State General Fund Revenues Take a Hit from Shutdown

Summary of Study

Bottom Line:  Difficult decisions must be made in response to a dramatic drop in the state's general fund revenues.

Over the first five months of 2020, general fund revenues are down about $2.55 billion compared to 2019. The largest component of general fund revenue is the personal income tax. The drop over the first five months in 2020 is about $1.37 billion—more than half of the total general fund shortfall.

Since personal income tax collections in 2020 are based on 2019 incomes, most of this shortfall, if not all, should be recovered as the new tax deadline of July 15 approaches.

The worry will be for fiscal 2021 as many non-essential businesses were closed for most of three months and more than 1 million Pennsylvania workers were furloughed.

Sales and use tax revenue, the state’s second largest general fund revenue source, was affected more immediately. After a strong January and February, March’s results were slightly higher.  April and May both had decreases of 35 and 26 percent below last year’s level. 

A large share of this revenue will be unrecoverable this year as it is unlikely consumers will increase spending enough beyond normal levels to make up the loss. Now is the time for the state to look at changing the way it operates—to cut unnecessary spending and reduce personnel counts, to lower taxes and reduce regulations to help businesses get back on their feet, and to encourage them to add employees to payrolls.

Read the full policy brief here

Feature Charticle

Allegheny Institute for Public Policy

 

Findings:

  • General fund revenues are down about $2.55 billion compared to 2019.
  • The drop over the first 5 months in 2020 is about $1.37 billion—more than half of the total general fund shortfall.

Read the full policy brief here