State budget agency projects billion-dollar plus deficits in early 2020’s — and that’s without a recession

Better get used to budget fights.

Pennsylvania’s fiscal watchdog agency is predicting deficits in the hundreds of millions of dollars annually over the next five years — some topping a billion dollars in the early 2020’s.

The Independent Fiscal Office, a state agency tasked with analyzing economic and budgetary data for the General Assembly, predicted that the state would face a $409 million shortfall during next year’s 2019-20 budget.

The 2020-21 and 2021-22 fiscal years would have deficits just under a billion dollars, at $926 and $959 million respectively.

The 2022-23 budget deficit would then peak at $1.33 billion, according to the IFO. The 2023-24 and 2024-25 deficits would decline somewhat, to $1.16 and $1.06 billion, respectively.

At least one legislative Republican took notice on Twitter:

Harrisburg reaction to @ind_fisc_office 5 Year Outlook.

How do people not understand what baseline budgets are? pic.twitter.com/M7WR4vCvM3

— Rep. Seth Grove – “the Architect” (@RepGrove) November 15, 2019

Such deficits could lead to protracted funding fights, like the ones that dominated Gov. Tom Wolf’s first few terms as governor. 

The Democrat faced off with a Republican-controlled General Assembly that boasted large majorities, leading to numerous one-time budgetary moves — such as gambling expansion, partial liquor privatization, and borrowing.

“Although annual state budgets were brought into balance using temporary one-time measures, the underlying structural imbalance remains and is carried forward into future years,” IFO director Matt Knittel said in a press release.

Wolf and legislative Republicans have had relative budget peace for the past two years, passing two on-time spending plans that were buoyed by higher than expected revenue numbers.

The report points to the increasing demand for the state’s services to the elderly, combined with a shrinking labor force of younger adults, which “suggests that real per capita tax levels … must increase to keep pace with the anticipated increase in demand for healthcare and other services.”

Knittel also pointed out that part of the early 2020’s budget spike is a $470 million transfer of state revenue to replace lost transportation dollars coming from the Turnpike. If a solution to the state’s transportation funding woes is reached, the deficits would look a lot smaller.

The IFO added that the projected deficits are a best-case scenario, and do not take into account a potential recession.