First and foremost, Happy Holidays to everyone. Pour yourself a glass of holiday cheer and drink up before reading the following state budget update.

Good. Are you feeling warm and fuzzy? Things a little blurry? Well things are blurry in Harrisburg these days as well.

In approximately 45 days (on February 7), Governor Wolf will give his third budget address. And in a little more than 6 months (the June 30 budget deadline), the House and Senate will hopefully be debating and passing a balanced budget. Pennsylvania residents concerned about the state’s fiscal health probably would have preferred a lump of coal for their Christmas stockings rather than the troubling financial report handed down last Wednesday, December 14. According to the mid-fiscal year assessment by Budget Secretary Randy Albright, Commonwealth revenues will be at least $600 million short of paying for current budget year spending. The Legislature’s nonpartisan Independent Fiscal Office projects a $1.7 billion deficit for the 2017-18 fiscal year that begins July 1.

Part of the reason for the $600 million and $1.7 billion estimates is that the Legislature didn’t complete all of its funding work for the 2016-17 spending package, including controversial gambling expansion – which was earmarked to generate $100 million in revenue. Beyond not funding the budget completely, the Legislature plugged into the current budget overly optimistic incoming-revenue projections. According to Albright, the administration will be working to close the $600 million hole, with General Fund tax revenues being $129 million short of estimates for the month of November alone. Wolf has previously proposed tax hikes to right the commonwealth’s fiscal ship, while Republican lawmakers have remained strongly opposed. Without a turnaround in the state’s fiscal fortunes, a tax hike is looming, if not sooner than later – and the later it is, the bigger the increase could be.

And until a broad-based tax increase is given serious consideration, all tax credits in Pennsylvania – including the film tax credit – could potentially be cut or eliminated as a way to plug the budget hole.