Pennsylvania’s surplus could run out with current spending, fiscal watchdog warns

HARRISBURG, Pa. (WHTM) — With a $7 billion surplus and $7 billion in the rainy day fund, Pennsylvania is in the best financial position in its history. Despite the achievement, questions are rising over whether our current spending level is sustainable.

Since signing the state budget, Pennsylvania Governor Josh Shapiro has been celebrating the long-awaited legislation, however, according to a non-partisan independent fiscal office, the state’s current spending levels could mean the surplus could soon be gone.

“We had about $1 billion deficit for the year that we just closed out, but we had some temporary monies in there,” said Matthew Knittel, the Director of the Independent Fiscal Office. “And then once you take those away and you have the extra spending, then it opens up to about $3 or $4 billion.”

Knittel projects this budget spends $3.3 billion more than the state earns this year, and $4.5 billion next year. If this proves to be true, the $7 billion surplus lawmakers worked hard for vanishes in just two years.

“Most of it’s mandatory spending,” Knittel added. “So you have wage contracts in there that have already been agreed to. You have Medicaid spending, things such as that. So a lot of this is not under the control of the legislature or the governor. It’s going to happen. So that’s why we feel pretty good about making these projections one year out.”

Governor Shapiro addressed the concerns about unsustainable spending, saying, “This budget transfers an additional $700 million into the rainy day fund and this budget will have around $14 billion still in surplus.”

Projections say this may not be true for long. Taxing and regulating skills games and adult-use marijuana would boost the bottom line by raising revenue. Republicans are warning of a tax hike possibly occurring to cover the spending.

“I do not anticipate, nor will we be supporting a tax increase next year,” said State Senate Minority Leader Jay Costa (D). “You just simply can’t figure out exactly where things are going to be, where our economy is going to be a year out of two years out, three years out.”

To Senator Costa’s point, it’s true we missed the last couple of years, [as they] were really difficult to predict,” Knittel conceded. “But it’s not difficult now.”

The Independent Fiscal Office, by law, must present its comprehensive, five-year budget projections by November 15.

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