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Senator Pat Browne


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Senate Appropriations Committee Report
June  2015

Committee Website


General Fund Collections, $49.8 Million, or 2.6%, Above Estimate for May

General Fund revenue collections for the month ended May 2015 totaled $1.96 billion, which was $49.8 million, or 2.6%, above estimate. Fiscal year-to-date collections total $27.68 billion, which is $618.9 million, or 2.3%, above estimate. Total FY 2014-15 General Fund revenues are $1.89 billion, or 7.3%, more than last year.

As discussed in previous months, gaming license fees and gas lease revenues in the amount of $220 million will not materialize in June as originally expected. Taking this into account means that fiscal year-to-date collections are effectively $398.9 million above estimate for the year.

The General Fund revenue surplus of $49.8 million for the month of May is attributable to continued strong non-tax collections resulting from changes to the dormancy period for unclaimed property (i.e. Treasury escheats). Escheats revenue exceeded the monthly estimate by $51.7 million in May while General Fund tax revenues were below the monthly estimate by $2.5 million thus resulting in the aforementioned monthly surplus.

Corporation taxes were above estimate for the month by $2.2 million, or 2.3%. As of May 31st, the year-to-date corporate net income tax surplus stands at $285.5 million; the capital stock/franchise tax year-to-date shortfall is $38.2 million; the gross receipts tax shortfall is $58.4 million; the insurance premiums tax shortfall is $1.9 million; and the financial institutions tax (i.e. bank shares tax) shortfall is $38.8 million. Total corporation taxes are above estimate for the year by $168.1 million or 3.9%.

Sales and use tax (SUT) collections were below estimate by $37.2 million, or 4.8%, for the month. General sales and use tax accounted for $27.5 million of the monthly shortage, and sales tax on motor vehicles was short of estimate by $9.7 million. Sales and use tax collections for May 2015 were actually 1.5% lower than May 2014 collections, which is significant because lower gasoline prices and warming weather were expected to jumpstart consumer spending. Year-to-date SUT collections for FY 2014-15 are 3.9% ahead of last fiscal year and $16.3 million, or 0.2%, above this year’s estimate.

Personal income tax (PIT) collections were above estimate by $12.7 million for the month. Employers’ withholding was below estimate for the month by $3.3 million, or 0.5%. PIT received from estimated and annual payments was ahead of estimate by $16 million for the month. Personal income tax collections are $70.5 million, or 0.6%, above estimate for the year. PIT revenues are 5.8% higher than last year through the month of May.

Realty transfer tax (RTT) collections were $916,505, or 2.8%, above estimate for the month. RTT is now $29.9 million, or 7.5%, below estimate for the year. Inheritance tax collections were $2.2 million above estimate for the month, and they are now $74.3 million, or 8.9%, above estimate for the year. The strong inheritance tax collections result from a one-time payment of $100 million received earlier in the fiscal year.

Cigarette tax collections were $3.6 million, or 4.2%, below estimate for the month and $13.3 million, or 1.6%, below estimate for the year. Liquor tax collections were $464,294 below estimate for the month, and they are now $1.2 million, or 0.4%, below estimate for the year. Table games tax collections of $8.9 million were $158,203 short of the monthly estimate. The table games tax is $3.2 million above estimate for the year.

As we enter the final month of the fiscal year, it is important to note that the May surplus, and much of the yearly surplus, results from one-time revenues that cannot be counted on in future years to help offset the structural budget deficit. In addition, the year-to-date surplus will be significantly reduced by year’s end due to $220 million of casino license fees and gas lease revenues that will not be remitted in June as was anticipated in the Official Revenue Estimate.

Recurring revenue sources, combined with continued fiscal restraint on the spending side of the budgeting equation, are the keys to future fiscal stability for the Commonwealth. Enactment of liquor and pension reforms put forth by the House and Senate majority caucuses will provide recurring revenues and budgetary savings that will put the Commonwealth on a stabilized fiscal trajectory.

Rainy Day Fund

The Budget Stabilization Reserve Fund which is commonly referred to as the “Rainy Day Funds,” is a special

revenue fund designated to receive a statutorily determined portion of any General Fund fiscal year-end surplus. The Fiscal Code specifically provides that 25% of any General Fund surplus occurring at the end a fiscal year must be deposited in the Rainy Day Fund by the end of the next succeeding quarter. When the balance of the Rainy Day Fund equals or exceeds six percent of that year’s revenue collections, the statutory transfer requirement is reduced to 10%.

Monies deposited in the Rainy Day Fund may only be used by the Commonwealth when emergencies involving the health, safety or welfare of Pennsylvania citizens or economic downturns resulting in significant unanticipated revenue shortfalls that cannot be dealt with through the normal budget process. In addition, the Commonwealth is prohibited from using Rainy Day Fund monies to begin or fund new programs but may use such monies to fund vital programs in danger of being eliminated or reduced due to economic downturn.

Balances in the Rainy Day Fund may only be appropriated upon request of the Governor and requires the approval of a separate appropriation bill by a vote of

two-thirds of the members elected to the Senate and the House of Representatives.

The current Rainy Day Fund balance is $231,000, an amount that would support the state government for about four minutes. On average, states maintain 5.9% of annual spending in their Rainy Day Funds. For Pennsylvania that would equal $1.7 billion. As recently as 2009, Pennsylvania’s Rainy Day Fund

balance was $755 million. However, the Great Recession and its impact on Commonwealth revenues necessitated the transfer of those monies to the General Fund to support the operation of state government as part of the Fiscal Year 2009-10 budget. Since that time, it has been necessary to suspend transfers to the Rainy Day Fund in order to balance subsequent years budgets.

The following charts provide additional detail and perspective on the Commonwealth’s reserve fund.


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