Already, state revenues are running $89 million below projections, according to a Budget Office report released last week. The economy has been slow to rebound from recession, and the stock market is gyrating. Forecasters also worry about war with Iraq.
"It's grim," said Mary Soderberg, executive director for the Democratic minority on the House Appropriations Committee. "I'm not joking. It's going to be grim."
Even before the economy is factored in, Soderberg and other officials say, next year's budget will likely have to be built without the measures that helped the state balance the last two spending plans. Those included a $1 billion withdrawal from the rainy-day reserve fund; $280 million from refinancing industrial-development bonds; and $181.8 million in unspent tobacco-settlement money that had been earmarked for new health programs.
Preliminary preparations for next year's budget are already under way, and state agencies have been ordered to keep spending flat, Budget Secretary Robert Bittenbender said. Unless the economy heads into another recession, the budget should be balanced for this fiscal year, which ends in June, he said.
After that, uncertainty. The new governor will have about six weeks from inauguration to prepare his first budget.
"If the new administration comes in and is prepared to be restrained in spending, I think that it is a very manageable situation," Bittenbender said. "If the new administration comes in committed to raising spending by 4 or 5 percent, I would suspect that revenues will not be available."
Rendell has said he would delay much of his education agenda to avoid digging a deeper budget hole. But he has not backed away from his promise to have the state immediately shoulder 50 percent of the cost of public schools. The price tag: $1.56 billion.
