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Economic Outlook for PA Supports Historic Investments in Governor Shapiro’s Budget Proposal

02/09/2024

Governor Shapiro’s vision maintains a balanced budget and does not raise taxes — and even if every initiative is funded, Pennsylvania will still have an $11 billion surplus by the end of FY 2024-25​

Harrisburg, PA — After Governor Josh Shapiro earlier this week introduced his budget proposal for the 2024-25 Fiscal Year, the Department of Revenue is reporting that the Commonwealth’s current economic outlook supports the Governor’s bold vision of making historic investments in several critical areas to create opportunity for all Pennsylvanians.

“Our revenue collections for the current fiscal year are right on estimate, which is a great place to be in as budget negotiations get underway. We’re also seeing many positives with specific tax collections that bode well for the future,” said Secretary of Revenue Pat Browne. “At the same time, many economic forecasters who were predicting the U.S. economy to fall into a recession have shifted their viewpoints and now have much more optimistic outlooks. This is all positive news that reinforces the fact that now is the time to act on the important investments Governor Shapiro is proposing.”

“Governor Shapiro’s sound fiscal management during our first year in office is saving the Commonwealth and our taxpayers millions of dollars,” said Secretary of the Budget Uri Monson. “Thanks to our responsible budgetary practices, we have an opportunity to invest in things like education, economic development, and safer communities while continuing to keep the Commonwealth on a sound fiscal trajectory. Under the Governor’s leadership, we will continue to work to set the Commonwealth up for long-term financial success.”

Revenue Collections Strong Through January 2024

The Department of Revenue (DOR) recently reported that the Commonwealth collected $3.9 billion in General Fund revenue in January, which was $74.6 million, or 1.9 percent, more than anticipated. That leaves fiscal year-to-date revenue collections totaling $23.8 billion, which is $6.6 million above estimate — nearly exactly on DOR’s projections.

Reserves & Rainy Day Fund

The Commonwealth is projected to have a total budget surplus of $14 billion at the close of June 2024. This sum factors in federal funding received during the COVID-19 pandemic and nearly $7.2 billion in the Rainy Day Fund.

Even if every one of the initiatives in the Governor’s budget is fully funded, Pennsylvania will still have an $11 billion surplus by the end of Fiscal Year 2024-25. This is on top of the fact that the Governor’s vision maintains a balanced budget and does not raise taxes.

‘Soft Landing’ Appears Likely

At one point, as interest rates were increasing and other economic pressures were impacting the U.S. economy, many economic forecasters were raising the possibility of the economy falling into a recession. Instead, the economy appears to be trending toward the “soft landing” that the Federal Reserve has sought, bringing inflation under control while tightening monetary policy.

The brighter outlook is largely due to the strength of the U.S. economy, which grew at an annual rate of 3.1 percent in the fourth quarter of 2023. This is a factor that bodes well for future revenue collections in Pennsylvania. For example, sales tax collections — one of the Commonwealth’s largest revenue sources — are expected to continue growing in Fiscal Year 24-25.

Credit Rating Bump the Result of Shapiro Administration’s Sound Fiscal Management

Governor Shapiro recently announced that Fitch Ratings has upgraded Pennsylvania’s credit rating to ‘AA’ from ‘AA-,’ building on positive credit rating outlooks from Moody’s and S&P’s Global Ratings. This fiscal progress is the result of a growing economy, balanced 2023-24 budget, and responsible financial management by the Shapiro Administration since taking office.

This welcome news comes at a time when Pennsylvania is not investing at the levels it needs to succeed — from being 49th in the nation in state investment in higher education, to being outspent on economic development by many of our neighboring states, to maintaining an unconstitutional funding system for K-12 education. Governor Shapiro believes this is unacceptable — and inaction is not an option.

This is why the Governor’s vision prioritizes economic opportunity and access to higher education while making historic investments in public education. Coupled with the continuing reduction of the Corporate Net Income Tax (CNIT), these strategies will help address projected demographic trends and position the Commonwealth for future success.

Media Contact: Jeffrey Johnson, ra-press@pa.gov

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