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Senate Appropriations Committee Report
General Fund Revenue Collections, $86.7 Million, or 2.0%, Above the Monthly Estimate
General Fund revenue collections for the month ended March
2016 totaled $4.49 billion, which was $86.7 million, or 2.0%, above the monthly
estimate. Fiscal year-to-date collections total $22.2 billion, which is $147.4
million, or 0.7%, above estimate for the year. Fiscal year-to-date General Fund
revenue collections are $529 million, or 2.4%, ahead of last year at this time.
March is typically the largest revenue collection month of the year.
Corporate net income (CNI) tax collections were $17.1
million, or 3.7%, below estimate for the month. Regular (i.e. annual) CNI tax
payments were over estimate by $17.2 million, or 9.7%. However, quarterly
estimated payments due in March were $34.3 million, or 11.9%, below estimate.
March is the first quarterly installment month for calendar year tax filers.
Other quarterly payments for the 2016 tax year will be due in June, September
and December. The weakness in March quarterly payments could translate into weak
quarterly payments in June when the second quarterly installment for 2016 is due.
Gross receipts tax (GRT) revenues were above estimate by
$70.2 million, or 6.0%, for the month, and GRT revenues are $78.1 million ahead
of estimate for the year. Most GRT is collected in March, and it appears that
the $1.29 billion in revenues collected thus far this year will be enough to end
a three-year trend of declining gross receipts tax revenues. In fact, FY 2015-16
GRT revenues were expected to decline by 1.9% from FY 2014-15. However, at the
end of March, GRT revenues are 4.0% more than revenues at this same time last year.
Financial institutions tax (i.e. bank shares tax) was below
the monthly estimate by $8.6 million, or 2.9%, for March. The overwhelming
majority of the tax is due in March, and so the shortfall will not be repeated
in the remaining months of the fiscal year. The Governor has proposed to
increase the bank shares tax rate from 0.89% to 0.99% for 2016 to achieve the
revenue neutrality intended with the enactment of Act 52 of 2013.
Sales and use tax collections (SUT) were over estimate by
$24.6 million, or 3.4%, for the month. General sales and use tax was $23.1
million, or 3.8%, above estimate, while sales tax on motor vehicles beat the
estimate by $1.5 million, or 1.3%. Total sales and use tax collections to-date
for FY 2015-16 exceed the estimate by $27.8 million, or 0.4%. SUT collections
are 3.6% ahead of last year. The Governor’s Official Estimate predicted 3.5% annual growth.
Personal income tax collections (PIT) were below estimate
by $1.6 million, or 0.1%, for the month. March 2016 employers’ withholding
collections totaled $962.3 million, which was $4.7 million, or 0.5%, above
estimate. Individual estimated PIT collections were above estimate by $3
million, but PIT payments on annual tax returns were $9.4 million lower than
expected. The bulk of PIT annual payments will be due by April 15. Hopefully,
the lackluster performance in March annual PIT collections will pick up in April.
Realty transfer tax (RTT) collections underperformed the
estimate by $3.3 million, or 9.6%, for the month. RTT is now $5.4 million, or
1.5%, above estimate for the year. Inheritance tax collections were ahead of the
estimate by $11.6 million for the month, or 13.5%, and they are now $31.3
million, or 4.7%, above estimate for the year. Cigarette tax revenue exceeded
the estimate by $2.7 million for the month, and liquor tax collections were
$362,626 higher than estimate. Table games tax revenue exceeded the monthly
estimate by $83,627, or 1.0%.
General Fund non-tax revenue collections were ahead of the estimate by $25.5 million.
The year-to-date revenue surplus, as stated above, is
$147.4 million, which is certainly good news. An examination of the past several
fiscal years indicates that in years where there was a revenue surplus in March
those fiscal years ended with a surplus. In all cases, except FY 2007-08 which
was the beginning of the economic downturn, the year-end surplus was increased
from the March surplus amount. The review of this historical data does not
reveal any pattern that would enable us to reliably project a June 30, 2016 surplus.
We are cautiously optimistic that the current revenue
surplus may increase modestly by year’s end. A significant increase in the
surplus is not anticipated because sales tax and PIT receipts are not
significantly outperforming the estimate and weak PIT annual payments in March
could carry over into April. In addition, the bulk of the March surplus was in
the gross receipts tax which will not recur in coming months. Revenue receipts
are monitored on a daily basis, and committee staff will prepare updated
forecasts for fiscal years 2015-16 and 2016-17 throughout the remainder of the fiscal year.
Motor License Fund collections were $22.6 million, or 9.2%,
higher than the estimate for the month of March. The Motor License Fund is now
$10.8 million, or 0.6%, below estimate for the year.
Budget Becomes law Without Governor’s Signature, Fiscal Code Vetoed
Governor Wolf allowed the supplemental budget approved by
the Legislature last month to become law without his signature. This is an
unprecedented phenomena which has not occurred in several decades. Media
reported that Governor Shapp was, perhaps, the last Governor to permit a budget
to become law without his signature.
Governor Wolf did, however, veto the Fiscal Code, which is
an integral part of the budget that provides direction for the intended
disbursement of certain funds including the Basic Education Subsidy.
The veto of the Fiscal Code has some very real world
First and foremost, because the Fiscal Code provided
authority for certain fund transfers and revenues to the General Fund, the
Governor’s veto places the Fiscal Year 2015-16 budget out of balance by about
$110 million. The Governor’s action means the Commonwealth now fails to meet the
constitutional obligation to enact a balanced budget.
Governor Wolf has also cut $439 million from schools:
$150 million in increased school funding is now frozen
because the fiscal code contained the funding formula. Without this language,
there is no authority to disburse the additional funds.
$289 million that was to address the state’s commitment to
provide reimbursements for school construction and renovations projects –
commonly referred to as PLANCON (Planning and Construction Workbook).
- After-school learning for low-income students.
- Mobile science and math education programs.
- Community college operating expenses.
- Career and Technical Education Equipment Grants.
Other items in the Fiscal Code vetoed by the Governor:
- $25.759 million in funding that was to come from the
Race Horse Development Fund to support the following:
- The Farm Show – $5 million
- Animal Health Commission – $5.35 million
- Pennsylvania Laboratory Lab System – $5.309 million
- Pennsylvania Fairs – $4 million
- State Racing Commission for the costs of oversight
of the race horse industry – $6.1 million
- The transfer of $2.5 million from liquor sales to the
Department of Drug and Alcohol Programs.
- Grants for hospitals, schools, businesses and
municipalities to gain access to natural gas.
- Automatic payments to counties for child welfare in the
event of a budget impasse.
- Funds for Marketing and Tourism Promotion.
- Allocation of funds for Pennsylvania’s two associations
for the blind.
- A program providing high school students with
disabilities with work-based learning experiences.
- Veterans’ workforce development.
Many of these items were agreed-to by the Legislature and
the Administration. In the case of PLANCON, the methodology was actually
developed by the Governor’s policy director at the time. What we have seen is a
willingness for the Governor to leverage his policy and fiscal goals against the
needs of citizens, schools, students and parents.
Subsequent to the Governor’s veto of the fiscal code, the
administration has requested the General Assembly to re-enact several of the
vetoed provisions. That request can only be interpreted as proof positive of the
faulty decision making related to the veto.
Now that the budget for FY 2015-16 is essentially
completed, we must focus on analyzing the spending needs for FY 2016-17. An
integral part of the process is the development of a cost-to-carry budget for FY
2016-17 with a careful examination of the cost drivers. Perhaps the largest cost
driver in the budget is the Department of Human Services and in particular the
Medical Assistance program. Pennsylvania’s demographics indicate that we will
see increased pressure in our long-term care and home and community-based
services programs as our population ages. The following charts show some
perspective as to how caseloads have increased over the past year. The increases
result from a combination of additional persons becoming eligible for medical
assistance under the Affordable Care Act and a shift away from more expensive
nursing home care for the elderly and disabled.
Contact Senator Browne:
On the Web:
702 W. Hamilton Street
9 AM to 5 PM
9 AM to 4 PM
281 Main Capitol
9 AM to 4:30 PM
Western Lehigh County
Upper Macungie Township Building
8330 Schantz Road
By Appointment Only
Northern Lehigh County
North Whitehall Township Building
3256 Levans Road
Coplay, PA 18037
By Appointment Only