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December 5, 2012

Cost increases are proving tough challenge for budget

HARRISBURG — Figuring out next year’s state budget may be the Corbett administration’s toughest balancing act yet.

While facing unavoidable personnel cost increases and potential federal cuts, the state is promising taxpayers it will not increase general fund taxes or create new ones.

Pennsylvania Budget Secretary Charles Zogby said Wednesday that while the state is not ready to announce a spending figure for next year, it knows it has to come up with at least half a billion dollars.

Known cost increases for next year tally around $1.3 million, though the administration estimates it will have $813,000, or 3 percent growth, in revenue.

“In an environment where you’re not raising taxes, not generating more revenue, the dynamic of this is that you have to go back into the general fund to find half a billion dollars in savings to come out at level,” Zogby said.

Around $511 million of those cost increases is pension costs, with another $650 million coming from medical-assistance costs.

Past budgets already saw “cost containment” in many departments, meaning spending the same or less than previous years. Given that, Zogby said the 2013-2014 budget will be much more difficult than the previous two.

The state has asked departments to prepare budget proposals that keep spending flat, which equals nearly 8 percent in cuts across the board in order to compensate for increased personnel costs.

“Most of the folks that come through my door aren’t asking me for less,” Zogby said.

“I think in many respects the (2013-2014) budget is going to be the most difficult budget that we’ve had thus far in what have been two very difficult budgets.”

Zogby acknowledged that this reality may result in more layoffs. The state’s workforce has shrunk by about 1,800 workers in Gov. Tom Corbett’s administration, Zogby said.

The state also has told departments it will not make up for any federal dollars that departments lose.

“We’re simply not going to be in a position to just simply backfill federal dollars,” he said.

But this rule of thumb becomes murky considering the so-called “fiscal cliff.”

If congressional leaders in Washington, D.C., fail to make a deal, around $300 million in federal cuts would slice through Pennsylvania programs, including social services block grants and special education funding.

Zogby said there may be exceptions based on what happens.

Come spring, when the state knows what lawmakers in Washington have done, “there may be decisions made in individual areas to break from that general rule,” Zogby said.

The bottom line, though, is that the state won’t fill in any lost federal dollars.

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