Will plummeting retail sales deal another blow to Pa.’s bottom line? | Thursday Morning Coffee

April 16, 2020 7:11 am

RICHMOND, CALIFORNIA – MARCH 13: A Costco customer stands by his two shopping carts at a Costco store on March 13, 2020 in Richmond, California. Some Americans are stocking up on food, toilet paper, water and other items after the World Health Organization (WHO) declared Coronavirus (COVID-19) a pandemic. (Photo by Justin Sullivan/Getty Images)

Good Thursday Morning, Fellow Seekers. 

Already facing a grim spring from the public health toll of the COVID-19 pandemic, Pennsylvania’s budget picture got a bit more bleak on Wednesday with the news that retail sales were down sharply in March, dealing a blow to sales tax collections.

Retail sales dropped 8.7 percent last month, according to U.S. Commerce Department data, marking the biggest drop since the government started tracking the data in 1992, Reuters reported. The news service noted that the economists it had interviewed had forecast retail sales dropping by 8 percent in March. Compared against March 2019, retail sales slipped 6.2 percent, Reuters reported.

The drop will further darken budget pictures for states, including Pennsylvania, that are already dealing with reduced tax revenues. “The sharp drop in retail spending … poses significant challenges for state budgets. General sales taxes raise nearly a third of all state tax revenues nationally, and are the largest tax revenue source in 15 of the 45 states that collect them,” Mark Robyn, the senior officer for state fiscal health at The Pew Charitable Trusts, said in a statement. “They are particularly crucial for six states where they accounted for more than half of all tax collections (as of fiscal 2018): Florida, Nevada, South Dakota, Tennessee, Texas, and Washington.”

Pa. Health Secretary Dr. Rachel Levine during a briefing on Tuesday, 4/14/20 (screen capture)

In Pennsylvania, revenue collections came in 6.2 percent behind projections last month, as officials braced for April being the proverbial cruelest month for tax collections. Sales tax collections were included in that tally, coming in $24.2 million below estimates, according to state Revenue Department data.

Historically, “sales taxes have provided a relatively stable source of tax revenue for states, helping to smooth out the ups and downs from taxing more volatile economic activity such as capital gains, corporate income, or oil extraction,” Pew’s Robyn said, noting that the drop in “retail spending illustrates one more way the pandemic poses a new challenge for state leaders attempting to stabilize their budgets.”

Last week, Pennsylvania’s Independent Fiscal Office, which provides nonpartisan analysis of state spending and policy, 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 the pandemic, the Capital-Star’s Stephen Caruso reported.

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, Caruso reported.

Heeding the complaints of business leaders, Republican leaders in the General Assembly are moving legislation aimed at reopening the state. The Senate gave final approval Wednesday to a bill that would align state business closings to federal rules, effectively undoing the Wolf administration’s business shutdown orders.

A second bill creating a COVID-19 task force won Senate approval, but still requires a vote by the House.

Wolf, joined by state Health Secretary Rachel Levine, has warned against reopening the state too early. The bills are headed for a guaranteed gubernatorial veto.

Through midday Wednesday, Pennsylvania had 26,490 confirmed COVID-19 cases and 647 confirmed fatalities.

The Pennsylvania Capitol building. (Capital-Star photo by Sarah Anne Hughes)

Our Stuff.
Elizabeth Hardison
 has the details on that round of party-line Senate votes, which came after four hours of virtual session on Wednesday. The bills are headed for a guaranteed gubernatorial veto.

It was a busy day on Capitol Hill — even if Congress wasn’t in session: U.S. Sen. Bob Casey, D-Pa., and Rep. Mary Gay Scanlon, D-5th Districtcalled for fairer distribution of COVID-19 relief moneyCorrespondent Hannah McDonald reports. And Democratic U.S. Reps. Susan Wild and Chrissy Houlahan pushed for the reopening of Obamacare exchanges so that people without coverage in the pandemic can purchase it.

The Wolf administration has ordered all essential businesses to require employees and customers to wear face masks. The order took effect Wednesday. Enforcement starts this weekend, Correspondent Kim Lyons reports.

Elizabeth Hardison also has the story of Pennsylvania’s first prison COVID-19 fatality — he was working on proving his innocence when he died.

On our Commentary Page this morning, former Elizabethtown College professor Jill Sunday Bartoli, of Carlisle, says we’re right to be worried about racial disparities in COVID-19 transmission — now what are we going to do to address those disparities? And Mansfield University political scientist Jonathan C. Rothermel says the most all-American thing Washington can do right now is protect American workers.

Gov. Tom Wolf delivers a daily press briefing Monday, April 6. (Screen capture)

Republican lawmakers don’t have the votes to override a likely gubernatorial veto of business-reopening bills that are headed for Gov. Tom Wolf’s desk, the Inquirer reports.
The Post-Gazette looks at the state’s ‘balky’ online system for selling liquor and wine.
A Bethlehem man talks to the Morning Call about what it was like to spend eight days on a ventilator.

Here’s your #Pennsylvania Instagram of the Day:

At least for now, tech jobs are essential during the pandemicWHYY-FM reports.
Fifty students at Susquenhanna University are on the air at the student radio station to keep the community informed, WITF-FM reports. explains how your unemployment call might be answered by the National Guard.
With Congress deadlocked, a small business loan fund is almost depletedPolitico reports.

What Goes On.
Time TBD:
 Daily COVID-19 briefing.

You Say It’s Your Birthday Dept.
Best wishes go out this morning to veteran Harrisburg PR hand Jeanette Krebs, who celebrates today. Congrats and enjoy the day.

Heavy Rotation.
Well if we can’t go to the beach — might as well bring the beach to us. Here’s a whole playlist of the Top Summer Hits of the 1990s.

Thursday’s Gratuitous Baseball Link.
Speaking of which, runs down the 30 greatest players of the 1990s.

And now you’re up to date.

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John L. Micek

A three-decade veteran of the news business, John L. Micek is the Pennsylvania Capital-Star's former Editor-in-Chief.