As Pennsylvania heads into the second half of its fiscal year, expectations of a slowing economy don’t have the state’s top tax collector seeing a rosy future for revenues.

“We need to be cautious as we go into this budget season of doing things with the assumption this is a rosy picture,” Department of Revenue Secretary Tom Wolf said Thursday as he discussed the state’s revenue and the outlook for 2008.

That doesn’t mean Wolf is seeing red, either.

State revenues in December came above last year’s estimates, but Wolf said those numbers don’t necessarily mean the state has experienced or will continue to see significant gains over last year.

Wolf stressed that revenue projections, used by the Legislature and the Rendell administration to come up with the budget, are produced using objective numbers, but it’s still a process that relies on looking backward and is anything but exact.

With talk of a possible recession in 2008, Wolf said trying to pin down where the state will be financially 18 months from now is dicey.

“When you try to predict a change — and inflection point — you run into a real problem,” Wolf said.

Even with the standard definition of a recession — two or more consecutive quarters with negative growth in the gross domestic product — not yet met, Wolf said the state’s data indicate a 1.1 percentage point growth in the GDP for the fourth quarter of 2007 and forecast the first quarter of this year to be 0.6 percent.

The state’s personal income tax revenues to date are described by Wolf as flat, and its take from sales and use taxes —numbers that won’t be in until later this month — are expected to be sluggish. Wolf also said the realty transfer tax take is down as well.

Wolf’s assessment of the state’s revenue comes a day after House Republicans unveiled two bills to lower the personal income tax.

House Bill 1641 would drop the rate from 3.07 percent to 2.99 percent, and House Bill 1092 would drop it to 2.93 percent in the first year and to 2.8 percent in the second year.

Cutting taxes is one way to spur a slow economy because it puts money back in people’s pockets, said Nate Benefield, director of policy research for the Commonwealth Foundation, a nonpartisan Pennsylvania think tank.

Benefield said revenue projections are always a little bit off, although during the past several years, Pennsylvania’s projections have involved growth with revenues coming in above expectations.

Benefield said although Pennsylvania’s economy is growing slowly, it still lags behind the rest of the country.

“The economy is growing, although it could be doing a lot better than the national average,” Benefield said.

Whether or not a recession will hit is like trying to predict a long winter, he said.

Daniel DiLeo, Penn State-Altoona professor of political science, said if the revenue outlook does become bleak, it could effect the state’s largest expenditures, such as education and Medicaid.

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