New Pennsylvania Gov may inherit $5 billion budget gap
NEW YORK (Reuters) - Pennsylvania's next governor could inherit a budget gap of as much as $5 billion as federal stimulus ends and pension costs rise, the state auditor general said on Wednesday.
Another problem is the $3 billion Pennsylvania is expected to owe the federal government for unemployment payments, according to a statement by Auditor General Jack Wagner.
Saying this could be "one of the greatest fiscal crises in state history," Wagner said Pennsylvania might have to slash its fiscal 2012 budget to $24 billion, a $4 billion cut from the current budget.
Almost all U.S. states are likely to struggle to balance their budgets next year because they depended heavily on federal stimulus dollars. That support to revive the national economy ends this year.
Pennsylvania stands to lose $2.5 billion of these federal dollars and its pension costs will rise at least $800 million, Wagner estimated.
Saying he opposed raising taxes during a recession, Wagner blamed what he called Pennsylvania's financial crisis on "years of fiscal sloth." Politicians increased the size of the state's budget by 33.5 percent from fiscal 2004 to 2010, he said.
"Tax revenues for the first two months of this year show that the economy has stabilized, but there are no indications that we're going to grow our way out of this hole," said Wagner, who will propose various budget remedies in the next several weeks.
A successor to Democratic Governor Ed Rendell, who is now finishing his second and final term, will be chosen on November 2 when voters elect either Republican Attorney General Tom Corbett or Democratic Allegheny County Executive Dan Onorato.
Corbett has just a three-point lead over his Democratic rival, according to a Franklin & Marshall College Poll issued on Wednesday. That is within the 3.6 percentage point margin of error for the September 20 to 26 survey.
The poll by the Lancaster, Pennsylvania-based college of 606 voters found that 33 percent of them backed Corbett, 30 percent supported Onorato while 37 percent were undecided.
The Republican candidate says he wants to improve Pennsylvania's ability to control costs by switching to two-year budgets from one-year accords. He would require agencies to meet performance standards and sunset new boards and commissions after five years.
The Democratic candidate for governor, who says struggling Western Pennsylvania became a "hub for 21st century jobs" under his leadership, wants to "curb the power of special interests," impose term limits on legislators and reduce their number.
(Reporting by Joan Gralla; Editing by Andrew Hay)