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Local News

A Budget Bump?: Pa. Collected $2.8B in Tax Revenue in February

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by John L. Micek, Pennsylvania Capital-Star
March 3, 2023

Gov. Josh Shapiro will head into his first budget speech next week buoyed by a bit of some fiscal good news: Pennsylvania raked in more tax money in February, and year-to-date collections also are up, according to new state data.

But as the Capital-Star has previously reported, that doesn’t necessarily signal clear sailing in the future. More about that in moment.

The commonwealth collected $2.8 billion in general fund revenue in February, which was $351.8 million, or 14.2%, ahead of projections, acting Revenue Secretary Pat Browne said in a statement.

Year-to-date collections for the budget year that ends June 30 now total $26.1 billion, which is $649.3 million, or 2.6% ahead of estimates, according to the Revenue Department.

Below, a look at collections, broken down by major categories.

Pennsylvania Gov.-elect Josh Shapiro speaks to supporters in Montgomery on Tuesday, 11/8/22 (screen capture)

Sales Taxes: Sales tax collections totaled $1 billion for February, which was $63.1 million above estimate. Year-to-date sales tax collections total $9.4 billion, which was $209.5 million, or 2.3%, more than anticipated, state data showed.

Personal Income Tax: PIT revenue in February totaled $1.2 billion, or $81.2 million above estimate. Year-to-date collections total $10.4 billion, which was $135.4 million, or 1.3%, below estimate.

Corporate Taxes: Collections totaled $303.8 million last month, which was $166.7 million above estimate. Year-to-date corporation tax collections total $3.3 billion, which is $509.2 million, or 18.5%, above estimate, according to the Revenue Department.

Inheritance Taxes: Inheritance tax collections totaled $133.3 million last month, which was $16.3 million above estimate. That brought the year-to-date total to $984.8 million, which is $3.9 million, or 0.4%, ahead of estimates.

Realty Transfer Taxes: Realty transfer tax collections totaled $29.1 million in February,  which was $18.5 million below estimate. That brings the fiscal-year total to $436.5 million, which was $62.3 million, or 12.5%, less than anticipated.

Other: Other general fund tax revenue, including cigarette, malt beverage, liquor and gaming taxes, totaled $149.4 million for the month, which was $8.5 million above estimate. This brought the year-to-date total to $1.2 billion, which was $23.7 million, or 1.9%, below estimate.

The ceiling of the main Rotunda inside Pennsylvania’s Capitol building on Tuesday, May 24, 2022. (Photo by Amanda Berg for the Capital-Star).

Now here’s why the state’s budgetary picture is more complicated than it seems.

(Source: Pa. Independent Fiscal Office)

The state likely will be sitting on a projected budget surplus of more than $8 billion by the time it closes the books on the 2022-23 budget year on June 30, according to a recent report. And if you factor in the state’s Rainy Day Fund savings account, that total approaches something like $13 billion, the data show.

But it’s probably not going to last. In fact, if current trends hold, the commonwealth will be facing cumulative budget deficits totaling nearly $13 billion by fiscal 2027-28, that same research shows.

Last month’s analysis by the Pennsylvania Budget and Policy Center, a progressive think-tank in Harrisburg, suggests a number of causes for that seemingly abrupt shift in the state’s financial fortunes.

Among them, the end of federal stimulus money that fattened the coffers of Pennsylvania and other states during the peak of the COVID-19 pandemic, the flat-funding of scores of state programs in the 2020-21 budget year, and the hole that will be punched in state revenues because of a reduction to Pennsylvania’s corporate tax rate.

“The fiscal status of Pennsylvania is almost paradoxical. We have a huge surplus of more than $13 billion. Yet we are likely to have recurring budget deficits starting next year and critical needs for additional state spending, especially for full and fair funding of K-12 education,” the think-tank’s director, Marc Stier, said in an email.

“The huge surplus creates a temptation for politicians to avoid making hard decisions,” Stier continued. “But it also provides an opportunity to use the surplus and [a] modest addition to revenues now to meet the needs of the state over the long term.”

Lawmakers and the Democratic administration have until midnight on June 30 to deliver a new budget. Shapiro delivers his first budget address to a joint session of the state House and Senate on Tuesday.

Pennsylvania Capital-Star is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Pennsylvania Capital-Star maintains editorial independence. Contact Editor John Micek for questions: info@penncapital-star.com. Follow Pennsylvania Capital-Star on Facebook and Twitter.