State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.
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IFO director says state can recover from revenue slump

Written by Mary Wilson, Former Capitol Bureau Chief | Mar 6, 2014 5:28 PM
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Lower than expected tax collections for Pennsylvania puts an even greater focus on revenue reports in the coming months.

Monthly state revenue reports start getting more attention right around this time of year in the Capitol - when the state budget plan is at the forefront of lawmakers' minds. The latest report marked the third time monthly revenues came in below estimate. February collections were 2.1 percent lower than anticipated, or about $75 million. For the year so far, the state is about half a percent behind.

"There is a potential that it could be made up going forward," said Matthew Knittel, director of the state's Independent Fiscal Office, which offers nonpartisan economic analysis. "However, already built into the projections is pretty strong growth, and if that growth does not materialize, then we could have further shortfalls."

If one subset of tax revenues is going to bring the state back into the black, it's more likely to be corporation taxes and sales taxes, according to Knittel. He said personal income taxes probably won't provide a game-changer.

"It's very difficult for personal income tax to pick up quickly because it depends on labor market conditions - hiring," Knittel said. "But for corporate income there have been times where we've received an unexpected large amount of revenues that were unanticipated."

There's reason to hold out some hope for a turnaround. Knittel said it appears the harsh winter is at least partly to blame for lower than expected sales tax revenues, which could rebound with warmer weather. In addition, the state typically collects a large amount of its tax revenues in March and April.

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