GENERAL FUND

The final revenue shortfall was $1.253 billion. However, with the numerous one time spending cuts and revenue enhancements the budget is fairly close to being in balance at the end of the fiscal year. Without the benefit of a balance sheet from the administration it appears that a small deficit of $75 million would have been realized if not for the liquidation of the rainy day fund and the placement of the entire billion dollars from the fund into the general fund. The final budget agreement uses only $750 million of the rainy day fund to balance the budget, yet the full $1.05 billion will be temporally transferred into the general fund. Next fiscal year $300 million will be placed in the rainy day fund’s successor fund to be called the Budget Stabilization Reserve Fund.

2002-03

There are not any certified revenue estimates available for the up coming fiscal year, but based upon the Governor’s original budget presentation, those estimates are probably about $600 million too high. However, with the increase in the cigarette tax and the tipping fees and the one time revenue from the change in the escheated properties, the budget should have a $225 million surplus at the end of the year. The tax bill is expected to bring in $1.14 billion in additional revenue for the fiscal year. Those items will be detailed elsewhere in this report.

While House and Senate Republicans are claiming that new General Fund spending for the 2002/03 fiscal year will be below available funding for the 2001/02 fiscal year, in reality spending was increased substantially. Spending increases were simply masked with the use of one time revenue sources that temporarily reduced the required amount of General fund spending during the next fiscal year. Two of these one time gimmicks alone, a $270 million transfer from the Pennsylvania Industrial Development Authority to reduce commonwealth debt service, and a $198.5 million transfer from the Tobacco Settlement Fund used to reduce the long term care appropriation in the Department of Public Welfare, boost total General Fund expenditures well above $21 billion, nearly $400 million above current year spending authorizations.

In order to balance this budget numerous one time spending cuts or revenue enhancements are used. For fiscal year 2001-02, $1.03 billion of such fixes are used. The amount used for the 2002-03 fiscal year is even higher at $1.61 billion. This $2.6 billion of resources will have to be replaced in real spending cuts or tax revenue growth in the 2003-04 fiscal year. 

There were numerous changes made to the commonwealth’s taxes in House Bill 1848. While there were some tax reductions as in previous years, the bill mostly contained tax increases. The full effect of the changes are that commonwealth revenues are increased by $1.14 billion in 2002-03. The changes are itemized below. The accompanying chart shows their two year cost.

The Governor’s proposal to increase the amount of the dependent deduction under the poverty forgiveness program of the personal income tax by $500 was passed. It is expected to reduce revenue by $12 million. Under this proposal, a family of four would owe no income tax if they earned $31,000 or less each year in taxable income.

The Governor also attempts to portray a smaller than already enacted capital stock and franchise tax reduction as a new tax reduction this year. On January 1, 2002 the rate automatically decreased to 6.49 mills due to previously passed legislation. The tax bill changed that decrease to only a quarter of a mill decrease making the rate 7.24 mills for the 2002 calendar year. This change saves the commonwealth $136.5 million in the 2002-03 fiscal year. The scheduled 1 mill decrease in 2003 is also scaled back to be a quarter of a mill.

The net operating loss carryforward provisions are expanded so that losses may be carried forward for 20 years instead of the current 10 years. The change affects losses incurred in 1997 so the first year that there is any cost to the commonwealth is 2008.

The research and development tax credit is extended for two years. Qualifying expenditures made in 2006 would be eligible to receive the credit.

The cigarette tax is raised by $.69 a pack to $1.00. The transfers to the CHIP program and the Agricultural easement fund are also changed from 3 cents and 2 cents a pack to fixed amounts the approximate what those respective funds received in 2001-02. Cigarette tax receipts are decreasing slightly each year as smoking decreases in popularity. By fixing the amount of the transfers, these two funds should have stable revenues in the future.

The deduction for depreciation is decoupled from the federal corporate and personal income taxes to prevent the commonwealth from losing revenues due to the changes made in the federal stimulus bill passed earlier this year.

The city of Philadelphia’s net profits tax is also effected by the change in federal depreciation allowed and that tax is also decoupled from the federal changes.

The situs for taxation of mobile phone service is clarified to be taxable in the purchaser’s residence.

The inheritance tax is decoupled from the federal estate tax regarding the so called "pick up" credit .

Enhanced enforcement of out of state corporations that have a presence in Pennsylvania but are merely pass through entities.

Conforming the rules for the sales tax and the personal income tax to the corporate net income tax regarding the bulk sales provisions. The CNI provisions are more stringent.

Strengthening the language on-out-of state vendors to insure that businesses doing business in Pennsylvania are taxable here.

The fines for operating a business without a required sales tax license are increased from between $100 and $1,000 to between $300 and $1,500.

Levying a surcharge on PURTA taxpayers if the amount of refund paid under this tax is more that $5 million in any year. It is not clear why the commonwealth should levy a surcharge if refund claims are more than $5 million.

The revenue neutral reconciliation rate surcharge on the gross receipts tax is permenately set at 15 mills. The tax is designed to insure that commonwealth tax receipts are not decreased by the changes brought about by electric deregulation. The rate had been set by the Secretary of Revenue each year. The rates had been much lower than 15 mills and in some years had even been negative.

The bill directs that PEMA is to determine if it is feasible to place a tax on wireless communication services in order to finance a $100 million bond issuance that, if approved, would be used to aid volunteer fire companies and emergency service companies. The bill also would place this referendum on the ballot in a general election.

Provides a checkoff on the personal income tax return for contribution for a Korean/Vietnam war memorial.

Eliminating the transfer of 1/4 of a mill from the capital stock tax to the hazardous sites clean up fund. Since this tax is being phased out, the end of this transfer was going to happen sometime but doing it now places $29 million into the general fund instead of the hazardous sites fund. If the amount of money in the fund becomes less than $5 million, the commonwealth is to transfer the amount equal to 1/4 mill to the fund.

The transfer to the Keystone Parks and Recreation fund is decreased to 10% in 2001-02 and 7.5% in 2002-03 from the realty transfer tax. 15% had been transferred in previous years.

Clarifies that the construction contractor exemption from sales tax is for contractors doing business with non-taxable entities only.

Allows for the advertised price to include the amount of sales tax applicable.

Provides that separately stated uniform commercial code filing fees are not taxable under the sales and use tax.

Clarifies that contractors who purchase goods to be used for contracted work done for farming concerns will be exempt from sales tax. Because if the farmer bought the goods himself, he they would be exempt from sales tax.

GENERAL OBLIGATION DEBT SERVICE

The amount appropriated for debt service in the 2002-03 budget is $349 million. $349 million will not pay the cost of debt service. The additional money needed will come from the bond proceeds generated from the capitalization of the monies in the PIDA fund. The Governor had originally requested $370 million for debt service and predicted that the PIDA capitalization would raise $280 million. It raised $10 million less so unless there is less money needed for debt service where the additional money for debt service will come from is not clear.

TOBACCO SETTLEMENT FUND

The Tobacco Settlement legislation was passed with much fanfare last June and the administration was quite proud that it had convinced the General Assembly to preserve the tobacco funds for health related purposes. Other than $68 million transferred in the initial legislation, it was not to be simply a supplement to the General Fund. Furthermore, funds not expended in any of the programs supported by the fund were to lapse into the endowment fund.

Now the Republicans are taking a different position. They impliedly admit that they have been tardy in developing the programs they proposed and enacted. As the result there will be substantial unspent funds. However instead of lapsing into the endowment fund as required by the Tobacco Settlement legislation, the Republican budget provides that $198 million in lapses and earnings are to be transferred to the General Fund to part of the state fund cost of Medical Assistance Long Term Care in the Department of Public Welfare.

The following chart shows how money was planned to be spent by the legislation, based on percentage of available funds allocated to a series of health related programs as compared to the amounts that are were projected to be spent by the Governor in his February budget presentation. In most cases, the adjustment to projections are for the 2001-02 fiscal year, but the Adult Health Insurance and Disabled Worker Medical Care projections are revised for the 2002-2003 fiscal as well.

receive a 2.4% decrease over the current year’s appropriation, as the Governor requested. The appropriation is equal, however, to the current available funding level, as $287,000 was placed in budgetary reserve.

Currently, 10,005 families caring for older members in their homes as an alternative to nursing home care receive funding. This large increase in the number of families served is possible due to a large increase in federal funds in the current year. Working through the AAAs, the program provides benefits counseling and, depending on income, financial assistance including supplies, services and home adaptations and devices.

The budget increases funding to expand the availability of home and community-based services for additional older Pennsylvanians as an alternative to nursing home care. A total of $35.1 million in Tobacco Settlement funding provides home and community-based services to older Pennsylvanians ineligible for the Federal Medicaid Community-Based Waiver Program because they exceed the personal asset limit. Program participants are required to share in an average of 50% of the cost of services. In the current year, approximately $8.8 million in unspent Tobacco Funds will lapse and be transferred to the General Fund.

The budget includes a modest $2.0 million increase in the PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 112 recipients. Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports.

The budget includes $250,000 for Alzheimer’s Outreach Services, as the Governor requested. The current year budget included $500,000, however $250,000 was placed in budgetary reserve.

The enacted budget includes no funding for Grants to Senior Centers. The current year appropriation was $2.0 million, however $1.0 million has been placed in budgetary reserve.

Lottery funding for the PACE and PACENET Programs is increased $36.0 million in the budget to provide for increases in the cost per prescription and the number of prescriptions per person, and does not provide for any program expansion. In addition, $33.2 million in Tobacco Settlement Funds is included to support pharmaceutical purchases under the PACE and PACENET programs. Act 77 of 2001, the Tobacco Settlement Act, provided funds to allow for an increase in the income eligibility for PACENET, raising the maximum by $1,000, and provided for a moratorium for PACE for those participants who, because of Social Security COLAs would have been dropped from PACE as of December 21, 2000. This moratorium expires December 21, 2002.

Enrollment in the PACE program decreases each year as Social Security cost-of-living adjustments make certain seniors ineligible for the program. Enrollment in the PACE program has declined from its peak of 478,000 in June 1988 to the current level of 199,439 as of the end of May 2002. Income limits in the program are fixed by statute and have only been increased twice during the past 13 years, while Social Security payments have increased 37%. The PACENET program, with its $500 annual deductible, was enacted in 1996 in an attempt to increase eligibility. The deductible is based on the idea that higher income persons can bear a larger portion of their pharmaceutical costs. The program has enrolled just over half of the number of seniors expected to participate, with a current enrollment of 28,736.

PACE is available for older Pennsylvanians whose annual income is at or below $14,000 for single persons and $17,200 for married persons. PACENET covers older Pennsylvanians whose annual income is between $14,000 and $17,000 for single persons and between $17,200 and $20,200 for married couples.

The 2002-2003 General Government Operation line item contains $30.9 million which is a deduction of 3.6% from the 2001-2002 state fiscal year. This budget has a special allocation of $183,000 for a food certification training program. This program is to train all those non-profit corporations who handles food as part of any fund raising activities.

The Farmer’s Food Market Coupon program has received an appropriation of $1.455 million in the 2002-2003 budget. However, there is special language in the budget that specifies that at least $500,000 shall be used for senior citizens within the program.

The Agricultural Promotion, Education and Export line item received $1.379 million in the 2002-2003 state fiscal year or an increase of $74,000. This is one of the very few increases the Department did receive, however modicum. The budget sets aside $100,000 of this program to be used exclusively for Pennsylvania wines.

A Veterinary Distance Learning Program is the only new program funded by the 2002-2003 state budget for $100,000 within the Department of Agriculture. This program will allow rural veterinary clinics to receive vital information from the state’s veterinary centers and labs that are operated by the University of Pennsylvania and Penn State.

Net job growth in Pennsylvania has trailed most of the nation, remaining in the low to mid 40’s among the 50 states during the past decade. Some recent trends may be slightly more positive, however. The current economic slowdown has not impacted Pennsylvania more severely than most other states, as was the case during past recessions. Currently, unemployment in the commonwealth is below the national average (5.7% vs. 5.8%). Total state employment continues to decline, including a 15,700 net loss of jobs since the beginning of the year, but Pennsylvania’s relative ranking among the fifty states has improved slightly to 35^th through May of 2002.

Historically, when competing for new business location or expansion projects, the commonwealth has attempted to compensate for some of its deficiencies by offering an aggressive array of subsidized loan and grant incentives to attract jobs. Several recent national comparisons suggest our programs are among the largest in the nation. While some belt tightening could easily be absorbed, given the net loss of more than 65,000 jobs this past year and an uncertain economic future, funding cuts for several of these programs certainly won’t make reviving our state economy any easier.

Nearly all of the major business financing programs will receive reduced appropriations when compared to their available year funding amounts. Opportunity Grants will be reduced by $12 million, Infrastructure Development is reduced by $4.1 million, while last year’s decision to sell the existing loan portfolios of the Small Business First Fund and the Machinery and Equipment Loan Fund will reduce available funds for both programs by more than $20 million. Technology programs will be cut, with a proposed $2 million reduction for the Ben Franklin Technology Development Authority. All of these funding reductions were part of the Governor’s original budget request.

Despite these cuts, the Department of Community and Economic Development will have an estimated $300 million available for business financing programs, more than $70 million for technology programs, and $60 million through the Tobacco Settlement Fund for venture fund initiatives.

The final budget agreement includes a $270 million transfer of Pennsylvania Industrial Development Authority (PIDA) reserves to reduce General Fund debt service payments. The fund transfer was approved by the PIDA Board last month, following a new bond issue that pledged future PIDA loan repayments. Future General Fund appropriations to PIDA will have to be increased to replace these assets.

Funding for community programs is also reduced significantly. Housing and Redevelopment Assistance is cut by $3 million, New Communities initiatives will be reduced by $1.5 million, and Community Conservation and Employment funding has been lowered by $3 million.

The budget restores $70 million for Community Revitalization grants and includes an additional $30 million for other special appropriations.

The Governor has highlighted a new multi-agency $23.4 million job training initiative. However, the only new funding included in the initiative is a $5 million appropriation for Workforce Leadership Grants, intended to guide training funds to be more responsive to business needs. The balance of the funds are redirected state and federal appropriations from existing programs.

The General Government Operations appropriation has received $1.806 million or a 10.13% increase.

State Park Operations has received a $688,000 or a 1.10% reduction.

The Heritage and Other Parks appropriation has received a $1.100 million or a 9.33% increase.

Forest Pest Management has been reduced by $2.007 million or 36.91%.

State Forest Operations has received a $936,000 or a 5.66% reduction.

The enacted budget contains legislation which would legalize the $35 million reduced transfer to the Keystone, Recreation, Park and Conservation Fund from the State Realty Transfer Tax.

State spending for the Department of Corrections will rise above $1.26 billion in the new budget. It should be noted that more than half of the $101 million increase is due to the use of $60 million in onetime revenue to pay for current year Corrections expenditures. Unfortunately, inmate growth that had slowed considerable the past few years has again begun to accelerate. The offender population reached 39,074 inmates by the end of May, more that a 5.5% increase (2,054 inmates) above the prior year.

The renewed growth means significant increases will likely be necessary for the 2003/04 fiscal year. Each one percent increase in prison population growth costs the commonwealth more than $12.5 million. When factoring in the cost of inmate health care, education and training expenses the average cost per inmate will reach $32,000 in the new budget.

Further facility expansions this year will include Laurel Highlands renovations, adding 505 additional beds, a new restricted housing unit at Muncy with72 beds and a new 60 bed community corrections center. Planned expansions during the next fiscal year will be highlighted by the opening of the new Fayette Institution to replace the current state prison in Pittsburgh. Although, the rising population has already delayed the planned closing of the Pittsburgh facility, after Fayette is open. Other expansions next year would include a new 230 bed housing at Cresson, a new 110 bed unit at Pine Grove, and a 148 bed unit at Graterford. The only other new institution, currently under construction in Forest County, will not be completed until later in 2003.

Probation and Parole

Probation and Parole spending will total $101.7 million in the new budget. This funding will include $20.1 million for county Adult Probation grants. Total General Government support of more than $78 million should be sufficient to keep average parole agent caseloads around 65.

The enacted budget contained a number of increases over that proposed by the Governor in his budget request to the General Assembly. Most of these increases appear to have been driven by the legislative intent to reduce the disparity between the proposed funding for the School District of Philadelphia which, in addition to normal formula funding, also received a separate $75 million line item appropriation in the original Governors’ budget. Ultimately, in the final version of the budget, the school District of Philadelphia received a $25 million separate line item appropriation since the remaining funds for the School District were contained in various line item appropriations which had been increased to provide additional funding for all 501 school districts. Therefore, while the School District of Philadelphia will receive funding commensurate with the amount originally proposed by the Governor, the remaining school districts will also receive increased funding resulting from the legislative additions to the budget. Those increases are related to increased funding for the school subsidy, an increase in the reimbursement for the transportation of nonpublic and charter school students and a new reimbursement to school districts for the partial cost of charter schools. To see what new additional funds your school district will receive please see the printout furnished with this material. That printout shows increases to all 501 school districts as a result of increases in the school subsidy, nonpublic and charter school transportation and reimbursements to school districts for charter school costs.

A number of the other basic education appropriations were reduced further than that initially proposed by the Governor. A partial listing of those appropriations follow. A printout containing all General Fund appropriations is furnished as an attachment to this material.

Special Education received a $12.921 million or a 1.5% increase.

School Performance incentives have been reduced by $11.892 million or 32.23 %, from $36.892 million to $25.0 million.

The Read to Succeed program was reduced from $25 million to $15 million accounting for a decrease of $10 million or 40%.

The Technology Initiative was reduced from $26.6 million to $5.070 million. This represents a $21.530 million or 80.94% decrease.

Funding for Job Training programs were eliminated. The program received $5.100 million in FY 2001-02.

Independent Schools were reduced by $500,000 or 25% - from $2.0 million to $1.5 million.

Teacher Professional Development has been reduced by $3.306 million or a $36.26%. The total appropriation is recommended at $5.811 million.

There were a variety of minor changes, some reflecting the programmatic intent of the Administration but many based solely on the need of the administration to fund the current commitment of existing formula’s These were:

State Library - $43,000 or a 1.0% increase.

PA Assessment - No increase. Held at $20.656 million.

School Improvement Grants - No increase. Held at $26.661million.

Authority Rentals & Sinking Fund - +$7.017 million or a 2.54% increase.

Pupil Transportation - +$23.138 million or a 5.57% increase.

Early Intervention - +$384,000 or a 0.37% increase.

School Food Services - +$254,000 or a 1.04% increase.

Textbooks /Supplies Nonpublic Schools - +$218,000 or a 1.0% increase.

School Employees Social Security - +$21.235 million or a 5.35% increase

School Employees Retirement - -$10.567 million or a 19.2% decrease.

The various library appropriations, which received significant increases in past years, have received no increase in the enacted budget.

The budget includes a $5.9 million increase in funding for Community Colleges over the current year. This is a slight increase over the Governor’s request, in anticipation of increases in enrollment. Funding would allow for the continuation of current FTE reimbursement and anticipated increases in enrollment. The budget does not provide funds for workforce development grants or separate funding for capital projects.

Based upon enrollments, the appropriation would be tentatively distributed to the community colleges as follows:

The budget includes $6.0 million to provide assistance in securing dormitory sprinklers. This is second-year funding of a $44.0 million, 5-year commitment to subsidize any interest rate costs exceeding 3% on bonds used to pay for sprinklers.

The budget discontinues funding for the higher education graduation incentive program Governor Ridge introduced to encourage public and private higher education institutions to offer the opportunity for undergraduate students to complete degrees within four years.

The budget includes $4.5 million for Higher Education Technology Grants, to provide for competitive grants focused on innovative approaches to community-based networking and for curriculum development for information sciences and technology programs. Funding is targeted toward workforce development, research and professional development programs as well as infrastructure to interconnect community networks. Funding may also be targeted toward the development of curriculum for information sciences and technology programs. Through these networks, students and teachers will have access to a wide range of educational resources beyond the traditional institutions and geographic boundaries and will progress toward a future classroom which has no boundaries.

The budget includes $6.0 million for Higher Education Equipment

Grants, as in the current year’s budget. The funds would be distributed to institutions of higher education for the purchase, lease or acquisition of Pennsylvania-based equipment in support of undergraduate instruction. Distribution of funds is based on full-time equivalent undergraduate students from all eligible institutions applying for grants. Those institutions eligible include: community colleges, state-owned and state-related institutions and independent colleges and universities. In the current year, $2.0 million has been placed in budgetary reserve.

Also included is $1.0 million for Engineering Equipment Grants. Funds are provided for grants to engineering degree-granting schools to assist in the acquisition of new engineering equipment or the upgrading of existing engineering equipment that is necessary to provide students with the courses required to obtain a degree in engineering.

The State System of Higher Education receives a 3.0% decrease over the current year, or a $14.2 million decrease. The State System was requesting a 5.5% increase from the state in its education and general appropriation. Certainly a substantial tuition increase will be necessary at this level of state support. The System is anticipating an 8% to 9% increase in tuition, which would raise tuition bills from $320 to $362 for the next school year. Tuition will be set by the board later in July.

In addition, the System will receive $6.3 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance, and is eligible for a portion of the technology grants, the higher education equipment grants as well as money for sprinklers.

The Pennsylvania State University, Temple University and The University of Pittsburgh will receive a 3.6% decrease in the budget from the current year’s level. Lincoln University will receive a 1.1% decrease. The Governor’s budget included 5% cuts for the four state-related institutions. Some of the extra funds that Penn State, Pittsburgh and Temple received was targeted for their medical schools. It should also be noted that in the current year, 3% of the appropriations were placed in budgetary reserve, and were therefore unavailable to the institutions.

Again one can assume substantial tuition increases will be necessary at this level of state support. Temple, for example, has raised tuition for next year by 9%, for an in-state yearly tuition rate of $7, 752 up from $7,110 for last year. Penn State will set its tuition later in July, and anticipates tuition increases of 10% or 14%. Tuition increases in that range could raise tuition by $705 to $988.

Additionally, all the state-related universities are eligible for a portion of the technology grants, the higher education equipment grants as well as money for sprinklers.

Overall, state support for the State-Aided Colleges and Universities is reduced by 5.0% in the budget, with some institutions receiving even larger reductions. The University of Pennsylvania receives a 4.0% increase, primarily for its veterinary programs. It should be noted that 3% of the current year appropriations were placed in budgetary reserve and therefore were unavailable to the institutions.

In the 2002-03 budget, all the medical school appropriations will receive appropriations equal to the original levels of funding in the current year.

The budget includes a 3.5% increase for the Grants to Students Program. The

Governor had originally recommended only a 2% increase. This is the state’s scholarship program which helps students pay tuition at an accredited college or university. Students who attend private schools, which charge higher tuition, generally qualify for more aid.

The PHEAA Board annually determines the distribution of funds to applicants on criteria including family income, family size and the cost of the institution the student will be attending. Currently, 135,500 students receive grants and the average award is $2,535. The Board will determine later this month how this increase of $11.8 million will be distributed; for example, if more students will qualify, and/or wether the average grant amount will be increased.

The budget includes a $2.1 million decrease for the Institutional Assistance Grants Program, or a 5.0% reduction. These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions. This funding reduction will decrease the per capita grant from $1,127 to $1,070 for an estimated 38,000 students.

The Matching Funds Program, which disburses matching funds as a percentage of the federally-required match for the Federal Perkins Loan Program and the Federal Work-Study Program, would receive a 12.8% increase to provide match for increased federal funds.

The budget continues the Agricultural Loan Forgiveness Program. The Child Care Loan Forgiveness Program receives no funding.

The budget includes $6.2 million to continue the SciTech and GI Bill Scholarships to provide an incentive for Pennsylvania students to pursue education and training in science and technology and stay in Pennsylvania after graduation, thus expanding Pennsylvania’s skilled workforce.

Federal funding in the amount of $1.5 million will be available to expand programs that serve low-income students, including grants and scholarships for post-secondary education.

An appropriation of $2.1 million is included for the Cheyney University Keystone Academy, to recruit gifted students to enroll at the university.

In the current year’s budget, Tobacco Settlement Funds were appropriated to PHEAA to implement the Pennsylvania Medical Education Loan Assistance Program and the Loan Forgiveness Program for nurses. These were one-time appropriations, therefore no additional funding is included.

The enacted budget has eliminated any General Fund Transfer to The Environmental Stewardship Fund. When originally implemented this Fund was to receive a $100 million annual transfer from the General Fund. Current plans are to only transfer $50 million of the $100 million expected for FY 2001-02.

For FY 2002-03, the anticipated $50 million transfer (reduced from $100 million) from the General Fund will be replaced by $50 million which will be derived from a $4.00 increase in the tipping fee for trash disposed of in the Commonwealth’s landfills. The remainder of the funds derived from the $4.00 tipping fee will go into the General Fund. Therefore, within the new legislation, Growing Greener will be funded at a level of $85 million derived from the following: $50 million tipping fee, $30 million Recycling Fund and Hazardous Sites Cleanup Fund, and $5.0 million from the landfill post closure fund.

For FY 2003-04 all funds (estimated to be $92-$94 million) derived from the $4.00 tipping fee would go into the Environmental Stewardship Fund. Estimated monies, from all sources, going into Growing Greener if the full $4 per ton fee is dedicated to it would be $129 million. However, reduced General Fund revenue estimates of 3% could trigger a 25% transfer to the Commonwealth’s General Fund from funds generated by the $4.00 tipping fee.

Beginning in FY 2004-05 and continuing into year 2012, all funds derived from the $4.00 tipping fee are to be transferred into the Environmental Stewardship Fund. The $4.00 tipping fee is in addition to funds derived from the landfill post closure fund, the Recycling Fund and the Hazardous Sites Cleanup Fund. However, transfers from these latter two funds are expected to sunset, as stipulated under current law, in FY 2003-04.

With these new provisions, the Environmental Stewardship Fund is expected to receive $1.33 billion over its life versus $645.88 million for the original program.

The General Government appropriation has been reduced by $1.218 million or 5.56 %.

Cleanup of Scrap Tires has been reduced by $2.0 million or 50%.

Environmental Protection Management has been reduced by $2.382 Million or 5.11%.

Environmental Protection Operations has increased by $579,000 or 0.75%.

Black Fly Control and Research has been decreased by $196,000 or 4.0%.

West Nile Virus Control and Research has been decreased by $335,000 or 4.06%.

Sewage Treatment Plant Operations Grants has been increased by $1.022 million or 2.0%.

The Office of Pollution Prevention and Compliance Assistance has received a $29,000 or a 0.77% decrease.

The appropriation for the Chesapeake Bay Commission has received a $75,000 or a 22.06 % reduction. The budget indicates that this is due to nonrecurring program costs.

Full Cost Bonding received $7.0 million in FY 2001-02. The enacted budget contains no funds for this program.

The Safe Water appropriation has received a $2.0 million increase, thereby bringing the total appropriation to $11.0 million.

The enacted budget contains legislation which would legalize the $35 million reduced transfer to the Keystone, Recreation, Park and Conservation Fund from the State Realty Transfer Tax.

The Department has received a number of increases, most of which are tied to the security and homeland defense concerns.

General Government operations has increased by $1.866 million or 2.87%.

Capitol Police Operations has received a $2.856 million or a 30.93% increase.

The $1.0 million Information Systems appropriation has been eliminated.

The 2002-2003 budget contains an increase of approximately $1 million for the Bureau of Quality Assurance. A new initiative is included in this increase entitled - Enhanced Acute Ambulatory Care Oversight. This new program worth $568,000 is to improve the oversight of hospital and ambulatory care facilities. It also provides for the timeliness of inspections, the monitoring of corrective action plans and the investigations of incidents and complaints.

This budget reduces the level of funding for Cancer Programs from $3.89 million in the 2001-02 fiscal year to $3.59 million in 2002-2003. However, the 2002-2003 fiscal year budget does provide for a new initiative entitled, "rural cancer outreach". This new program will be funded at $200,000.

This budget contains a decrease in the program entitled, Assistance to Drug and Alcohol Programs. In the 2001-2002 fiscal year it was funded at $41.078 million, however, in the 2002-2003 fiscal year it was reduced to $40.360 million. This is the first decrease in funding for this program since the 1996-97 state fiscal year. This is disconcerting, since the waiting lists for those attempting to receive treatment at residential and outpatient drug and alcohol facilities continues to grow. Additionally, this budget contains new language that this allocation can be made to private institutions as well as single county authorities.

The 2002-2003 budget eliminates two major programs. It cuts the Medical and Surgical grants program and the Community - Based Health Care Assistance program at a cost of $20 million and $25 million respectively. Additionally, according to the Department, it will not be able to spend approximately $35 million that was appropriated in the 2001-2002 fiscal year for the youth tobacco prevention and cessation programs. Therefore, this money will lapse back into the Tobacco Endowment Fund or the General Fund.

The Commission’s Maintenance Program receives $1.9 million in the budget, a 2.0% decrease from the current year. Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are also decreased by over $7.4 million in 2002-03 to $6.0 million. Funding is available to Pennsylvania non-profit organizations and public agencies that operate a publicly accessible historic property listed in, or eligible for, the National Register of Historic Places, or that operates a contributing historic property in a National Register historic district. Grants are awarded on a 50-50 matching basis and support projects in the areas of redevelopment, preservation and rehabilitation and restoration.

There is no increase in funding for the Museum Assistance Grant Program which receives $4.5 million. The Museum Assistance and Local History Grant Program is a competitive financial assistance process available to all qualified history related institutions within Pennsylvania. It is anticipated that 240 museum assistance competitive grants and 140 general operating support grants will be awarded in the 2002-03 fiscal year.

The budget includes decreases in funding of between 4.4% and 5.2%, for the individual Non-Preferred Museums that historically receive funding. These funding amounts are the same as the Governor requested.*

The General Government appropriation is increased 2.5%. Included in this amount are funds to develop an electronic document and records retention system; administrative and operational support at the Pennsbury and PA Military Museum sites; additional funds for the operation of the State Museum; and funds to operate the Commonwealth Bookstore.

HOMELAND SECURITY

The final budget includes state, federal, and capital funds totaling $72.7 million in 2001-02 and $132 million in 2002-03 to provide for strengthened security in the Commonwealth. This funding will be distributed across nine different departments and will be used to support a variety of security initiatives. The following table provides a summary of homeland security spending broken down by department for 2001-02 and 2002-03.

The budget includes state supplemental appropriations totaling $6.3 million for 2001-02. Of this amount, $4.4 million will be distributed to PEMA and $1.8 million to the Department of General Services in order to provide for immediate security needs relating to state and local emergency response capabilities and infrastructure improvements at Commonwealth facilities.

The additional General Fund money for 2001-02 will be accompanied by a federal supplemental appropriation. The exact amount of federal money that the Commonwealth will receive has not yet been determined by Congress, however, it is likely that ample funds will become available to provide for the the $66.5 million in federal spending outlined in the Governor’s budget proposal. The bulk of federal supplemental funds for 2001-02 would be distributed to the Department of Health for public protection, as well as to the State Police to enhance law enforcement preparedness and cyber security.

The 2002-03 budget includes $38.3 million in state funds and $30 million in capital funds to continue security efforts in the state. These funds will provide for initiatives including the full implementation of the Statewide Public Safety Radio System and an additional 100 State Police troopers. Improvements to Commomwealth facilities will continue in terms of infrastructure, data security, equipment, and additional staff. State funds will also provide for environmental and agricultural preparedness, as well as the ongoing enhancement of response capabilities of emergency services at the state and local level.

Federal funds for 2002-03 have not yet been agreed upon by Congress. The Governor’s budget proposal outlines a $63.8 million spending plan for federal dollars that is anticipated to receive sufficient funds. Federal security funds will be concentrated in the Department of Health which is expected to receive approximately $47 million in 2002-03.

The enacted budget includes a $14 million or 9.9% General Fund increase for the Office of Information Technology appropriations. Even though several appropriations received funding decreases, significant increases were maintained for Commonwealth Technology Services and Integrated Management Systems. These increases were sufficiently large to offset other decreases in expenditures, as well as $73.9 million in nonrecurring costs from fiscal year 2001-02.

The budget includes a $20 million increase for Commonwealth Technology Services (CTS) which is comprised of five units responsible for the management and use of the state’s technology investments. This large increase in funding is due in most part to the significant increase in spending for Homeland Security. $6.5 million in state funds has been provided to CTS in addition to $4.7 million in Motor License Funds that will be used for the first year operation of the Statewide Public Safety Radio System. CTS will also receive $2.7 million in state funds supplemented by $5 million in capital funds to enhance data security at two facilities.

The Integrated Management Systems appropriation received an increase of $22.3 million for 2002-03. The size of this increase is understated considering that the 2001-02 budget contained $44.1 million in nonrecurring costs within this appropriation. The Governor’s budget proposal indicated that $69.5 million would be used for the continued implementation of the Enterprise Resource Planning (ERP) project that will fully integrate the Commonwealth’s administrative functions, including accounting, procurement, budgeting, payroll, and human resources.

The final budget includes $35.1 million in state funds, $116 million in federal funds, as well as $30.7 million in state cigarette tax revenue for the Children’s Health Insurance Program (CHIP). The amount of cigarette tax revenue transferred to the Children’s Health Fund has been changed from 3 cents per pack to a fixed annual amount.

CHIP is designed to provide free or low-cost health care insurance to children under 19 whose families cannot afford private health insurance but earn too much to qualify for state medical assistance. Currently, a total of 120,408 children are enrolled in the program. Over 112,000 of those enrolled receive free benefits and only 8,093 receive subsidized benefits. There are still approximately 258,000 children in Pennsylvania who have no health insurance coverage. Of this number, 41,386 are estimated to be eligible for CHIP but are not yet enrolled. Funding will be used in fiscal year 2002-03 to continue and expand the department’s outreach activities designed to target and enroll eligible children. The department’s goal for the upcoming year is to increase enrollment to 133,041.

The budget for 2002-03 should include $93.3 million of Tobacco Settlement funds for the new Adult Basic Health Insurance Program. $17 million of this amount, however, is planned to be withheld from the program. This is in addition to $77 million in appropriated funds that went unspent in 2001-02, delaying the start of the program from March until July. With the passage of Senate Bill 1366, these lapsed Tobacco funds plus the interest earned will be transferred into the General Fund and used to support Medical Assistance Long-Term Care. The decrease in funds for Adult Basic in 2002-03 will significantly reduce the number of uninsured adults expected to receive health coverage through the program from 60,000 to 80,000 persons to only 40,000. Even though lapsed Tobacco money will still be used for health purposes, Act 77 of 2001 designated 30% of Tobacco Settlement funds for an Adult Health Insurance Program. These funds should now not be used to support General Fund expenditures in order to reach a balanced budget.

The Adult Basic Health Insurance Program will provide health insurance coverage to uninsured adults between the ages of 19 and 65 whose household income is less than 200% of poverty. The program is intended for those low-income adults who have jobs but cannot access coverage, or are between jobs. All adults enrolled in the program must pay a monthly premium of $30 in order to receive benefits. Unlike CHIP, the benefit package is basic, including services such as emergency care and physician services.

With the passage of Senate Bill 1366, $100 million will also be transferred from the Underground Storage Tank Indemnification Fund to the General Fund to provide additional revenue necessary to balance the budget. The amount transferred, plus interest, is to be repaid over a ten-year period beginning in fiscal year 2004-2005.

As part of the budget package, the Senate passed HB 2322, which amends the Judicial Code to increase filing fees for the benefit of the Judicial Computer Augmentation Account and a new Access to Justice Account. However, the Senate acted too late on June 28 for the House to consider Senate amendments.

When the legislation becomes law, the fees will be increased in the following manner:

In 2002-03, the fees will be divided so that 90% go the Judicial Computer Augmentation account and 10% will be deposited in the Access to Justice Account. In the following two years, the division will be 85%/15% and thereafter the funds will be divided 80%/20%.

The funds in the computer account will be used by the court system to implement the Common Pleas Criminal Project which will create a single statewide computer system for the criminal division of the courts of common pleas. The conceptual design of the automation of the criminal division was completed during the current fiscal year and became the basis for a multi-year projection of required funding through 2005-06. Without this additional funding, financing of the criminal division project will be in difficulty during the 2003-04 fiscal year.

The monies in the Access to Justice Account are to be appropriated annually to the Administrative office of the Pennsylvania Courts [AOPC]. The AOPC is authorized to distribute these funds to the Interest on Lawyers Trust Account Board [IOLTA]. The IOLTA Board is authorized to contract with eligible legal service providers to furnish civil legal assistance to the poor or disadvantaged. The Access to Justice funding sunsets in five years.

On an annualized basis the current revenues from these sources raise approximately $5.1 million. These fee increases will raise $33 million. Of the total $38.1 million, 3.8 million will be available for the Access to Justice Account and the remaining $34.3 million will be available for judicial computer system investment.

The Judiciary budget provides for 8 new county court administrators, now called district court administrators. The county court administrators were moved from county payrolls to the state two years ago. That action was the first step in the Montemuro plan for the implementation of Allegheny County v. Casey. The remainder of the Montemuro plan for state funding of county court costs has not been implemented.

The new program established last year as part of the 2001-02 budget reimbursing counties for their Senior Judge Costs is funded at the same level as the current year, $3 million.

The budget funds the 15 new judges who took office in January 2002 for the entire fiscal year 2002-03.

The Pittsburgh Magistrates Court which received $1.2 million in 2001-02 was not included in the 2002-03 budget.

The new budget for the Department of Labor and Industry would fund most programs at or near current year funding levels. The General Government appropriation for the Department was reduced by more than $2 million.

The transfer to the Vocational Rehabilitation Fund is increased by $881,000 to total $37 million in the new budget. No increase above current year funding is provided for Vocational Rehabilitation Services, Supported Employment, or Centers for Independent Living.

The Federal Workforce Investment Act of 1998, which replaced the Job Training Partnership Act, gives the state considerable flexibility to streamline the delivery of federally funded job training services. Numerous programs have been consolidated into three basic grants: adult employment and training, disadvantaged youth employment and training, and adult education and family literacy programs. The Department is expecting to spend approximately $100 million for Workforce Investment Act programs during the next fiscal year. Federal funding decisions later this year could further impact this spending. President Bush’s proposed budget would make major reductions in funding for these training programs, particularly youth programs.

The budget includes a 5.62% decrease in state funds for the department’s general government operations.

$1.2 million of these funds will be used to purchase additional equipment, enabling 97 armories, 6 air bases, 6 veterans’ homes, the Scotland School for Veterans’ Children, and reservation staff located at Fort Indiantown Gap to participate in the Statewide Public Safety Radio System.

The department will receive an 8.5% increase in state funds to support the six state veterans’ home facilities, including a new home located in the Delaware Valley which is expected to begin accepting residents in the fall of 2002.

The budget also includes an 8.3% increase for the Scotland School for Veterans’ Children. This school services children of Commonwealth veterans who are considered to be "at risk" for reasons such as a poor home or community environment.

The National Guard Education Assistance Program will receive a $2.1 million supplemental appropriation for 2001-02 to meet the demand for tuition assistance benefits. In 2002-03, the program will be provided an additional $2.4 million for a total of $10.5 million in state funds. This program provides 100% tuition grants for National Guard members in Pennsylvania who attend approved two or four year colleges in the state.

The department’s general government appropriation basically remains unchanged from the prior fiscal year. The enacted budget does include significant increases for several homeland security initiatives. A supplemental appropriation totaling $4.4 million has been provided for 2001-02 to begin implementing emergency preparedness initiatives. The 2002-03 budget includes $9.9 million in state funds to expand upon these efforts.

Security funds will be used by PEMA specifically to support training and emergency preparation exercises for state and local response organizations, emergency plan development for counties, the establishment and training of a second Urban Search and Rescue team, as well as the development of Regional Assessment Teams. Funding will also be used to provide for enhanced monitoring, detection, and communications equipment. Furthermore, the budget provides for the development of state and local shared information resources that will be used to track the availability of emergency response resources and map critical infrastructures within the state.

The budget does not restore any funding to the Volunteer Company Grant Program which received $25 million in 2000-01. With the enactment of House Bill 1848, however, a statewide referendum will be put forth at the next general election seeking voter authorization to incur debt of up to $100 million to establish an interest free loan program through which volunteer emergency service organizations can purchase equipment. This bill also requires PEMA to conduct a study on the feasibility of a monthly surcharge on the usage of cellular and wireless telephones as a means to offset the debt created through the proposed loan program.

In the spring of 2002, the General Assembly passed legislation which changed the methodology used to compute the PSERS contribution rate and placed a one year cap on that rate for both the pension and premium assistance at 1.15%.

The cap will not be in place for the 2003-04 fiscal year. The estimated employer contribution rate [assuming a 4.5% actuarial loss during 2001-02] will be 3.85 percent. Future years will be substantially higher. Each 1 percent will cost the Commonwealth approximately $60 million. The school districts will share the other $60 million of the cost.

On an historical basis, these employer contribution rates are still low. The school districts and the Commonwealth had enjoyed extremely low rates in the last few years. The recent history is as follows:

Unfortunately, the future is not bright. Based on the assumption that PSERS will lose 4.5% in 2001-02 and will make its actuarial assumption of 8.5% in succeeding years, the estimated contribution rates are:

The budget provides supplemental appropriations of a net $59.3 million in the Department of Public Welfare. The following table shows the DPW supplementals accompanied by the appropriation reductions.

(Dollars in Thousands)

While, most of the supplementals will also lead to higher expenditures in the 2002-03 budget, the SSI supplemental is due to a change in federal policy. The federal Social Security Administration distributes Pennsylvania’s SSI Supplemental benefits with its federal benefit. During the current fiscal year, the federal government changed the rules to require the Commonwealth to advance funds a month in advance; thus for this year, the department has to make 13 payments. In future years, only 12 months of payments will be necessary.

The Long Term Care appropriation is partially funded with an appropriation of $198.1 million from the Tobacco Settlement Fund.

The department expanded mandatory managed care in the ten county Lehigh/Capital Region in October 2001. Full implementation occurred in April 2002. Further conversions will not be implemented prior to July 1, 2003.

The Governor’s budget proposed a Program Revision Request entitled Medical Assistance Cost Containment . The proposal did not affect real costs, but placed limits on eligibility. The PRR was to save save $13.2 million in 2002-03 and $55 million in 2003-04.

When fully implemented 16,000 persons per month were to be affected. The following briefly describes the provisions:

1. Narrow spend-down for Medicaid applicants.

Currently Pennsylvania allows a person whose income exceeds eligibility income limits to use certain paid or unpaid medical expenses to "spend-down" the excess income to become eligible for medical assistance coverage normally available only for the lowest income persons. Under the change, spend-down coverage would only be equivalent to that of medically needy persons instead of the lowest income persons even if spend down principles reduced the income to that of the lowest income group. This provision is estimated to save $4.26 million in state funds.

2. Limit the use of unpaid medical expenses to establish medicaid eligibility.

At the present time, applicants for Medically Needy Only coverage can use certain paid and unpaid medical expenses as deductions to excess income to determine both retroactive and continuing eligibility. There are no time limits on the expense that can be used as deductions. The administration proposed to limit the use of those expenses to those expenses paid or incurred during the retroactive period of eligibility. This provision is estimated to save $4.6 million in state funds.

3. Tightening the eligibility for nursing home care

A. Currently a nursing home resident who is certified as able to return home within six months can have a monthly home maintenance deduction diverted from the nursing home payment to cover the costs of maintaining that home. The administration proposed to eliminate this deduction at an estimated savings of $1.47 million in state funds.

B. A nursing home resident with assets above the medical assistance limits can place the excess assets into a private annuity to generate monthly income for the spouse who remains in the community. The administration proposed to implement the Income First rule which has been recently approved but not required by the U.S. Supreme Court. The resident would be required to allocate more of that monthly income to the nursing home payment. This is estimated to save $1.151 million. While there were many objections to changing from a Resource First rule to an Income First Rule, the General Appropriations Act appears to allow the change to take place.

C. Medical assistance covers the full cost of nursing home care while the resident’s contribution is reduced to pay all previously incurred medical expenses. The administration proposed to set a limit of $10,000 on unpaid medical expense deductions when calculating the resident’s cost of care contribution. This is estimated to save $40,000.

D. Impose partial month ineligibility for asset transfers without fair market consideration at an estimated savings of $1.2 million.

4. Limits eligibility for children with disabilities based on parents income.

Currently, Pennsylvania does not consider parental income or resources or a child’s resources when determining financial eligibility for a child with a disability as defined by the federal Social Security Administration. Only the income of the child is considered if the child meets the poverty guidelines set by the federal government. Under the proposed change, resources will continue to be disregarded but the income of the parents [after some deductions] available to the child will be considered. This provision is estimated to save $1.167 million in state funds.

The General Appropriations Act contains language that partially averts the effects of the parental income proposals. It states:

"No funds from any medical assistance appropriation shall be used to pay for services for any child under 21 years of age who has a Supplemental Security Income (SSI) level of disability and whose parental income is not currently considered in the eligibility determination process, unless the custodial parent...has provided to the Department of Public Welfare...information as required by the department for inclusion in an annual report. Income information ...shall not be considered by the department when determining ... eligibility."

Both the House and Senate versions of Senate Bill 5 contained language requiring the physical and financial separation of women’s medical services programs from projects providing abortion or abortion related activities. The Conference Committee Report contains some language modifying that provision. It is as follows:

"The physical and financial separation requirement shall not apply to a hospital or to a project which receives federal funds pursuant to Title X of the Public Health Service Act...and which performs only those nondirective abortion counseling and referral services required under that act if failure to perform those services will result in the withholding of Federal funds."

Even though the federal TANF five year deadline is fast approaching and caseloads are beginning to increase, the budget does not contain any initiative either in the Cash Grant or New Directions appropriations to deal with these issues. The department has proposed regulations which would provide extended TANF eligibility based on hardship or domestic violence. In its regulatory materials, the department has stated that the state cost for a full year of implementation will be $7.5 million.

The Mental Health and Mental Retardation appropriations recommendations do not contain a COLA. Furthermore the initiative begun in the current year budget to recruit and retain direct care workers in the mental health and mental retardation programs has not been expanded. There is no money for Respite Care. No institutional closings are projected in this budget.

While Legal Services did not receive a state fund increase the Governor is requesting an additional $2 million in federal Social Services Block Grant funds for "Legal Service System Improvements." However House Bill 2322 discussed in the Judiciary materials increases court fees to provide $3.4 million for IOLTA.

The Child Welfare appropriation is increased by $46 million in accordance with the formula established in Act 30 of 1991. Total state and federal funds to the counties for child welfare purposes will be increased by $80 million from $1.212 billion to $1.292 billion.

While there is no increase in the state funding for Child Care, the budget proposes an additional $20 million federal child care block grant funding, increasing the total state and federal support for child care from $225.6 million to $248.5 million.

There are no increases in the appropriations for Domestic Violence, Rape Crisis, Breast Cancer Screening, Human Services Development Fund, or Homeless Assistance. The Community Based Family Centers program will not receive a state fund increase and is projected to receive $1 million less in federal Child Care Block Grant funding.

The Governor recommended no increases over the current budget year for any of the appropriations to the Attorney General, Treasurer or Auditor General.

The enacted budget follows the same approach, but provides $12.5 million for Escheat Administration and eliminates the ability of the Treasurer to expense administrative costs against escheat receipts.

Debt service is discussed separately in another portion of these materials.

The 2002-3003 budget contains many significant changes in their budget. This 2002-3003 budget contains $7.230 million for the salary and benefits of 100 new state troopers that will be hired during the fiscal year. This budget also contains $7.240 million to provide training, equipment, uniforms and new vehicles for the 100 new state troopers. Associated with the hiring of 100 new state troopers is the increased need for 40 more patrol vehicles at a cost of $860,000 that the governor has requested for the 2002-2003 state fiscal year. In addition, this budget contains $8.671 million for patrol vehicles that are needed to replace those that are no longer operable.

Also found within the State Police budget for the 2002-2003 state fiscal year is $3.6 million to be used for new mobile video cameras on patrol vehicles, additional crime lab equipment, and the acquisition of additional storage facilities used to store evidence.

This budget provides $1.421 million to upgrade the state police’s Automated Fingerprint Identification System to meet the new standards established by the F.B.I..

The governor is recommending that for the 2002-2003 budget contain $2.708 million to the Municipal Police Training program. At this level of funding the Municipal Police Training program will be able to develop a better database for all municipal police officers records. This will be particularly useful for mandatory training of lethal weapons for municipal police officers.

The 2002-2003 budget contains $588.308 million for highway and bridge construction projects. This level of funding includes the following appropriations: Highway and Safety Improvements, Highway Capital Projects (EA - Executive Authorization) , Highway Capital Projects - Excise Tax (EA), Highway Bridget Projects (EA), and Bridges - Excise Tax (EA). The 2001 - 2002 state fiscal year budget contained $551.357 million for the same appropriations.

The new budget provides $1.089 billion for highway maintenance. The maintenance appropriations include: Highway Maintenance, Secondary Roads - Maintenance Resurfacing (EA), Highway Maintenance Safety Projects, Highway Maintenance - Exercise tax (EA), and Highway Maintenance Enhancements (EA). The current year appropriation for highway maintenance was $1.040 billion.

Mass Transit Assistance grants were not increased in the final budget agreement. In addition to this $270.19 million grant, urban transit agencies are projected to receive Public Transportation Assistance Fund (PTAF) Grants of more than $188 million. Rural Transportation systems will receive a $1 million General Fund grant, along with an estimated $5.3 million in projected PTAF receipts.

Uncertainty remains, however, over future PTAF revenues due to changes in public utility taxes related to utility deregulation. During the current fiscal year PTAF Utility Realty Tax/Gross Receipts Tax revenues haven fallen nearly $10 million below the original estimate, while next year’s projections may be inflated by $12 million or more.

The budget includes more than a $10 million increase in the fixed route transit appropriation, supplementing the lottery funded free transit program, and a new $2 million appropriation for Regional Mass Transit Planning & Assistance. Lottery Funded support would grow to $137 for transit programs during the next fiscal year. Rail Freight assistance, already reduced in half during the current year, will receive only $4.25 million in the new budget.

On June 22, 2001 an official estimate for the 2001-02 fiscal year of $1,955,790,000 was certified. However, the governor in his February, 2002-2003 budget presentation had revised his initial estimate, and his new estimate was $1,978,560,000.

However, as of June 28, 2002, the last day of revenue collection for the 2001-2002 state fiscal year; the year to date revenue for the fund is $1,955,000,000. Therefore, the governor’s revised estimate for the 2001-2002 state fiscal year is -$23.56 million.

For the 2002-03 state fiscal year, the governor has estimated that the revenues for the Motor License Fund will be $1,998,900,000.