Tuesday, November 19, 2013

Pennsylvania about to fly without a fiscal safety net

Pennsylvania faces a long-term structural deficit and will enter next year's budget deliberations without the financial cushion that helped policymakers manage the past three years, the Pittsburgh Post-Gazette reports.

According to an economic outlook released last week by the state's nonpartisan Independent Fiscal Office (IFO), if current laws remain unchanged, Pennsylvania's revenues over the next five years would increase at an average annual rate of 3.1 percent, failing to keep up with a 4.1 percent average annual rate of growth in expenditures.

The projected disparity is based in part on forecasts that the population of Pennsylvanians 65 and older will increase 29 percent between 2010 and 2020, while the state's working-age population will remain unchanged.

These demographic trends could limit growth in the personal income tax base and in the sales tax base, as older people tend to spend more of their disposable income on non-taxable goods and services, such as health care, the report noted.

Payments into the pension systems for state and public school employees are scheduled to rise significantly in the next few years.

State law requires the enactment of balanced budgets, and so the IFO noted that the disparity it projects in the coming years "merely reflects the difficult choices that policymakers will confront in future budgets."

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