PA Environment Digest

Auditor General Jack Wagner said this week the next governor and General Assembly will be confronted with one of the greatest fiscal crises in state history – a potential $5 billion budget gap created by a $2.5 billion loss in federal stimulus funds, $3 billion in unemployment payments to the federal government, and an increase of at least $800 million for rising pension costs.

Wagner, who opposes raising taxes during a recession, said that the state's budget will likely have to be reduced from $28 billion this year to $24 billion for the 2011-12 fiscal year.

With Pennsylvania and the nation still mired in the greatest economic calamity since the Great Depression, Wagner said it was unlikely that tax receipts would grow enough by the end of the next fiscal year to cover the shortfall.

"Pennsylvania's budgetary woes are far from over," Wagner said. "In fact, they will get worse before they get better."

Wagner said that years of fiscal sloth, in which state spending rose significantly faster than the overall inflation rate, created Pennsylvania's fiscal crisis.

The state budget has increased from $21.01 Billion in Fiscal Year 2003-04 to $28.04 Billion in Fiscal Year 2010-11, a 33.5 percent increase, Wagner said. He noted that during that same time period, the inflation rate increased by 18.5 percent, meaning that Pennsylvania's state budget increased nearly double the rate of inflation.

Tax revenues for first two months of this year show that economy has stabilized, but there are no indications that we're going to grow our way out of this hole, Wagner said.

Wagner said that during the coming weeks he will be making additional recommendations on how the next governor and General Assembly can save money and balance the budget without resorting to tax increases.

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