Key Takeaways from House Appropriations Hearings

HARRISBURG – Today the House Appropriations Committee held its first day of budget hearings. The committee heard from the Department of Revenue, the Independent Fiscal Office (IFO) and the Department of Aging. Here are the key takeaways from the day:

The Department of Revenue struggled to explain why the governor’s revenue estimates are $762 million higher than the IFO’s estimates in FY2022-23 and cumulatively $5 billion higher than the IFO’s estimates over the next 5 years:

• The governor’s estimate for sales tax collections alone is more than $1 billion higher than the IFO’s.  The governor assumes a 2.8% growth in sales tax, despite the fact that IHS Markit data predicts a 0.5% decline in the purchase of durable goods next year.
• The governor’s sales tax estimates for the next 5 years assume compound annual growth of 4.2%, while the IFO estimates 1.8% for the same period and IHS Markit data for PA consumer expenditures on durable goods shows an annual growth rate of 0.2% for the same period.

Chairman Stan Saylor (R-York) told the Secretary of Revenue that he needs to go back and rework their numbers:

• Saylor followed up by saying this budget would force the next governor to raise taxes or cut services for seniors and the disabled in the very next year.  See his comments here. 
 

Matt Knittel, Director of the IFO, confirmed that their sales tax estimate is $1 billion less than what the Governor projects:

• Director Knittel confirmed that they stand by their revenue estimate and referred to the governor’s estimate as “optimistic”.
• Rep. Clint Owlett (R-Tioga) discussed the impact of federal stimulus payments and the resulting increase in durable good purchases.  Director Knittel said that resulted in a one time influx of $600 million in sales tax receipts.
• When asked by Owlett what would happen if we accepted the governor’s revenue numbers and proposed spending plan, Knittel highlighted the $1 billion difference in sales tax revenue estimates and described the IFO estimate as “a partial reversion back to normality.” He also described the temporary influx of $120 billion in federal stimulus monies and the loss of increased purchases in durable goods leading to a 3% retraction in sales tax projections.  He concluded, “the $120 billion of federal stimulus is just massive, and it’s no longer there.” Watch the full exchange here.