As Pennsylvania closed out the year, its state revenues remained strong, beating out both estimates and last year’s performance.
The budget remains fiscally sound, with revenues outpacing spending and a budget surplus, but future labor problems may mean the present situation won’t continue into the future.
The latest revenue update for December from the Independent Fiscal Office noted that money into the General Fund was $4.04 billion. That's above the IFO's estimate by about $430 million, or 12%.
Compared to December 2021, collections were up by $196 million, a 5% increase.
For the fiscal year to date, the commonwealth is $1.16 billion (6.3%) above estimates.
The above-average revenues in December isn’t necessarily a sign of a significant economic boost. Instead, as the Department of Revenue carried out a tax modernization project, about $200 million that would have been counted in November was shifted to December’s revenues.
As The Center Square previously reported, November collections came in below expectations due to that shift.
“Going into 2023, Pennsylvania is in a strong fiscal position,” Gov. Tom Wolf said in a press release. “Year to date, we are 2.6% above our estimated revenue collections, which means we have $503.1 million in the bank above and beyond what we expected. That’s money that can be used to better support the people of Pennsylvania in the coming year, and I look forward to seeing what the new administration and the General Assembly will accomplish on behalf of Pennsylvanians.”
Personal income tax revenues had the biggest boost above estimates, with the Department collecting an extra $206 million more than expected. Corporate net income tax revenues were also up by $139 million above estimates.
While current numbers are strong, the IFO has also warned of a shrinking Pennsylvania labor force as a threat to the budget surplus. While unemployment is low and the state has an “extraordinarily tight” labor market, the long-term decline in the labor force participation rate means that state spending is expected to outpace state revenue.
As an aging population puts pressure on state services, the IFO expects state spending to increase, but tax revenues to fall behind, eating into the budget surplus, which was $6.7 billion in November.
See also:
November Tax Revenues Down for Pennsylvania, But Still $700M Above Estimate
