Tallman August 2010 Budget Slide Show

8/8/2019 Tallman August 2010 Budget Slide Show

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www.RepWillTallman.com

State BudgetFiscal Year 2010-11Review and Analysis

State RepresentativeWill Tallman193rd Legislative District


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State Budget Summary

Final Spending: $27.84 Billion

State Funds: $24.94 Billion

ARRA Stimulus Funds: $2.70 Billion

General Fund Revenue: $27.65 Billion

Revenue Collections: -$1.18 Billion (Below Estimate)

More than $2 Billion in revenue transfers were needed to support this spending plan.

Reserve funds were exhausted in the 2009-10 budget, specifically the Rainy Day Fund.

Commonwealth Court ruled that up to $716 Million in funds used to finance this budget

(MCare and Health Care Provider Retention Account) must be repaid from the General Fund.

Budget

Notes


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Rendell Budget Proposal

Proposed Spending: $29.03 Billion



Spending Increase: $1.29 Billion or 4.6 Percent.

Budget

Notes

The Rendell Budget proposal assumed a revenue shortfall of $525 Million for FY 2009-10.

The $2.76 Billion in ARRA funds used to support this spending plan includes $850 Million in

yet-to-be-approved federal Medical Assistance (FMAP) dollars.

More than $800 Million in new taxes were included in the governors budget proposal for FY

2010-11. Although they were not originally intended to be spent in this fiscal year, thegovernor added the new taxes to his spending plan when revenues continued to decline.


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Final Enacted Budget

Proposed Spending: $28.04 Billion



Spending Increase: $207.2 Million or 0.74 Percent.

Budget

Notes

As the governor proposed, the final budget assumed the state would receive $850 Million inyet-to-be-approved federal Medical Assistance (FMAP) dollars.

An additional $30 Million was transferred from various special state funds to help balance

the 2010-11 spending plan.


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General Fund Spending: $28.04 Billion

PreK-12 Education,

$10.02 Billion

35.7%

Higher

Education,

$1.96 Billion

7.0%

Public Welfare,

$10.44 Billion

37.2%

Debt Service,$1.05 Billion

3.7%

Corrections,

$1.87 Billion

6.7%

All Other Spending,

$2.70 Billion

9.6%

NOTE: Funding includes $2.75 Billion in federal ARRA dollars.


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General Fund Revenue: $26.71 Billion

NOTE: Revenue only reflects state dollars. Federal ARRA funds are not included in this chart.

Corporate Net

Income Tax,

$1.85 Billion,

6.9%

Capital Stock

And Franchise Tax,

$767 Million, 2.9%

Sales and Use Tax,

$8.34 Billion, 31.2%

Cigarette Tax,

$1.09 Billion, 4.1%

Personal Income Tax,

$10.12 Billion, 37.9%

Inheritance Tax,

$771 Million, 2.9%

Non-Tax Revenue,

$1.02 Billion, 3.8%All Other Taxes,

$2.75 Billion, 10.3%

* Official Estimate


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House RepublicanBudget Analysis


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State Budget Analysis

House Republican Accomplishments

Defeating the Rendell Tax Increases: Despite the governors call to increase

taxes by more than $800 Million as part of his budget proposal for FY 2010-

11, we were successful defeating all tax hikes in this budget.

Controlling State Spending: While Governor Rendell advocated for a $29

Billion budget that increased spending by more than $1.2 Billion, we were

able to cut $1 Billion from his original proposal.

Meeting the Deadline: Throughout the budget process, we called for

cooperative action on the states annual spending plan to ensure it was

approved by June 30. In turn, the legislature was able to meet the

constitutional deadline and prevent the type of fiscal pain felt by human

service providers, educational institutions and non-profit organizations as a

result of last years impasse.


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State Budget Analysis

House Republican Concerns

Federal Revenues: The budget was balanced at the governors demand on the

assumption the state would receive $850 Million in new federal Medical

Assistance funds. Congress recently approved funding, but the state will onlyreceive about $600 Million. Coupled with other federal Medical Assistance

funding adjustments, the budget now yields a $280 Million shortfall.

Spending: Despite continued calls for fiscal restraint and our success in

cutting $1 Billion from the governors proposal, this $28 Billion budget did notgo far enough in controlling state spending.

Structural Deficit: With the looming loss of more than $2 Billion in existing

stimulus funds and the potential $716 Million funding hole that will exist if

the governors appeal of the Commonwealth Court ruling on MCare is lost,

the state is facing at least a $3 Billion structural deficit in FY 2011-12.


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Rendell-ProposedBudget Adjustments


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Rendell Budget Cuts August 2010

Accounting for Less-Than-Anticipated Federal Funds

Original FMAP Funding Assumption: $850 Million

Approved FMAP Funding: $600 Million

Total Budget Shortfall: -$280 Million

Budget

Notes

To offset the $280 Million budget funding hole that now exists, the governor has proposed

the following plan: $212 Million in Budget Cuts

1.9% Across-the-Board Reduction.

$50 Million Reduction in the Basic Education Subsidys Approved Increase.

Assumes the enactment of a severance tax to generate $70 Million.

(Includes -$30 Million in other federal MA funding adjustments)

House GOP: Throughout the budget negotiations, House Republicans advocated for a contingency plan for the assumedfederal funds in the event they were not approved or approved at a lesser amount. The governor rebuffed this plan.

(Approximately)


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Summary of Expenditures


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PreK-12 Education (As Enacted)

Funding: $10.02 Billion


ARRA Stimulus Funds: $654.7 Million (All to Basic Education)

BudgetNotes

The states Basic Education Subsidy was approved to provide Pennsylvanias 500 school

districts with $5.78 Billion a $250 Million increase over 2009-10.

Special Education funding will remain at the 2009-10 levels of $1.03 Billion.

Many education programs saw funding reduced in this budget. Accountability Block Grants,

Pre-K Counts, Services to Non-Public Schools and Public Libraries are among those that saw

funding reduced.

STIMULUS IMPACT: The loss of stimulus funds in 2011-12 will result in a minimum $654 Million funding hole in the statesBasic Education Subsidy.


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PreK-12 Education (August 2010 Update)

Rendell Budget Adjustments

Education funding will be reduced by $69 Million.

The Basic Education Subsidy accounts for $50 Million of the

total reduced funding.

Budget

Notes

The new Basic Education Subsidy after the governors recent move will total $5.72 Billion.

This still represents a $200 Million increase over 2009-10.

While there was a reduction in the approved-subsidy increase for 2010-11, the federal

government recently approved another $380 Million to support Pennsylvania schools.

Altogether, Pennsylvania schools are now slated to received $580 Million in new funding from

the state and federal government.


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Higher Education (As Enacted)



ARRA Stimulus Funds: $90.9 Million

BudgetNotes

All Higher Education Funding for the states colleges and universities remained level funded

with the 2009-10 budget.

The Pennsylvania Higher Education Assistance Agency (PHEAA) received $438.7 Million a

$16.4 Million reduction from 2009-10.

STIMULUS IMPACT: All higher education institutions will see a funding hole equal to the amount currently received in thisbudget come 2011-12. PHEAA will not be affected, as the agency receives no ARRA funds in this budget.

PSU: $333.9 Million Temple: $172.7 Million SSHE: $503.4 Million

Pitt: $168 Million Lincoln: $13.8 Million Community Colleges: $282.1 MillionIncludes $46.4 Million in Community College Capital funding


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Higher Education (August 2010 Update)

Budget

Notes


PHEAA Funding Reduction: -$8.3 Million

Approved Funding: $438.7 Million

Rendell-Adjusted Funding (August 2010): $430.4 Million

Combined with the $16.4 Million in funding that was cut from PHEAA as part of the 2010-11

enacted budget, the new cuts the governor has proposed will total a $24.8 Million reduction in

funding from the prior year.

Nearly $7.4 Million of the newly proposed cuts to PHEAA will come from the Student Grant

appropriation, which is PHEAAs largest budget line item.


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Public Welfare (As Enacted)



ARRA Stimulus Funds (FMAP): $1.83 Billion

BudgetNotes

The $1.83 Billion in ARRA funds included $850 Million in anticipated FMAP money that was

assumed in the governors budget proposal.

Medical Assistance accounts for approximately half of all Public Welfare funding and receivesthe largest portion of ARRA funds coming to the state.

Since the Rendell Administration took office in 2003, more than 600,000 people have been

added to the states welfare population through the Medical Assistance program.

STIMULUS IMPACT: The loss of stimulus funds will leave a budget hole in the Department of Public Welfare for 2011-12.Reevaluation and changes to DPWs budget and administrative operations must be made to help offset the loss in funds.


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Public Welfare (August 2010 Update)


Rendell-Funding Adjustments in State Dollars: -$57.9 Million

This proposed reduction would be among the funds needed

to offset the receipt of less-than-anticipated FMAP funds.

Budget

Notes

While the Rendell Administration assumed the state would received $850 Million in new

federal FMAP funds in the 2010-11, the state will receive approximately $600 Million.

Altogether, about $1.6 Billion in federal ARRA funds are being used to balance DPW

expenditures in the 2010-11 state budget. None of these funds will be available next year.


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Corrections (As Enacted)



ARRA Stimulus Funds: $180.3 Million

BudgetNotes

Corrections has remained one of the fastest growing expenditures in the state budget over

the last decade.

Inmate population growth has been a driving factor behind the growth in the correctionsbudget. To date, the states 27 prisons house more than 51,000 inmates 17 Percent over

capacity.

Overcrowding has forced the state to send 2,100 inmates to be housed out of state.

STIMULUS IMPACT: The loss of stimulus funds in 2011-12 will cut $180 Million from the Corrections budget, taking thedepartment back to 2007 funding levels.


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Corrections (August 2010 Update)


Corrections funding will be reduced by $32.2 Million.

Approved Funding: $1.87 Billion

Rendell-Adjusted Funding (August 2010): $1.84 Billion

Budget

Notes

The funding reductions proposed by the governor would cut $26.2 Million from the state

correctional institutions operating expenses, and it would cut another $4.6 Million from the

Inmate Medical Care Appropriation.

Each of these appropriations will still see an increase over what was provided in fiscal year

2009-10.


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Debt Service (As Enacted)



ARRA Stimulus Funds: NONE

BudgetNotes

Debt Service must be paid annually from the General Fund budget before any other

expenditures can be financed. General Fund debt service payments are divided among two

line items: General Obligation Debt Service (Treasury) and a Transfer to the Commonwealth

Financing Authority (DCED).

As a result of drastic increases in borrowing under the Rendell Administration, annual debt

service has increased by nearly $400 Million since 2003.

The states total debt outstanding to be paid from the General Fund currently stands at more

than $11 Billion about a $5.7 Billion increase under Governor Rendell.


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All Other Spending (As Enacted)


Includes funding for the following:

Budget

Notes

Nearly every agency saw overall funding reduced in this budget. The 2010-11 budget marked

the second consecutive year in which significant cuts were made to agencies and their

respective programs.

Of those noted above, only DCED received an increase over the prior years budget. The

Judicial Branch was level funded.

Agriculture

DEP DCNR

DCED

State Police

Labor and Industry Health

Row Offices

State House and Senate

Governors Office Executive Offices

Judicial Branch

Partial List of Departments classified as All Other Spending


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All Other Spending (August 2010 Update)


Implemented a 1.9 Percent across-the-board cut to agencies

classified under All Other Spending.

Approved Spending: $2.7 Billion

Rendell-Adjusted Funding (August 2010): $2.6 Billion

Budget

Notes

Since the state began to yield year-end deficits beginning in 2008-09, the departments and

agencies classified under the All Other Spending category represent those that have exhibited

the greatest reductions in funding.


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Budget-Related Issues


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Capital Budget

As part of an agreement between Senate Republicans, House

Democrats and Governor Rendell, two Capital Budget bills were

approved along with the General Fund Budget:

Budget

Notes

House Bill 2289: Authorizes the state to issue up to $1.59 Billion in general

obligation bonds to pay for capital projects during the 2010-11 fiscal year. Italso itemizes $335.9 Million in projects to be funded at the governors

discretion. (Includes projects honoring Senator Arlen Specter and the late-

Congressman John Murtha).

House Bill 2290: Increases the cap on the amount of debt that may beoutstanding at any one time for Redevelopment Assistance Capital Projects

(RCAP) by $600 Million. This creates a new limit of $4.05 Billion for RCAP

projects.

If all $600 Million in debt is issued under House Bill 2290, it will costtaxpayers $963 Million to repay over 20 years.

House GOP: These measures were widely opposed by House Republicans.


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Capital Budget RCAP

Budget

Notes Since taking office in 2003, Governor Rendell has increased the states RCAPdebt cap by $2.6 Billion, adding to the states growing debt service costs.

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

$3,500,000,000

$4,000,000,000

2003 Act 49 of 2003 Act 67 of 2004 Act 87 of 2005 Act 48 of 2008 Act 48 of 2010Pre-Rendell

179% Increase in RCAP Debt Allowance

Under the Rendell Administration

$4.05 Billion


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Marcellus Shale Natural Gas Extraction

As another budget-related agreement, the majority parties in the

House and Senate agreed to consider legislation in the fall that

would deal with raising additional revenue from the extraction of

natural gas.

Budget

Notes

SB 1042 (Fiscal Code)

It is the intent of the House Majority Leadership and Senate Majority

Leadership to pass legislation that raises revenue from the extraction of

Marcellus Shale natural gas by October 1, 2010, with an effective date for

implementation no later than January 1, 2011.

Regarding the aforementioned agreement, it is important to note that any future revenue

generated from Marcellus Shale legislation would supplement existing revenue, as the funds

are not needed to balance the 2010-11 state budget.


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Independent Fiscal Office

Another non-budget-related provision added to the agreement

dealt with the creation of an Independent Fiscal Office.

Budget

Notes

SB 1042 (Fiscal Code)

It is the intent of the House Majority Leadership and Senate MajorityLeadership to pass legislation establishing a new independent agency to be

known as the Independent Fiscal Office no later than October 1, 2010, with

an effective date for implementation no later than January 1, 2011.

A similar proposal is found in Senate Bill 1, which calls for a fiscal office to fulfill the

following responsibilities relative to the state budget:

Prepare Revenue Estimates

Analyze Executive Budget Proposal

Monitor State Taxes

Develop Performance Measures

Provide a Baseline Budget

Assess the States Fiscal Standing


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PennsylvaniasFinancial Outlook


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Budget

Notes

Loss of Stimulus Funds

The loss of ARRA stimulus funds will cut more than $2.5 Billion from the

revenues available to balance the state budget in 2011-12.

General Fund Revenue

$26.71 Billion

ARRA Stimulus Funds

Basic Education: $655 Million

Higher Education: $91 Million

Corrections: $180 Million

*Public Welfare: $1.6 Billion

Total: $2.5 Billion

* ARRA funds for DPW are based on

estimates and are subject to change.


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Budget

Notes

General Fund Revenue Collections

Even if state tax revenues realize a 3 Percent growth in 2010-11, the state willbegin the 2011-12 Fiscal Year with a tax revenue base less than that of 2006-07.

$14.000

$16.000

$18.000

$20.000

$22.000

$24.000

$26.000

$28.000

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11*

BillionsGF Tax Revenue

GF Non-Tax Revenue

Estimate

2009-10: Included $2.1 Billionin Fund Transfers


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Pension Spike and Future Costs

The states two pension systems (SERS and PSERS) are facing a

multi-billion dollar unfunded liability.

Budget

Notes

The Effect of the RecessionThe recession prompted major losses in the states pension systems

investments. PSERS alone yielded a 26.9 Percent loss in assets during 2008-09as a result of the economic decline. With about 77 Percent of the states

pension funds coming from investments, the recession has been a significant

factor in the states pension funding concerns.

In June, House Republicans were successful in adding key pension reforms to House Bill

2497. The reforms would help the state and school districts better control future pensioncosts. The bill is now before the state Senate.

Employer Contribution Rates for 2010-11PSERS: 5.64 Percent (2009-10 Rate was 4.78 Percent)

SERS: 5 Percent (2009-10 Rate was 4.0 Percent)


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House RepublicanEfforts and Solutions


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House Republican Efforts and Solutions

Revenue Solutions / Cost-Savings Options

Budget

Notes

Privatize the states liquor stores.

Better management of the states vehicle fleet.

Process other states SSI Payments.

Expanding purchasing power P-Cards.

Correct tax refund errors. Merge PennDOT and the PA Turnpike Commission.

Over the last several months, House Republicans have unveiled a list of

proposals that could account for billions of dollars in combined new revenue

and cost-savings all without increasing taxes. These proposals include but

are not limited to the following:

2010-11 Budget

The House GOP plans relating to P-Cards and tax refund errors were used in the 2010-11

budget as an alternative to new taxes. Greater use of these would lead to greater savings.


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Eliminating Documented Waste, Fraud and Abuse

Budget

Notes

Auditor General Jack Wagner has issued multiple audits citing rampant

waste, fraud and abuse in the Department of Public Welfare that was first

brought to light by House Republicans.

An audit of DPWs Medical Assistance program cited a 14 Percent error rate

in determining MA eligibility among 12,000 applications in 2009 (53 counties).

The Auditor General has cited a possible savings of approximately $320

Million by reforming DPWs administration of this program.

Given the massive increase in the states Medical Assistance population under Governor

Rendell 660,000-plus have been added for an increase of 44 Percent it is necessary to

question the departments operations given the Auditor Generals findings.


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Guidelines for the Future

In order to prepare for the future and help rebuild Pennsylvanias struggling

economy, House Republicans believe we must follow the following plans:

Control Spending: For years, the Rendell Administration has increasedspending at a faster rate than state revenues could grow. We need to ensure

future budgets spend only what we can afford.

Foster Job Growth: Pennsylvania ranks among the most non-business-friendly

states in the nation. In recent years, taxing businesses and job creators has

been the Rendell Administrations solution to revenue concerns. We mustreverse this trend and create a more business friendly and regulatory climate.

Increase Efficiencies: The state needs to reevaluate programs and services to

eliminate those that are no longer needed, consolidate those that are

duplicative and enhance those that have already proven to be successful.

Tallman August 2010 Budget Slide Show

Documents

Transcript of Tallman August 2010 Budget Slide Show