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Administration Reveals Potential $1 Billion Deficit With PM-Philadelphia-No Layoffs, Bjt

December 19, 1990

HARRISBURG, Pa. (AP) _ Pennsylvania’s state government is facing a potential deficit approaching $1 billion that could lead to the layoff of state workers and cuts in welfare and other programs, officials said.

State Budget Secretary Michael Hershock said Tuesday ″every indication″ showed the state’s economy had stopped growing and was expected to be in a recession through March.

The disclosure of the looming $959 million deficit marked the first time the administration has acknowledged the magnitude of the state’s financial problems.

Only last month Gov. Robert P. Casey’s campaign commercials described the state as ″the rising new star of America″ where the economy was flourishing.

Hershock said the state would take a wide array of cost-cutting steps aimed at balancing the budget by June 30, the end of the fiscal year. He said it was too soon to say if a tax increase would be needed.

Taxes ″will be the last resort,″ Hershock said, echoing previous statements by Casey.

Pennsylvania is not the only state facing a budget deficit because of the rising cost of services, falling tax revenues and slowing consumer spending. At least 30 states face deficits, ranging from $42 million in Tennessee to $1 billion in New York, according to recent studies by the National Association of State Budget Officers and The Boston Globe.

Hershock said the state was caught in a bind between a weakening national economy and an increase in the need for welfare programs.

Earlier this month, the Public Welfare Department disclosed it was facing a $440 million cash shortfall.

Last week, Casey directed state departments to slash maintenance and other operating expenses by 6 percent and ordered continued controls on hiring and purchases. Hershock said a series of task forces would look at additional ways to trim spending and raise revenue, such as selling surplus land and increasing state fees.

The state will also consider curtailing some programs that are optional under federal rules, Hershock said. Among them are dental, podiatric and drug- and-alcohol abuse programs for welfare recipients.

Layoffs for state workers are also being reviewed.

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