No Worries

Pennsylvania collected substantially less tax revenue than expected for the month of May.

Of course, Governor Rendell's office assured everyone that the declining revenues do not represent a noteworthy trend and stated that revenues fluctuate on a month-to-month basis.

However, as the Patriot-News reports:

"March's collections were down by 2.7 percent. May's collections were off by 7.2 percent. With the exception of the inheritance tax, all the major tax sources came in below estimates in May. More than one tax category has been known to come in below estimates before. But six of the seven major taxes collected are not all down during a typical month.

If the tax revenues continue to fall short, lawmakers would have to make up the difference. They would have three options: Draw down reserves, cut spending and services, or raise taxes."

Specifically:

• The sales tax came in $5.6 million below estimate.

• The personal income tax came in $97.9 million below estimate.

• The corporate tax came in $31.5 million below estimate.

• The realty transfer tax came in $1.8 million less than expected.

• The cigarette and malt beverage taxes came in $18.2 million below estimates.

• The motor license fund generated $15.2 million less than estimated.

The month of May represents only the fourth time in two years that revenues failed to meet expectations, but it was also the most severe imbalance. This certainly signals the downturn in the economy, but also that the Governor's expected surplus of $250 million will be unattainable.

This should strengthen the Republicans' hand in budget negotiations this week because it exemplifies everything the Republicans have been saying for the past few weeks: not to go hog wild on spending because the generated revenue may not be there to cover it.

May the today's Editorial in the Sun-Gazette sums it up best:

"Every governor should be responsible enough to send to the Legislature a budget proposal that, at the most, is equal to the rate of inflation. This governor does it the opposite. His everything-but-the-kitchen sink proposal amounts to a state government spending spree that taxpayers can't afford."