New fiscal reality for state officials

The belt-tightening has officially begun in Harrisburg. Brace yourself, this is not going to be pretty.

The belt-tightening has begun in Harrisburg. Brace yourself, this isn’t going to be pretty.

Much like the rest of us, Gov. Tom Wolf and the Legislature will be attempting to do the near impossible: Squeezing their postholiday figure into pre-holiday duds. The celebrating is over. Now it’s time to pay the band.

Pennsylvania is staring at a $600 million dollar deficit, and the latest projections on revenue show little in the way of relief. Yes, they are down as well.

Cognizant of just how bad the numbers are, and perhaps leery of another protracted budget debate, both the Democrat Wolf and Republicans who control the Legislature seem a bit more focused on the reality of the situation. In a word, it’s bleak. The money isn’t there — either for the state’s general fund, or the state’s two large public employee pension funds, both of which are wallowing in a sea of red ink themselves. That deficit is currently racing toward an ungodly $50 billion. That has been aptly and correctly described by several recent governors as the “ticking time bomb” in the state budget.

For that reason, Wolf is already taking action. The governor is well aware of Republicans’ reaction to this first two budgets, in which he twice tried — and failed — to win increases in both the state sales and property taxes. It’s the first rule of budgeting in Harrisburg, where Republicans rule the roost: Tax hikes simply don’t fly. So this year Wolf seems at least initially to be taking a page from the Republicans’ own playbook. They espouse restructuring over tax hikes, including the possibility of merging some state agencies to eliminate redundant spending. A recent Wolf memo indicated the governor is trying to pare down some functions in the executive branch, apparently targeting both administrative technology and human resources. The governor earlier had indicated the Commonwealth would shed thousands of unfilled state jobs.

Then last week came an even more eye-opening announcement: The state Department of Corrections said it would close two state prisons. The state has compiled a list of five to be shuttered, including SCI Mercer in Mercer County; SCI Retreat in Luzerne County; SCI Frackville in Schuylkill County; SCI Waymart in Wayne County; and SCI Pittsburgh in Allegheny County. Absent from the list were two local state facilities, SCI Chester in Delaware County and SCI Graterford in Montgomery County. The state is due to announce which two facilities will be shuttered Jan. 26, with a potential shutdown of June 30. The closures are not expected to result in job losses, every employee at the two targeted facilities will be offered employment elsewhere within the Department of Corrections, state officials said. Like many state agencies, the state Department of Corrections is looking at a shortfall of its own — in the neighborhood of $200 million — while expecting a budget reduction of 8 to 10 percent. Expect similar refrains from other state agencies. Unfortunately, none of these cuts is likely to stem the flow of red ink in the state. The Commonwealth needs revenue, and with Republicans in lock step against any new or increased taxes, expect our elected representatives to turn to a familiar old stand-bye in their thirst for more funding. Gaming. One state senator, Jay Costa, of Allegheny County, already is proposing a bill to legalize online gaming, as well as boosting fantasy sports and online lotteries.

Costa would allow the state’s existing casinos to get into the kind of action that is now legal in New Jersey. For the shot at online gaming, Pennsylvania casinos would have to fork over a $10 million fee upfront, then see their take be subject to a 25 percent tax bite. Slot machines in the state currently are taxed at 54 percent, while table games are hit with a 16 percent levy. For fantasy leagues, Costa would like to see those entities pony up a cool $2.5 million for a licensing fee, with revenue then taxed at 25 percent. The bottom line in Harrisburg this budget season at least seems a bit more pragmatic, perhaps more in tune with just how dire the state’s fiscal picture is. Gone are the boasts of massive education funding increases — as well as the tax hikes to pay for them — from the governor. Republicans seem intent on finally doing something to make inroads against the pension deficit, as well as focusing on the call from Senate Majority Leader Jake Corman’s call to focus laserlike on the state’s ability to deliver essential services. Gov. Wolf will deliver his budget address in early February. Don’t expect many Valentines in his spending plan.

The money just isn’t there.