April 5, 2010

A key Republican senator predicted Wednesday that Pennsylvania's budget deficit will reach $1 billion by the end of the fiscal year on June 30.

Senate Appropriations Chairman Jake Corman, R-34, Bellefonte, discouraged levying a state severance tax on natural gas production as a way to bridge the growing revenue gap that he forecast based on monthly state tax revenue shortfalls.

"It (natural gas) is the only industry growing jobs," said Corman at a Capitol press conference. "We want to see jobs grow in Pennsylvania."

Corman forecast a $1 billion deficit because state tax revenue shortfalls in March alone will total $278 million, due partly to lower-than-anticipated collections of business taxes.

However, Gov. Ed Rendell and House Democratic lawmakers were quick to challenge Corman's dire forecast. While agreeing on the amount of the March revenue shortfall, Rendell said it is possible April revenue collections will help Pennsylvania reach its goal of a balanced budget. The governor said a cumulative revenue shortfall of $750 million through March will be offset by higher personal income tax collections in the months ahead and unanticipated federal payments to cover the state's costs for providing prescription drug payments to senior citizens on Medicare.

"We are still in better financial shape than any large state in the nation," Rendell said in a prepared statement. "We are prepared to make the necessary cuts and adjustments to balance the budget."

What's giving the administration some optimism is the federal Health and Human Services Department's decision to give Pennsylvania an extra $275 million to cover the prescription drugs costs.

"We are pleased that the federal government has provided us unexpected assistance with our Medicare Part D costs that will help us tremendously," said Budget Secretary Mary Soderberg.

Rendell proposed a $29 billion state budget in February with steps to reconcile a year-end deficit estimate of $525 million. His plan relies on $2.7 billion in federal stimulus aid.

The governor has proposed using revenues from a 5 percent severance tax and a state sales tax overhaul to create a special fund to address a $4 billion spike in public employee pension costs in 2012 and the eventual disappearance of stimulus aid.

Observing that new Marcellus Shale formations have been discovered in Texas and Louisiana, Corman said the natural gas industry can move to other states if it objects to a tax policy.

"There's only so many (drilling) rigs in this country," he added. "They don't have to be in Pennsylvania." The senator said an effort is needed to reduce the budget amount, perhaps through new policies to put non-violent offenders in places other than state prisons.

Source: RepublicanHerald.com