Senate Appropriations Committee Report
(all tables and graphics can be viewed online)
A Trying Fiscal Year Comes to a Close
General Fund revenue collections for the month of June were below the Official Revenue Estimate by $577.4 million, or 17.8%, bringing total General Fund revenue collections for the fiscal year ending 2019-20 to $32.3 billion, which is $3.2 billion, or 9.1%, lower than the estimate for the year. Tax revenue collections for fiscal year 2019-20 shrunk by $3.3 billion, or 9.5%, compared to the estimate. However, the latest analysis suggests that tax filing deadline extensions that cross over into FY 2020-21 account for an estimated $1.9 billion of the tax revenue shortfall in FY 2019-20. In other words, the estimated $1.9 billion shift caused tax revenue collections to be delayed but not lost entirely. As a result, a truer picture regarding FY 2019-20 tax collections is that they missed the mark by approximately $1.4 billion, or 4%, for the fiscal year.
The deleterious impact of COVID-19 on the Commonwealth’s finances is undeniable, yet FY 2019-20 General Fund revenue collections performed somewhat better than expected by both the Independent Fiscal Office (IFO) and Governor Wolf’s Administration. When the five-month interim budget was completed at the end of May, the Administration had set expected year’s end FY 2019-20 General Fund revenues at $32.01 billion. Likewise, the IFO had pegged FY 2019-20 revenues at $32.01 billion in its June 2020 Official Revenue Estimate report for FY 2020-21. Actual FY 2019-20 revenue collections of $32.28 billion were $263 million higher than both the Administration’s and IFO’s most recent projections.
FY 2020-21 General Fund revenue collections are expected to be approximately $2 billion lower than what was projected in the Governor’s February 2020 budget proposal. Over the two-year period for the fiscal year just ended and the new one beginning, the Commonwealth is facing a combined revenue deficit that could exceed $5 billion.
June General Fund Revenue vs. Estimate:
Fiscal Year 2019-20 vs. the Official Revenue Estimate:
Fiscal Year 2019-20 vs. Fiscal Year 2018-19:
Motor License Fund:
CARES Act – General Assembly Action
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, was enacted by the federal government in late March, appropriating $2.2 trillion in emergency aid to respond to the COVID-19 pandemic. A cornerstone of the CARES Act was the establishment of the Coronavirus Relief Fund, which directed $150 billion in aid to state and local governments. Importantly, the CARES Act sets out that states may only use Coronavirus Relief Funds for unbudgeted and necessary expenditures related to COVID-19, and funds cannot be used to replace reduced state revenues resulting from the pandemic.
Pennsylvania’s allocation of the Coronavirus Relief Fund totaled $4.96 billion, with $1.03 billion going directly to counties with a population over 500,000 (Philadelphia, Allegheny, Montgomery, Bucks, Delaware, Lancaster, Chester) as required by the law, leaving roughly $3.9 billion to be distributed statewide.
The General Assembly took a first step in utilizing these funds with the passage of SB 1108, now Act 2A, sponsored by Senator Browne, that directed $2.6 billion to address the needs of an array of entities and areas impacted by COVID-19, particularly families, seniors, businesses, county and local governments, community service providers, first responders, educational institutions and food banks. Separately, the General Assembly also allocated $300 million to property tax relief, bringing to $2.9 billion in Coronavirus Relief Funds that have been expended to date.
Taking into account these actions, Pennsylvania has just over $1.03 billion in Coronavirus Relief Funds that remain available to spend. Under the CARES Act, the Commonwealth must allocate and incur costs related to COVID-19 before December 30, 2020 to appropriately spend the funds.
Impact of the COVID-19 Disaster Emergency on the PLCB
Through the month of February, the Pennsylvania Liquor Control Board’s (board) year-to-date sales totaled $1.5 billion, a 4.5% increase over the prior year-to-date. At that time, it was believed that the board would significantly exceed the previous fiscal year’s sales mark of $2.127 billion.
Unfortunately, due to the COVID-19 disaster emergency, on March 15th, the board began closing its Fine Wine and Good Spirits Stores (stores) in the southeastern counties of the state, and as of March 17th, it closed all stores statewide, licensee service centers and e-commerce operations.
After the closure, the board slowly resumed sales. On April 1st, it resumed e-commerce sales. On April 16th, it began curbside pickup at 176 locations, and by April 20th, curbside pickup was expanded to 565 locations. On May 8th, as counties began reopening, the board resumed in-person sales at 77 stores, and as of June 27th, in-person sales were being conducted at 559 stores.
As a result of the COVID-19 disaster emergency, the board sold 12.6 million fewer product items than during March, April and May of 2019. Specifically, sales for March, April and May combined totaled $372.1 million, a decrease of $149.9 million, or 28.7%, from the same three month period in 2019. In addition, the board reported losses of $15.1 million in April and $1.4 million in May and is projecting that total sales for the year ($2.034 billion) will fall short of last year by $93.2 million, or 4.4%.
Notwithstanding the COVID-19 disaster emergency and the possibility of further restrictions on sales, the Governor’s General Fund revenue estimate for fiscal year 2020-21 assumes that the board will be able to contribute $185.1 million in profits to the General Fund, the same amount as in FY 2019-20.
If you do not wish to receive this email, click here to unsubscribe.