|Posted:||March 5, 2021 01:57 PM|
|From:||Representative Robert W. Mercuri|
|To:||All House members|
|Subject:||Strengthening Pennsylvania’s Fiscal Discipline|
|Some progress has been made in recent legislative sessions to rebuild the reserves of the Budget Stabilization Reserve Fund, more commonly referred to as the “Rainy Day Fund.”
One lesson that we’ve learned from the ongoing pandemic is that we need to ensure there are resources put aside for unforeseeable events, whether it be a recession, a pandemic or some other kind of emergency. If we do not have adequate funds set aside, the result could be a significant tax increase or major budget cuts, neither of which are desirable.
Current law requires the state legislature to tuck away 25 percent of a fiscal year’s ending balance into the Rainy Day Fund, and while this is certainly a good starting point, it will not be enough to build the balance of the fund back to the recommended target of 6 percent of the General Fund receipts.
In an effort to better ensure the Commonwealth is responsibly planning and preparing for the future, I will be introducing a package of bills that will strengthen the reserves of our Rainy Day Fund. A brief description of each bill that comprises this package can be found below. This legislative package follows 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.
On the heels of this global pandemic, we have a prime opportunity to enact enhanced state fiscal measures, such as the mandated allocation of tax surpluses, that will result in a better future budgetary position when most needed by ourselves or future generations of Pennsylvanians. As such, I hope you will join me in cosponsoring this important legislative package.
Introduced as HB799
|Description:||Deposit of Increases in Non-Withholding Personal Income Tax Collections
House Bill 799 will require a portion of the annual increase in non-withholding personal income tax collections be deposited in the Budget Stabilization Reserve Fund. This is an unpredictable revenue source that is very sensitive to turns 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
Introduced as HB800
|Description:||Deposit of Proceeds from the Sale of Commonwealth Assets
House Bill 800 will direct all money received from the sale of Commonwealth assets, which would otherwise be deposited in the General Fund, into the Rainy Day Fund. This would include the sale of real property and surplus property.
Introduced as HB801
|Description:||Deposit of Increases of Inheritance Tax Collections
House Bill 801 will require the deposit of any increase in inheritance tax collections from the previous fiscal year into the Rainy Day Fund. Similar to non-withholding personal income tax collections, the inheritance tax can be a volatile revenue source, and as such, the legislature cannot count on each year’s growth continuing into the next fiscal year. The additional deposits can serve as a hedge against a reduction in collections in future years.