HARRISBURG, Pennsylvania — Pennsylvania state government is borrowing more money for its operations and faces a projected gap of nearly $2 billion in the coming year and a half, officials said Thursday.
The bad fiscal news follows Gov. Tom Corbett's signature on a $29 billion budget in July that was balanced with more than $2 billion in one-time savings or cash items and prompted the three major credit rating agencies to downgrade Pennsylvania's debt.
Gov.-elect Tom Wolf, who takes office Jan. 20, called the situation a "financial crisis." The Democrat defeated Corbett, a Republican, in last week's election.
Treasurer Rob McCord said the state will soon max out a $1.5 billion line of credit as it struggles through a period of low cash flow. The treasury loaned the state $700 million in September when operating funds hit a 10-year low.
"We see a deteriorating financial scenario that casts serious doubt on Pennsylvania's ability to balance its budget this year," McCord said in a statement. "The state's fiscal health remains precarious."
Meanwhile, the Independent Fiscal Office projected a nearly $2 billion structural deficit in the state's finances over the next year and a half. It projected a shortfall of $170 million in the current fiscal year, and nearly $1.7 billion in the fiscal year beginning next July 1, a gap that will only grow in future years.
It said tax collections will increase 2.7 percent a year while spending, under current law, will increase by 4.1 percent a year, propelled mainly by rising pension fund payments, inflation and a growing population of elderly who will need care in nursing homes and other settings.
In a statement, Wolf called the Independent Fiscal Office's projection "bad news for Pennsylvania" and said worse news about the state's financial hole could still be coming. Wolf will be required to send the Republican-controlled Legislature a balanced budget plan in March for the 2015-2016 fiscal year.
"Leaders from both parties need to work together to achieve meaningful solutions for the people of Pennsylvania," Wolf said. "We have to move Pennsylvania forward and make difficult decisions in order to solve our state's financial crisis."