|Posted:||June 3, 2019 10:05 AM|
|From:||Representative Kerry A. Benninghoff|
|To:||All House members|
|Subject:||Strengthening the Rainy Day Fund|
|For the first time in over a decade, last year, we put $22 million into the state’s Rainy Day Fund (Budget Stabilization Reserve Fund), something Republicans and Democrats both touted as a turning point for the Commonwealth’s finances.
However, despite that responsible financial decision, the Commonwealth’s “savings account” is far from prepared to shield Pennsylvanians from significant tax increases or serious budget cuts when the next economic recession hits. And despite recent news that revenues are up due to a thriving economy, an economic recession will hit eventually.
Current law requires us to tuck away 25% of a fiscal year’s ending balance into the Budget Stabilization Reserve Fund. While this is a good starting point, it will not be enough to build the balance of the fund back to the recommended target of 6% of the General Fund receipts. More can and should be done.
To better ensure the Commonwealth is responsibly planning and preparing for the future, I am introducing a bill to require a portion of the annual increase in non-withholding personal income tax collections be deposited in the Budget Stabilization Reserve Fund. If you aren’t familiar, this is an unpredictable revenue source that is very sensitive to ups and downs in the economy, making it a not-so-wise revenue source to dedicate to critical line items, but a great revenue source to pump into our savings during times of economic boom.
Following best practices identified by The Pew Charitable Trusts as part of its study on how other states have rebuilt their Rainy Day Funds after the Great Recession, this strategy will help rebuild the fund and help us avoid the trap of using one-time spikes in revenues to set an unsustainable budget baseline.
I look forward to working with you on this important legislation.
Introduced as HB1927