Reduce Spending Now, or Increase Taxes Later

$281 million budget shortfall puts taxpayers at risk 

HARRISBURG, PA — The Commonwealth Foundation renewed its call for Governor Rendell and the General Assembly to take action to prevent a potential multi-billion dollar tax increase in 2009, following the Pennsylvania Department of Revenue’s latest report of a $281 million budget deficit.

The September revenue report indicates General Fund collections were $164 million below estimate.  “A $281 million shortfall at this time in the fiscal year far exceeds the budget deficits experienced in 2002 and 2003, both of which resulted in significant tax increases on the people Pennsylvania,” said Matthew J. Brouillette, president of the Commonwealth Foundation. 

“Our early warnings and predictions that the recently passed budget would put Pennsylvania on a path toward a massive  tax increase is, unfortunately, coming to fruition,” said Brouillette.  “Although Gov. Rendell’s recent action to save an estimated $200 million is a good step, it has already been surpassed and will not likely be enough to prevent a massive tax increase in 2008.”

In July of this year, Senate Republican Appropriations Committee Chairman Gib Armstrong suggested there would be an $800 million to $1.2 billion deficit by the end of the fiscal year.  A senior Democratic Appropriations Committee staffer suggested that the deficit could reach upwards of $2 billon.

“Failing to act now will only make the problem more painful next year,” said Brouillette.

In order to thwart the need for a massive tax increase next year, the Commonwealth Foundation urged Gov. Rendell and the General Assembly to shelve plans for new spending and begin cutting out the “walking-around-money” and corporate welfare programs that have failed to improve Pennsylvania’s economy.  In March 2008, the Foundation provided ideas for cutting $1.2 billion from the General Fund budget.  For more information, see “Government on a Diet”.

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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

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