.2 billion out of $ 7.3 billion in state and local tax recovery funds. This includes the transfer of $ 3.8 billion to the general fund to support “government programs,” according to the presentation.

The vague nature of how the money is spent has annoyed Beverly Bunch, a professor at the University of Illinois School of Public Administration and Politics in Springfield who wrote the report.

“I think the main thing that caught the eye of Pennsylvania was the transfer of $ 3.8 billion to the General Fund without disclosing how it would be used,” Bunch said. “Part of trying to avoid a break is knowing what is used for one-off projects such as capital and what for recurring (costs), and then you watch these recurring ones.”

Bill Glasgal, senior director of public finance for The Volcker Alliance, told City & State that Wolfe is not wrong when he paints a rosy picture of Commonwealth spending.

“Sales taxes are strong. The income from gambling is great. There is a lot of cash, so the governor is right. But what happens if what the Federal Reserve is doing now slows down the economy and federal funding runs out? ”

The Volcker Alliance report highlights a number of recommendations for government officials to consider, including developing plans to avoid fiscal cuts, identifying other sources of funding available when using COVID-19 for recurrent spending, and improving transparency in the use of state and local aid. .

If the state relies too heavily on federal aid for recurring spending, it could lead to the state facing a fiscal cut and it will need to find out, cut programs or find new sources of funding for them, Bunch said.

“It is worrying that programs will need to be cut or new sources of funding identified. At best, revenues continue to go at the state level, and that’s a moot point, ”Bunch said. “But if the coronavirus has deteriorated, or if the economy has tightened and incomes have fallen or fallen, it’s a break – and we’re trying to get government officials to avoid that break.”