Latest Pennsylvania Budget Estimate Has Modest Economic Growth, Dip in Tax Revenue
June 28, 2022 | Pennsylvania
Pennsylvania’s economy will have modest real economic growth but also a dip in tax revenues in the next fiscal year as one-time boosts fade away, according to the latest revenue estimates from the Independent Fiscal Office.
The estimate for fiscal year 2022-23 does not assume a recession will hit, but does assume inflation will still be a problem, which cuts away at real gains in areas such as wages and salaries.
For the commonwealth’s General Fund, the IFO expects $43.32 billion in revenues, $5.38 billion lower than fiscal year 2021-22. The lower total comes from the end of one-time federal transfers and higher-than-expected tax revenues from the corporate net income tax, personal income tax, sales tax, and other sources.
The total tax revenue decline will be about $2 billion, a 4.5% drop.
One-time gains from stock market returns, the winding down of federal stimulus dollars, higher interest rates and a contracting money supply all influence lower revenues, IFO Director Matthew Knittel said in an email.
It’s unclear how many states expect a similar pattern to Pennsylvania, but Connecticut also anticipates a decline in their General Fund revenues, as does North Carolina.
The state of the economy could complicate the revenue estimates; as The Center Square previously reported on the IFO’s initial estimate, the office placed a 60% chance of economic stagnation or a “growth recession” happening, and a 30% chance of a recession.
“Many analysts believe there is significant potential that the forecast could deteriorate rapidly based on high energy prices, volatile and declining equity markets, and global events,” the report noted…. (Excerpt from Pennsylvania Daily Star)
