Pa. tax revenue declines $2.2B
Official says reopening won’t save economy
HARRISBURG — Pennsylvania’s tax revenues nosedived $2.2 billion in April, falling 50% below official estimates, according to figures released Friday by the state Department of Revenue.
The majority of the shortfall is due to the three-month extension of the deadline for filing personal income taxes, which means almost $2 billion that is usually collected in April will not flow into the state’s coffers until July.
But roughly $400 million is the direct fallout from the economic slowdown caused by the COVID-19 outbreak, Revenue Secretary C. Daniel Hassell said, a drop of roughly 10% that represents “a significant shortfall all by itself.” Revenue declines will only increase as summer approaches, Mr. Hassell said.
“This is by no means over even once we get to the point where businesses are allowed to reopen in the coming weeks,” he said.
The new numbers offer the starkest picture yet of the damage inflicted on the state’s finances by the outbreak, adding a looming budget deficit to the list of pressing issues Gov. Tom Wolf and lawmakers must address in the next two months.
Tax collections for the current fiscal year, which ends June 30, are now 7.4% below estimate.
The revenue slump is part of an increasingly gloomy economic picture. Businesses have been closed for weeks. Economic relief programs have been overwhelmed by demand. Pennsylvanians are filing for unemployment in record numbers, straining the state’s system.
As a result, sales and income tax receipts, the largest sources of tax revenue, are dramatically lower than anticipated. Personal income taxes withheld from employees’ paychecks dropped $100 million below estimate, and sales taxes came in $215 million lower than anticipated because of reduced economic activity.
Congress has not offered unrestricted aid to the states to fill those budget gaps, leaving open the need for dramatic cuts.
Pennsylvania will receive nearly $5 billion under the federal CARES Act, but guidance from the Treasury Department says the money can only be used on spending that is needed to respond to the outbreak — not as “revenue replacement.”
The National Governors Association has said states need $500 billion in federal aid to replace revenues lost as a result of the outbreak, warning of “drastic cuts” otherwise. Democratic House Speaker Nancy Pelosi said Thursday local governments are seeking a similar amount, saying a total $1 trillion rescue package is needed.
As the prospects for further federal aid remain unclear, state lawmakers face a fast-approaching July 1 deadline to pass next year’s budget — or at least a stopgap measure.
Mr. Wolf has said he will stick to the ambitious spending plan he unveiled before the virus hit, although it assumes a 4.5% growth in revenue — a forecast that now seems virtually impossible.