State Government is Spending Money it Doesn't Have

Pennsylvania is spending taxpayer money it doesn’t have.

Yesterday the Independent Fiscal Office (IFO) released its report on revenue collections for the past fiscal year. Total revenue came in approximately $98 million below expectations.

This failure to meet projections is important because spending decisions are based on revenue projections. If revenues don’t meet expectations, it can throw the budget out of balance. That’s exactly what happened in 2015-16.

The state ended the fiscal year more than $43 million in the red.

2015-16 Balance Sheet (in thousands)
Starting Balance	$256,622
Total Revenue	$30,901,600
Refunds	($1,300,000)
Net Revenue	$29,858,222
Lapses	$200,947
Total Funds Available	$30,059,169
2015-16 Expenditures	$30,102,253
Balance Remaining	($43,084)

One important point to note: If spending were kept at the $30.03 billion level passed back in March, the state would be running a surplus. But regrettably, the legislature added more than $98 million in new spending—defined as “supplementals”—to the 2015-16 spending total.

With the state starting the year in the red, the legislature won’t have access to the $55 million surplus it was counting on to balance the budget. Moreover, the 2016-17 revenue estimate may once again be lower due to underperforming revenue collections. Both dynamics will make balancing the budget more difficult.

Lower than anticipated revenues mean lawmakers will need to raise more than $1.3 billion to balance the state’s books—an inevitable consequence of agreeing to a spending plan before determining how to pay for it.

2016-17 Budget Deficit (in thousands)
Starting Balance	($43,084)
Revenue Projection	$31,661,000
Refunds	($1,310,000)
Total	$30,307,916
2016-17 Proposed Budget*	$31,629,079
Projected Deficit	($1,321,163)
*Includes Commonwealth Financing Authority line item

Some Republican lawmakers are offering a revenue package of $1.2 billion to pay for the current budget proposal. Democrats prefer a revenue package closer to $1.4 billion. Neither package would be necessary if spending were pared back to avoid raising taxes on working people.

And it can be done. As my colleague James has pointed out, dramatic cuts are not necessary to balance the budget without tax hikes. What’s needed is spending restraint. But the proposed budget represents the opposite of restraint.

If Harrisburg is going to break free from autopilot budgeting, a different mindset is a must. Rather than debating how much more taxpayers need to pay, policymakers should focus on how much government can spend.