Pa.’s revenues take another coronavirus blow in May, falling $440 million short of expectations

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HARRISBURG — Pennsylvania’s tax revenues dropped 17% below official estimates in May, new figures from the state Department of Revenue show, as the economic fallout from the coronavirus continues to wreak havoc on the state’s finances.

Just over half of the roughly $440 million shortfall was due to the economic slowdown caused by efforts to contain the outbreak. The rest represents revenues that have been delayed due to the extension of several tax deadlines, and which the state expects to collect later in the summer.

The deadline for paying personal income tax has been pushed back from April to July, shifting more than $1 billion of revenue into the next fiscal year. The shifts mean that a clearer picture of the pandemic’s effect on the state’s finances won’t emerge until later in the year, Revenue Secretary Daniel Hassell said in a news release.

Revenues from sales taxes have taken a hit since March, when Gov. Tom Wolf ordered all but “life-sustaining” businesses to cease their physical operations in an effort to slow the spread of the virus, and urged Pennsylvanians to stay home.

The uncertainty around how badly the state’s bottom line will be affected prompted lawmakers last week to swiftly pass a stopgap budget that provides five months of flat funding for most state agencies, and school funding for a full year.

Wolf signed the measure Friday.

The federal CARES Act has poured an estimated $78 billion into the state through various programs, including one-time stimulus checks, small business loans, and expanded unemployment benefits.

This has temporarily cushioned the blow to state tax revenues, Matthew Knittel, director of the state’s Independent Fiscal Office, said last week. It might also have created a “temporary bubble” in the economy that could burst when many of the federal relief efforts expire later in the summer.

For its part, the Wolf administration has received $3.9 billion in federal stimulus dollars to dole out as it sees fit to respond to the outbreak. The governor last week signed off on a plan for $2.6 billion of that funding, with relief programs for nursing homes, small businesses, and local governments.

Under current rules, that money can’t be used to make up for lost revenues, though there are hopes that the federal government will give states more flexibility, or that Congress will approve another stimulus package targeted at ailing state and local budgets.

With the prospects for more federal funding uncertain, however, lawmakers will likely face difficult decisions when they tackle the budget for the rest of the year. The fiscal office estimates that Pennsylvania will permanently lose almost $5 billion in revenues through next June — a forecast Knittel said nonetheless “leans optimistic.”

Even as counties across the state move into the “yellow” and “green” phases of Wolf’s reopening plan, under which restrictions on businesses are eased, the prospects for economic recovery remain uncertain.

People may avoid congregating in shops, gyms, and restaurants, even with social-distancing safeguards in place. It’s also unclear how many people will be able to return to work and how many jobs have been permanently lost.

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