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Pa. budget lags projections by 7 percent in Oct.

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By Associated Press October 31, 2008

Last updated: Saturday, November 1, 2008 9:29 AM EDT

HARRISBURG — Stock market volatility pummeled Pennsylvania’s state government as the pace of a growing budget gap widened at a much faster rate in October, state officials said Friday.

Revenues for the four-month-old fiscal year fell to $565 million, or 7 percent, below expectations in October, according to the state Revenue Department. That means that the shortfall that grew to $281 million during the first three months of the fiscal year — July through September — doubled in October.

Pennsylvania’s revenue secretary, Tom Wolf, said more than half of the October shortfall can be traced to losses that the state treasury suffered in the stock market decline.

“Just as individuals are experiencing drastically lower returns on investments in these tough economic times, so, too, is the commonwealth,” Wolf said in a statement.

So far this year, the state has collected $7.4 billion for its main account — which is even behind collections of $7.8 billion at this point a year ago.

Of the state’s major revenue sources, collections of sales taxes are 3 percent behind, personal income taxes are 2 percent behind and corporation taxes are a whopping 14 percent behind.

The 7 percent shortfall, if projected over a full year, would tear a $2 billion hole in the state’s $28.3 billion budget approved in July.

On Thursday, Gov. Ed Rendell outlined $311 million in potential spending cuts, which were in the works since early September as the nation’s economic troubles deepened.

The biggest reductions are in social assistance programs, education spending, economic development incentives and prisons, but a spokesman for the Democratic governor said layoffs were not anticipated. Still, Rendell has frozen hiring and pressed state agencies that are not under his control to reduce their spending, as well.

Senate Majority Leader Dominic Pileggi, R-Delaware, said this week that deeper spending cuts are necessary — even with a “rainy day” budget reserve of almost $750 million.