Just recently, the Pennsylvania Treasury announced that it borrowed $1.2 billion in an effort to sustain a positive balance in the state's General Fund. The total thus far borrowed against the state's line of credit stands at $1.6 billion. The loan must be repaid by June 30, 2017. (Pennsylvania Treasury news release, 9-13-2016.)

In an effort to address the state's budget woes, Governor Tom Wolf has unsuccessfully attempted over the last two years to increase the state's personal income tax rate. Most recently, the governor included in his FY 2017 budget a provision to increase the personal income tax rate from 3.07% to 3.4%, effective retroactively to January 1, 2016. He abandoned the measure to avoid missing the budget enactment deadline. (Tax Alert 2016-375)

A further strain on state cash flows could occur next year if New Jersey Governor Chris Christie doesn't rescind his notice to end its reciprocal income tax agreement with Pennsylvania, a move that could cut Pennsylvania tax revenues by an estimated $5 million annually. (Phiily.com, Tax Alert 2016-1502)

Action on the passage of an increase in the state's personal income to address these recent challenges is not out of the question, and employers should watch for a possible change in income tax withholding rates for 2017.

The Pennsylvania General Assembly adjourns on November 30 of each year.

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