Pa.’s 2020 budget could be up to $1.8 billion short because of COVID-19 business closings

Pennsylvania could lose as much as $4 billion in tax revenues over the next 15 months due to the coronavirus-related economic shutdowns, according to estimates published by a state agency.

The Independent Fiscal Office, which analyzes Pennsylvania budgets and policies, estimated that state coffers will be between $2.7 to $3.9 billion short of expectations as businesses close and workers lose jobs to fight the spread of COVID-19.

Between $1.3 to $1.8 billion of that impact could hit before the state closes its books on the 2019-20 fiscal year on June 30, the IFO projected.

The lower number is based on business closings  lasting for six weeks, until April 27. The higher number is an estimate if business closures last for 10 weeks, until May 20.

Pa. tax revenues were down in March, as officials brace for bigger future hit from COVID-19 

Gov. Tom Wolf, who ordered all non-“life-sustaining” businesses to close on March 19, extended his shutdown order until at least April 30. A University of Washington study estimates Pennsylvania’s coronavirus outbreak will peak on April 13.

The IFO’s projections do not take into account federal stimulus money, which could add between $400 million to $500 million to the state treasury.

The IFO’s projects that 1.1 million workers will be affected by business closings. 

But other projections say that is half of the potential impact, while 1.2 million Pennsylvanians have already applied for unemployment benefits, according to state data.

Capitol observers have noted that the fiscal repercussions of COVID-19 will likely make this year’s state budget a trickier negotiation than usual.

This came after strong revenue numbers led to two, straight on-time state budgets in 2018 and 2019, featuring little friction between Wolf and legislative Republicans.

But smooth budget sailing is a new phenomenon for Wolf, who faced drawn out fiscal standoffs in his first years in office.

Wolf’s 2020 budget proposal, released in early February, called for $36 billion in spending, a $1.4 billion increase. At the time, Republicans were already skeptical. 

The administration has not yet said whether it intends to go back and adjust its spending plan.

“The estimates for the current year have all fallen to pieces,” Wolf said in an April 6 video press briefing. 

He added that he was working with the Legislature to adjust to “greatly altered circumstances.”

The state has limited fiscal reserves, totaling just $340 million as of last summer. That’s about half a percent of Wolf’s 2020 budget proposal.

The IFO will release new estimates in mid-May.