Op-Ed by state Sen. John N. Wozniak, D-Cambria, Clearfield, Centre, Somerset, Clinton

A survey by the National Conference of State Legislatures found that by last December, 41 states faced budget deficits totaling a cumulative $137 billion over the next year and a half. Compared with the enormous shortfalls in other states, even some with smaller budgets than ours, Pennsylvania’s $2-to-$4 billion financial hole leaves us better off than most.

That is not much consolation to Pennsylvanians – either taxpayers or public officials — as we wrestle here at home with the pain of the worst nationwide financial crisis since the Great Depression. It doesn’t make the laid off worker or the owner of a shuttered small business feel much better. But it does help us understand our current situation, and puts it in some perspective.

Governors and lawmakers in 41 states, who had previously been balancing their budgets regularly for years, did not suddenly become irresponsible spendthrifts, nor lose their ability to do math overnight.

When we enacted our budget for the current fiscal year in July, we knew the economy was slowing down, and we acted accordingly. Economic forecasting services on whom we rely estimated then that the real Gross Domestic Product (GDP) would have one quarter of negative growth, from October through December of 2008. That decline was expected to be only four-tenths of one percent.

Still, that one dark cloud was enough of a warning to make the legislature careful when we finalized the current fiscal-year blueprint. We reduced the overall spending increase by $72 million from Governor Ed Rendell’s original proposal. Proactively, we actually cut the appropriation to scores of line items from what they had received the previous year. Our spending increase was 3.9 percent, which was lower than the inflation rate at the time. The budget that we enacted for this year allowed for 2,221 fewer state employees than when Rendell took office in 2003.

Instead of a mild downturn followed by a rebounding economy in early 2009, however, the nation experienced a near economic meltdown. We all remember the emergency atmosphere that swept over the country within mere days last September, with the bankruptcy of some of our largest and best-known financial institutions, Treasury Secretary Hank Paulson’s dire predictions of financial collapse without a swift and huge bailout bill, and Senator John McCain suspending his presidential campaign to rush back to Washington.

The magnitude of the problem, and its sudden emergence, took almost everyone by surprise.

While we enacted a prudent Pennsylvania budget premised on one quarter of a declining GDP, few economists saw the reality ahead – now they tell us we are in a recession and that we can expect four quarters of severe GDP shrinkage, not one mild negative quarter.

Pennsylvania’s total employment as of the end of December was 5.732 million. That was 76,000 fewer jobs than we had a year earlier; significantly, 75,000 of those jobs have been vanished since July when we approved the budget.

The unemployment rate in Pennsylvania was 5.4 percent back in July. Today it has climbed to 6.7 percent. Although painful for families with lost income and damaging to the state’s balance sheet, it is still lower than the national rate of 7.2 percent. Thirty states have employment-loss numbers worse than ours.

Even so, state finances are now being hit hard, just the same as most sectors of the private economy. Pennsylvania’s budget feels the effect of everyone’s financial distress.

Not a day passes that the news doesn’t tell us of another plant closing or mass worker layoffs. Auto sales are down. Home sales are weak and new housing construction is even worse. People are cutting back their spending today in ways they never dreamed they would have to six or nine months ago.

Those factors reduce the amount that the state collects in sales tax, personal income tax, corporate taxes, realty transfer taxes, and other categories. All those revenue sources are below estimate. Meanwhile, some of our costs rise in a bad economy. More jobless workers, for instance, means more people depending on the government for medical assistance. So we have to cut spending in ways that we did not expect a half year ago. We are required by law to have a balanced budget.

Over the past few years when the economy was good, we accumulated budget surpluses, and we wisely placed a sizeable portion of those funds into the state savings account, the Rainy Day Fund. It now holds more than $750 million, and will help us balance the budget.

Governor Rendell and the legislature have also made strategic investments to develop our economy, which are helping to create jobs and are lessening the impact of this recession.

No one should think balancing the state budget this year or next year will be easy. No one should believe that more tough times are not ahead. Pennsylvania, however, is in better position than most other states to ride out the storm.