Newspaper: Revenue dip raises red flags for PA

I first wrote about the $117 million budget deficit Pennsylvania showed at the end of August last Friday, but it's worth reinforcing the red ink hemorrhaging from the 2008-09 Rendell budget. (See PA headed for a deficit?)

The Harrisburg Patriot-News has a story today that says Pennsylvania has failed to meet its monthly tax revenue projections three times since May.

If the trend continues (and there's no indication it won't), Pennsylvania faces three options: Reduce services, raid the state's Rainy Day Fund or raise taxes.

The problem? With the slowdown in the economy, Pennsylvania residents are spending less, which means the government is collecting less in tax revenues, says reporter Sharon Smith.

Since the start of the new fiscal year July 1, Pennsylvania consumers continued to drive less, buy fewer homes, drink and smoke less, work less and buy less in general, the August revenue collections showed, according to Smith.

From Smith's article:

"Is there something to worry about?" asked Joel Naroff, an economist with Commerce Bank. "Yes."

However, the Rendell administration has decided to adopt a "What me, worry?" attitude.

From Smith's article:

"The predictions are for an upswing in the economy in the third quarter, which begins in January," said Chuck Ardo, spokesman for Rendell, a Democrat. "We'll just have to wait and see. It's just too soon to cry wolf."

At what point will Rendell admit that his 2008-09 budget was built on a house of cards? When the budget deficit nears $1 billion?

Read the full article at the newspaper's Web site.