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Pennsylvania state budget

Pennsylvania's legislature passed the $27.15 billion FY2012 state budget on June 29, 2011. The FY2012 budget reduces spending by three percent from FY2011. Gov. Tom Corbett signed the budget with 15 minutes to spare onJune 30, 2011, giving the state will have its first on-time budget in nine years.^[1] The budget does not include any tax increases.^[1] It reduces education funding by approximately $860 million and also made cuts to human services.^[2]

Pennsylvania has a total state debt of approximately $147,788,481,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[3]

See also: The Pennsylvania State Budget on State Budget Solutions

[edit] Fiscal Year 2013 State Budget

The budget for FY2013 must be in place by July 1, 2012, the start of the fiscal year.^[5]

Budget Secretary Charles Zogby predicted in Dec. 2011 that the state would face a revenue shortfall of at least $500 million and that the commonwealth will be searching for at least $750 million in cuts to balance the FY2013 state budget that includes mandated increases in debt payments, pension costs and welfare spending.^[6]

Neither the legislature nor the governor proposed increasing taxes.^[7]

Legislative Proposed Budget

On May 9, 2012, the Senate approved a $27.7 billion FY2013 budget. It erases many cuts proposed by Gov. Tom Corbett and in fact increases spending by approximately $500 million over FY2012. It includes the governor's proposals for a $275 million business-tax cut and the elimination of the $150 million temporary cash-assistance program for poor adults.^[8]

The Senate plan also restores funding to higher education, a portion of cuts to social service programs and adds $100 million dollars to K-12 basic education funding. The Senate plans to use some better than expected revenue collections to pay for the extra portions of its budget.^[7]

Governor's Proposed Budget

Gov. Tom Corbett released his proposed $27.13 billion FY2013 state budget, which can be foundhere, on Feb. 7, 2012. It lowers spending less than a tenth of a percentage point from FY2012, when the state budget was $27.16 billion. The governor proposed steep cuts to higher education, but did not raise taxes.^[9] The higher education cuts include 30 percent cuts in state aid to state-related universities like Penn State, Temple and Pitt, and 20 percent cuts for the state-owned universities, but largely level funds community colleges and public schools.^[10]

Basic education funding for K-12 will increase from $5.3 billion this fiscal year to $5.4 billion, although pre-K and Head Start funding will be cut as would $100 million in accountability block grants to schools.^[9]

The governor's proposed budget reduces the state vehicle fleet by 1,200 vehicles.^[11] Other highlights of the proposed budget include:

• Leveling funding for the Department of Corrections for the first time in a decade, increases the funding for PA Board of Probation and Parole to support transition from incarceration to community, provides funding for volunteer fire companies and provides funding for 115 state police troopers; ^[11]
• reforming the public welfare system by providing incentives to those who are able to transition from the welfare line to the workforce, providing real relief to our poor and safeguarding taxpayer dollars through the elimination of waste, fraud and abuse. ^[11]

[edit] Fiscal Year 2012 State Budget

A mortgage foreclosure settlement between banks and states was announced in Feb. 2012, with Pennsylvania receiving approximately $69 million. The administration said some of its $69 million may be used to offset $2 billion in cuts to programs made earlier in the fiscal year.^[12]

[edit] Passed Budget

Gov. Tom Corbett signed the budget with 15 minutes to spare on June 30, 2011, giving the state will have its first on-time budget in nine years.^[13]

In Jan. 2012, the governor cut spending from the budget by $160 million in reaction to a tax revenue-shortfall that reached $487 million at the end of December. Gov. Corbett directed most agencies, including the Department of Environmental Protection and the state parks and forest bureaus, to reduce spending by 3 percent. But some individual programs are seeing reductions up to 10 percent.^[14]

The House approved the budget with a 109-92 vote on June 29, 2011, and the day before the Senate passed it on a party-line vote. Republicans called the spending plan a $27.2 billion plan with no increased taxes, while Democrats put the total at $27.7 billion and called a higher hospital "assessment" a tax increase. Approximately $200 million of the FY2012 budget comes from FY2011's surplus, revenues that have outpaced projections by some $700 million, ^[15]

On June 23, 2011, Republican legislative leaders and the governor agreed on the framework of a state spending plan of less than $27.3 billion that reinstated most of the higher education money Corbett proposed cutting, although the details were not yet finalized. Those involved in budget talks said the plan to eliminate a $4.2 billion deficit does not raise taxes.^[16]

Pensions

The FY2012 budget accounts for $1.1 billion in pension payments.^[17]

[edit] Legislative Proposed Budget

On June 28, 2011, the Senate passed a $27.1 billion state budget with a party-line vote of 30-20 and sent it to the House. If he does so, this budget will be the first on completed on time in nine years. The budget spends 3 percent less than the state spent in FY2011, marking the first budget decrease since 2001. Under the budget, higher education funds will be cut by 18 to 19 percent.^[18]

House Republicans released a counterproposal to the governor's budget, but said that they agreed with the governor's $27.3 billion bottom line. They would go about that almost 3% reduction in spending very differently, however, focusing more on cuts to welfare and less to education. The House Republican plan would restore $380 million to universities, with cuts being 15% for most state -sponsored universities, although four would lose a quarter of their state aid. It would give public schools an additional $210 million compared to the governor's budget. Although the House Republican plan restores some funding when compared to the governor's plan, public schools would still have to see cuts of 10 percent, amounting to about $1 billion. It would cut $470 million out of the Department of Public Welfare, and would expand by $50 million the co-payments for some optional services under the Medicaid program or services that are used by higher-earning families.^[19]

The proposal also eliminates currently vacant jobs in state government and would reduce the Legislature's funding five percent, saving approximately $15 million.^[19]

[edit] Governor's Proposed Budget

Gov. Tom Corbett said shortly after being elected that he intended to reduce state administrative operations by 10% and that he also planned to reduce the state automotive fleet by 20%, saving the state $140 million over 10 years.^[20] Corbett has also said that he wants to require all elected officials to contribute to their health care coverage.^[20] Corbett acknowledged the "pending storm" of a budget deficit projected at $4 billion to $5 billion in his inaugural address and will deliver his budget address on March 8, 2011.^[21]

Gov. Corbett introduced his $27.3 billion proposed budget for FY2011-2012 on March 8, 2011. At the time, Pennsylvania faced a projected $4 billion budget shortfall. To address that, Corbett's planned to cut spending by $866 million, returning spending to 2008-09 levels, prior to the recent budget plans that included several billion in federal stimulus funding. The proposed budget did not raise taxes.^[22]

The $27.3 billion spending plan proposes to eliminate nearly 1,000 vacant state jobs as well as laying off about 500 state workers. The budget includes no pay increase for state workers for the 2011-12 year and will look for salary roll backs. Corbett is also calling for school districts to freeze pay for all employees even if it means re-opening contracts. ^[23]

Cuts

The governor's proposed would reduce basic education funding by more than $1 billion and would cut by more than half funding for state-supported universities.^[24]Funding to four state universities and 14 schools in the State System of Higher Education would be cut in half. Funding for the Department of Environmental Protection would decrease from $147 million to $140 million.^[22] To save $400 million next year, or preserve about 9,000 teaching jobs statewide, the governor asked for all school personnel to agree to a wage freeze for the 2011-12 school year. As of mid-April, around 70 of the state's 500 school districts had teachers, staff or administrators agree to the pay freeze.^[25] State education spending K-12 increased from $13 billion in 1995, to more than $26 billion currently.^[25]

The governor's plan also cuts funding to the State Department of Community and Economic Development from $337.9 million to $223.6 million.^[22]

Despite the cuts, some agencies would see an increase in funding. The proposed budget includes an additional $607.7 million for welfare funding and health funding would increase by $61.5 million, Military and Veterans Affairs would increase by $19.6 million, the state police would get a $10 million increase and the Department of Revenue funding would increase by $8 million.^[22]

Budget Secretary Charles Zogby told the Pennsylvania Press Club the governor will not use any one-time budget gimmicks to fill the gap. ^[26]

Some lawmakers and activist organizations are calling on Corbett to tax shale gas. Pennsylvania is the only state with this kind of gas that does not tax its extraction.^[27]

Budget highlights include:

• Cuts $550 million from basic education spending
• Cuts preschool funding by $2.4 million
• Special Education funding would remain at $1 billion
• Increase spending on prisons by $186 million
• Increase funding for state police by 3.4 percent
• Lease oil and gas rights on state forestland to provide $65 million to help keep state parks open
• $15 million increase in the Research and Development Tax Credit

adultBasic cuts

In order to address a $4 billion budget shortfall, Pennsylvania Gov. Tom Corbett shut down adultBasic, a government-subsidized health care program for the state's working poor who earned too much to qualify for Medicaid. There were approximately 41,000 members in the program. Corbett said the 10-year old program is not sustainable. In 2010 the program cost $163 million. Much of the funding for the program came form Blue Cross/ Blue Shield, however the insurance giant ended its financial partnership at the end of 2010. ^[28]

Participants in the program paid monthly premiums of $36.

[edit] Public Employee Unions and Right to Work

Right-to-work bills have been introduced and not passed by the legislature on several occasions, and observers on both sides say any such legislation faces an uphill climb in 2011. The head of the American Federation of State, County and Municipal Employees, the largest state-employee union, said that while he did not like the prospect of a right-to-work bill, he was not concerned about the legislature passing such a bill.^[29] However, Gov. Corbett said if such legislation made it to his desk he would sign it. Legislation is expected to be introduced in the Pennsylvania legislation in March 2011. ^[30] State Rep. Daryl D. Metcalfe said he was sponsoring a right-to-work bill targeting both the public and private sectors. ^[31]

If a right-to-work bill is introduced, labor leaders said they would fight it.^{[citation needed]}

[edit] Fiscal Year 2011 State Budget

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

In Dec. 2010, the National Conference of State Legislatures said that the state faced a midyear shortfall of $276.2 million, which represents 0.2% of the FY2011 state budget.^[32]

As of Oct. 2010, four months into the fiscal year, the state collected $7.6 billion, just $19 million more than had been projected, although the Oct. figures were less than expected.^[33]

Pennsylvania's legislature passed its $28.05 billion FY2011 budget on June 30, 2010, marking the first time in eight years that the state has met its fiscal deadline.^[34][35] Gov. Ed Rendell Gov. Rendell signed the budget into law on July 6, 2010, after a dispute regarding over the establishment an Independent Financial Office which left the state to start FY2011 without a budget.^[36] The Senate voted in favor of the $24 billion FY2011 budget 37-13. Then the House passed the budget with all Democrats and more than a dozen Republicans saying yes in the 117-84 vote.^[34]

The FY2011 state budget is 0.6 percent higher than that for FY2010. The spending plan includes no tax increases. Basic education and economic development are two areas that will see increased funds; most of all other areas are subject to cuts. Areas with spending reduced by 7 percent or more include libraries, state parks, the Department of Environmental Protection, the Department of Agriculture and the Department of Labor and Industry.^[34] Republicans criticized the budget because it increases spending in difficult and uncertain economic times. Democrats countered that by saying the budget is $1 billion less than what Gov. Ed Rendell requested in February.^[34]

[edit] Federal Funds

Congress approved nearly $1 billion in funds for Pennsylvania for Medicaid and education.^[37] That amount, however, was not enough for the state, which had relied on more when budgeting. After the bill was signed giving the state $668 million to help pay for Medicaid and $387.8 million to save K-12 education jobs, Gov. Rendell called for cutting nearly 2 percent from most state agencies, trimming education funding, and using new natural-gas tax revenue to close the remaining $280 million gap.^[38]

Gov. Rendell also suggested ending the vendor discount under which the state gives retailers a discount for timely remitting their state sales tax revenue. The discount amounts to $75 million in revenue the state forfeits. Mr. Rendell said it makes no sense for the state to let retailers have that money when it could be used to preserve jobs.^[39][38]

[edit] Spending cuts

After the amount of federal funding became clear in August 2010, Gov. Rendell proposed a budget cutting plan to the legislature on August 11, 2010, which included trimming 1.9% from state agencies, the legislature, judiciary, and independently elected offices such as attorney general and treasurer and also cutting $50 million from the basic state aid to school districts.^[38] The cuts must be approved by the legislature because the governor controls only the state agency funding.^[38][40]

Three independent agencies refused to make those cuts -- State Auditor General Jack Wagner, the General Assembly and the courts.^[41] The governor said that their refusal means the state is missing out on $11 million in savings.^[41] Other agencies also not under the governor's control complied with his request for a spending cut, including Attorney General Tom Corbett, an agency that oversees hospitals and the state Ethics Commission.^[41]

[edit] Job cuts

Gov. Rendell announced that 50 state employees would be laid off due to the state's budget problems.^[42] The governor had initially estimated that 1,000 jobs would be cut if federal funds are received, and more if not.^[43] The number was lower than first estimated in part because more state employees retired than anticipated.^[42] The state also is eliminating 500 vacant jobs.^[42]

[edit] WAMs

The budget includes up to $100 million in discretionary spending, otherwise known as WAMs ("walking around money") or legislative initiative grants.^[44][45] Included in the funds is $10.6 million for "urban development," $2.4 million for "cultural activities" and $500,000 for zoos.^[44]

"It was insisted upon by the Legislature and was part of the arrangement," Rendell said. "If I were king, (WAMs) wouldn't be there, but I'm not."^[46]

[edit] Capital Budget

Of the $600 million capital budget, the governor gets to designate half the amount borrowed for his favored construction projects. The governor's portion of the capital budget for FY2011 is $298 million, which is financed by state-issued construction bonds. It includes $10 million each for the Arlen Specter Library to be built at Philadelphia University and the John P. Murtha Center for Public Policy would be at the University of Pittsburgh at Johnstown.^[47]

$141 million in the governor's pot this year has been designated for projects in Philadelphia and the four suburban counties.^[47]

Traditionally, the governor gets to designate half the amount borrowed for his favored construction project. Auditor General Jack Wagner said July 6, 2010, that he was considering performing an audit of the capital budget and the process around it, perhaps before Rendell leaves office in January.^[47]

[edit] Shale Tax

State officials have been unable to agree on a tax on natural gas extracted from deep underground areas of Marcellus Shale.^[48] The FY2011 budget included the deadline of Oct. 1 for enacting such a tax.^[48] The governor plans on $70 million being generated by the Marcellus Shale tax in FY2011 to help ease a $282 million budget shortfall.^[48] The governor wants a tax that imposes a 5% levy on the value of the natural gas that's sold, plus an additional $0.047 cents for each 1,000 cubic feet of gas produced, but some Marcellus gas producers think that's too high, and say the tax shouldn't be prohibitive when the industry is just getting started.^[48] Rendell disagrees, saying, "Pennsylvania is the 15th largest production state for natural gas, but is the only major fossil fuel producer that does not levy a tax on natural gas extraction. That's just not fair."^[48]

[edit] Budget transparency

• See sample transparency legislation at the Sunshine Standard

[edit] Government tools

A new site, called PennWATCH, is required by law to go online by December 31, 2012. The site will include spending and contract information, tax collections and federal revenues, as well as the name, position, and salary of all state employees.^[49]

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

See also: Evaluation of Pennsylvania state website

[edit] Budget Background

The $27.8 billion General Fund budget for FY 2010 is $1.9 billion lower than FY 2009 and $524 million smaller than FY 2009 when federal stimulus dollars are included. Education receives a $300 million increase for a total of $5.5 billion. While the plan does not have a broad-based tax increase, it does include 25 cents per pack increase on cigarettes and projects a $350 million year-end balance as a hedge against economic uncertainties.^[50]

Pennsylvania's fiscal year begins July 1 and ends June 30 of the following year. According to the state constitution, every year the Governor must present a spending recommendation to the Legislature. Agencies prepare budget requests starting in August for the Governor to review prior to making his/her own recommendation in February. Between the months of February and June both the House and the Senate review the budget proposal before finalizing the budget for the upcoming fiscal year. The Governor may sign, take no action, veto, or line-item veto an appropriation bill. If the Governor signs a bill, it becomes law upon signature. A bill also becomes law if the Governor fails to take action on the bill within a time certain.^[51]

[edit] Accounting Principles

Pennsylvania Department of the Auditor General has been the commonwealth's fiscal watchdog since 1809, when it was created by an act of the General Assembly. The auditor general was appointed by the governor until 1850, when the position became an elected office. State and local audits reports are published online. Jack Wagner was elected Auditor General in 2004 and re-elected in 2008.^[52]

The Institute for Truth in Accounting (IFTA) rates Pennsylvania “Timely” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider Pennsylvania's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[53] Pennsylvania's CAFRs are annual publications of the Pennsylvania Office of the Budget. The Office of the Budget is authorized by the Administrative Code of 1929; it is under the direct supervision of the Secretary of the Budget, who reports to the Governor. Anna Maria Kiehl has been Chief Accounting Officer for Office of the Budget since December of 2007 and Mary A. Soderberg has been Secretary Office of the Budget since her appointment in July of 2008.^[54]

[edit] Stimulus

Pennsylvania has received $5.6 billion in federal funding.^[56]

[edit] Public Employees

Main article: Pennsylvania public employee salaries

Main article: Pennsylvania public pensions

According to 2008 Census data, the state of Pennsylvania and local governments in the state employed a total of 696,616 people.^[57] Of those employees, 529,454 were full-time employees receiving a net pay of $2,152,542,653 per month and 167,162 were part-time employees paid $178,554,748 per month.^[57] More than 57% of those employees, or 399,454 employees, were in education or higher education.^[57]

[edit] External links

• State Budget Solutions, Pennsylvania
• Model transparency legislation from the American Legislative Exchange Council
• Commonwealth Foundation for Public Policy Alternatives
• A Taxpayer's Budget 2010: Responsible Spending for Pennsylvania
• Allegheny Institute for Public Policy
• Governor's Office of the Budget, 2008-2009
• Pennsylvania state site
• Pennsylvania General Assembly

[edit] Additional reading

• Gov. Ed Rendell,"2009-10 Budget Address," February 4,2009
• Meadville Tribune,"Local state workers protest budget stalemate," July 16, 2009
• Philadelphia Business Journal,"Phila. state legislators back mayor on sales tax," July 27, 2009
• The Philadelphia Inquirer,"Rendell optimistic on budget; others less so," July 24, 2009
• Reuters,"Pennsylvania gets stop-gap budget, Philly left out," August 5, 2009
• Pittsburgh Tribune-Review,"Pennsylvania Governor Rendell doles out $361 million in borrowed money," August 9, 2009

[edit] References

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