HARRISBURG - State revenues from taxes are lagging hundreds of millions of dollars behind projections, a growing problem that could stoke a new round of budget battles and tough decisions in coming months, legislative analysts say.
Gov. Corbett's administration is set to release its April revenue totals Thursday, but lawmakers this week have been gearing up for grim news.
Miriam Fox, a top aide to the ranking Democrat on the House Appropriations Committee, said she expected the report would reveal a year-to-date shortfall of at least $500 million, potentially pushing the state's funding gap over $1 billion.
"This is a precariously situated budget," said Fox, who receives regular updates on revenue collections. "Any additional losses are problematic."
The numbers could have immediate and longer impact.
In his $29.4 billion budget proposal in February, Corbett promised $400 million in additional education funds next year - based in large part on strong tax receipts, one-time transfers of funds, and delaying pension and Medicaid payments.
If those receipts fall short, the months ahead may mean new rounds of cuts or the prospect of raising taxes - a move lawmakers are extremely reluctant to make in an election year.
Corbett spokesman Jay Pagni on Wednesday said the administration would withhold comment on the revenue picture until the numbers were released. But he said Pennsylvania was facing shortfalls similar to other states, attributed in part to changes in federal tax policy.
"We recognize the potential exists for lower-than-expected revenues," said Pagni.
A deficit problem could pose a significant hurdle to budget negotiators in the next two months, and then reverberate through the fall, when the governor, all 203 members of the House, and half the Senate are up for reelection.
Corbett already made deep cuts in education when he took office in 2011, which he said were necessary because of the shortfall left by the dried-up stimulus funds used in the last year of the Rendell administration.
In the years since, Corbett has tried to stabilize funding while holding the line on budget increases - an argument he hopes will sway voters to give him a second term in November.
But lawmakers are likely to be loath to cut funding and many - especially Republicans running on no-new-tax pledges - will resist any tax increases.
Sen. Jake Corman (R., Centre), chairman of the Appropriations Committee, agreed with Democratic analysts on the bleak projections ahead.
He said the legislature would have to "adjust budget projections to the revenue we have," and criticized the Democrats' tax proposals as ineffective.
Democratic leaders in the House and Senate contend the administration and the Republican-led legislature are leaving money on the table by not expanding Medicaid - which would bring in hundreds of millions in federal funds - or imposing a natural gas severance tax, and continuing corporate tax cuts that help the wealthy.
"I think we've been in a crisis already," said Sen. Vincent Hughes (D., Phila.), the ranking Democrat on the Appropriations Committee. "What we're seeing is a manifestation of budget mismanagement and misplaced priorities. The only people who have benefited from Gov. Corbett's administration are the wealthiest corporations."
Corbett rejected Medicaid expansion, saying the state could not afford future costs. Instead, he offered an alternative to provide health care to 500,000 low-income Pennsylvanians by using federal money to pay private insurers. But that plan has yet to be approved by the Department of Health and Human Services.
Pagni said he would not address specific proposals but appeared to leave the door open to new revenue options.
"The reality remains, by working together we can develop a budget that is balanced and meets the needs of Pennsylvanians," he said. "Over the next several months, different types of ideas will be suggested, some will be embraced, others not."
Democrats say Corbett may have painted himself and the legislature into a corner by leaving no room for new cuts and remaining opposed to new revenues.
Pagni said the legislature needed to act on long-term solutions such as pension reform.
"There are fiscal pressures and legislative solutions that need to be addressed when contemplating the budget, and pension reform is one of them," he said. "The contribution costs are affecting the ability to fund programs and services."
House Republican spokesman Steve Miskin said the lower chamber was prepared to deliver pension legislation this spring that could lead to savings.
Corman said that unless growth in expenditures was checked, the budget could balloon to $40 billion in coming years.
"I want to make investments in higher ed, in education, tourism, and infrastructure, but I can't because other areas [health care, pensions, prisons] are growing," he said. "We're out of tricks to make room for them."