Finally, with the passage of a revenue bill to fund the appropriates bill passed last wee, we can say the 2016-2017 budget is done.
But whether it was a success or not, is very much in doubt.
The budget deficit is, technically closed. New projected revenues of $1.3 billion have been enacted.
But as the following table shows, over half of the new revenue is non-recurring. That is, it is one-time revenues that will be available only this year and not in future years. That means we will start the 2017-2018 budget year already more than $700 million in deficit.
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New Revenue in 2016-17 (in millions of dollars) |
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Recurring Revenue |
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Non-recurring revenue |
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Cigarette Tax |
431 |
Tax amnesty |
100 |
|
|
E-Cigarettes |
13 |
Internet gaming |
100 |
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|
Smokeless Tobacco |
48 |
Liquor licenses |
149 |
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|
Roll you own |
3 |
Casino license fee-Philadelphia |
50 |
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|
Cap sales tax vendor discount |
56 |
Table games license fee |
25 |
|
|
Sales tax on digital downloads |
47 |
Tobacco settlement transfer |
29 |
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|
Personal income tax on lottery winnings |
16 |
Volkswagen settlement |
20 |
|
|
Bank shares tax |
24 |
Balance transfers |
37 |
|
|
Table games tax 2% increase |
17 |
Loans from other funds |
200 |
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Minor tax changes |
-2 |
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|
|
|
Education Improvement tax credit |
-25 |
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|
|
|
Subtotal recurring revenue |
627 |
Subtotal non-recurring revenue |
709 |
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The one-time revenues are, in addition, problematic.
- The $100 million from Internet Gaming will only be available if the General Assembly enacts legislation authorizing it. So far, that legislation is a matter of dispute between the House and the Senate.
- The $50 million projected for a second Philadelphia casino license appears on the budget for the second year in a row. However, the city and state seem to be no closer to actually selling that license now than they were last year.
- The $100 million from a tax amnesty program—the second one in a decade—means that people who have not paid their taxes will be able to do so without owing all the interest and penalties the law previously requires. And that may well encourage high income Pennsylvania taxpayers to not pay their taxes in the future, with the hope that another tax amnesty is enacted a few years down the road.
- The $200 million transfer from other funds, including the fund dedicated to medical malpractice insurance, has to be repaid, which means that the deficit for future years is greater than it otherwise would be.
Perhaps you see why these one-time revenues are often called “gimmicks.”
And there are two other problems.
First, even on the recurring revenue side, the major portion of new revenues comes from tobacco taxes. We can expect, however, that between the new taxes and changing social mores, tobacco consumption, and thus the revenues generated by these taxes will decline. Declining tobacco consumption is, no doubt, a good thing for public health. But the budgetary consequences are real as well.
And second, the budget is based on revenue estimates that are tens of millions higher than those put forward by the Independent Fiscal Office just a few weeks ago. Perhaps these new estimates are sound. But if they are not. Or if the Pennsylvania economy slows—and $150 million projected from Internet gaming and the Philadelphia casino license fail to come to fruition, the technically balanced 2016-2017 budget fall into deficit.
Don’t say we haven’t warned you.