THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS

FISCAL YEAR 2004-05 GENERAL FUND BUDGET
ANALYSIS OF IMPACT ON PHILADELPHIA

Overview

            The enacted FY 2004-05 spending plan is generally in line with the Governor’s February proposal, as it provides for substantial increases in education spending without resorting to core tax rate hikes.

            The major difference between the Governor’s proposal and the final budget is the absence of Growing Greener II in the enacted spending plan.  Although the General Assembly ultimately elected not to impose new fees on hazardous waste disposal and toxic releases, there is a commitment to revisit the question of a Growing Greener II ballot question before the legislature adjourns in November.

            The licensing of slot machines and the accompanying property tax reform legislation is also significant, in that it will result in dramatic cuts in the resident and non-resident wage tax rates for Philadelphia’s workers.  Non-resident homeowners will further benefit from the property tax reductions they receive in their home school districts.

            Details regarding specific changes in funding levels and their anticipated effects for the City of Philadelphia follow.

Human Services

            Unlike the enacted budget for FY 2003-04, the FY 2004-05 spending plan contains a two-percent cost of living adjustment for human services programs that are not provided by county staff.

            The new budget level-funds Human Services Development Fund programs, once the COLA is backed out.

Psychiatric Services in Eastern PA (EPPI), which received $3.5 million in FY 2002-03, had its appropriation completely eliminated in the original FY 2003-04 budget proposal.  It was fully restored in the December 2003 budget agreement, however, and will receive $3.5 million again in the new fiscal year.

            The FY 2004-05 budget also contains $1.5 million for Philadelphia’s Mercy Hospital, which will be leveraged in order to obtain nearly $2 million more in federal matching funds.

            This budget also contains an additional $1 million (and a two-percent COLA) for homeless services in Philadelphia, along with new funds for safe neighborhoods and community education.  It is not yet clear how much Philadelphia will receive from the latter initiatives.

            Finally, the enacted budget also includes a new $10 million appropriation that is designed to help bring supermarkets into urban areas.  Philadelphia will receive funds through this appropriation in an amount yet to be determined.

         
Aging Services

            In the City of Philadelphia, state funds for aging services are allocated to the Philadelphia Corporation on Aging.  Services include nutrition, employment, transportation, domestic care, personal protection, long-term care assessment and both basic and intensive in-home services.  In FY 2004-05, the Philadelphia Corporation on Aging can reasonably expect to receive approximately $47.4 million.

            The PennCare appropriation now includes programs to expand adult day care services, which previously fell under a separate line item.  Philadelphia will also be eligible for additional funding for in-home services as an alternative to nursing home care under the Tobacco Settlement.  It should be noted that when combined with available federal and state general funds, the Philadelphia Corporation on Aging should receive roughly $71.8 million in the current fiscal year.

Library Services

            The Governor’s initial FY 2003-04 budget proposal called for a severe 50 percent cut in library assistance.  Had this draconian reduction remained in place, the Free Library of Philadelphia would have likely received roughly $4.9 million in the 2003-04 fiscal year.  Ultimately, the final 2003-04 budget agreement provided for a partial restoration of these funds, and as a result, the Free Library received approximately $6.0 million.

            Under the new distribution formula, the Free Library of Philadelphia can expect to receive slightly more than $7.2 million in state assistance through the Improvement of Library Services line item in the new fiscal year.

Higher Education

            The Governor requested relatively small increases for each of the publicly-supported institutions in Philadelphia in FY 2004-05.  These proposed increases ranged from 1.6 percent for the Berean Trade School to 5.0 percent for the Community College of Philadelphia.  The General Assembly responded with increases of 2.3 percent and 5.75 percent, respectively.

            The Governor’s proposal to carry forward the $3.0 million line item for Community College Facilities and Services was honored, although it is not yet clear what share of these resources would be directed towards Philadelphia.

            Despite this increase, the Community College of Philadelphia is likely to raise tuition rates as a result of past state funding shortfalls.  The Community College of Philadelphia continues to receive fewer dollars per student, both in operating revenue and total revenue, than any other community college in the Commonwealth.

            After backing out its Podiatric Medicine program, Temple, Philadelphia’s state-related university, is slated to receive a 3.1 percent increase in the upcoming year.  This is compared to a 2.5 percent increase for the city’s private institutions of higher education.

Basic Education Services

            The enacted FY 2004-05 budget includes an increase of approximately $25 million in the School District of Philadelphia’s Basic Education Funding subsidy, in addition to a 2.3 percent increase in support through the Special Education line item.  This spending plan also maintains the $25 million line item for the Philadelphia School District, which first appeared in FY 2002-03.

            The final FY 2004-05 budget also includes over $40 million from the new PA Accountability Grants program, plus increases of $10 million in Alternative Education grants and $6.6 million in tutoring grants.  In addition to these funds, the district’s charter school reimbursement will climb by $13 million over the prior year’s level.

PURTA Distribution to Local Governments

            Each October, the Department of Revenue distributes checks to municipalities and school districts from PURTA tax revenue collected in the previous fiscal year.  In 1999, the PURTA tax was “fixed” to provide a reliable tax collection stream.

            Due to declining PURTA tax collections, Philadelphia will only receive $4.0 million from this revenue source in the upcoming fiscal year.

Transportation Services

            For FY 2004-05, the Governor called for a $9.3 million increase statewide, of which SEPTA would have received approximately $6.5 million.  The General Assembly added an additional $8.5 million to the Mass Transportation Assistance line item above and beyond the Governor’s request, for a total increase of $17.8 million.  SEPTA will receive roughly $12.5 million in additional assistance in FY 2004-05 through this line item.  Including the local match, this will raise roughly $16.7 million for mass transit in the Philadelphia area.

            The final FY 2003-04 budget package also provided for future growth and stability for the Public Transportation Assistance Fund, by removing the PURTA and gross receipts tax components and replacing them with a dedicated share of sales tax receipts.  This year’s budget estimates that PTAF disbursements will reach $197.8 million in FY 2004-05, from which SEPTA should receive roughly $132.4 million.  The local match will place another $3.0 million in SEPTA’s coffers.

            There will be a statewide cut of slightly less than $2.4 million for “Older Pennsylvanians Transit”, which includes the General Fund appropriations for Fixed Route Transit, along with Lottery Fund support for Shared Rides and Free Transit.  According to the administration, however, the current level of services can be provided, despite the reduced expenditures.  The budget funds all transit commitments promised as part of the 1997 gas tax deal.

Health Care Services

* Rounds to less than $0.1 Million

            The final FY 2004-05 budget makes relatively few changes to the Department of Health’s appropriations.  Assistance to Drug and Alcohol Programs will be increased by 2.6 percent, which translates into more than a $200,000 increase for Philadelphia.  On the other hand, the Maternal and Child Health appropriation will be cut by almost $1 million statewide.  Philadelphia’s share of this reduction will be just above $400,000.

            Funding for most other research programs and support services in Philadelphia will continue to be funded at FY 2002-03 or 2003-04 levels.

Probation and Parole Services

            The FY 2004-05 budget contains an increase of 2.1 percent ($439,000) for the Improvement of Adult Probation Services.  Philadelphia’s share of this increase will be approximately $120,000.

Port Development

            The FY 2003-04 PennPorts appropriation provided additional resources to the Philadelphia Regional Port Authority for engineering, renovations, and deferred maintenance to Piers 38, 40, 78, 80, and the Pier 80 Annex.

            The enacted FY 2004-05 budget goes above and beyond the prior year’s level of support by providing $9.9 million for debt service and operating subsidies, plus an additional $3.0 million for earmarked capital and special projects, such as a new navigational system.

Housing and Redevelopment Assistance

            The FY 2004-05 spending plan provides an additional $5.0 million for Housing and Redevelopment Assistance on a statewide basis, which takes this line item to twice its FY 2002-03 level.  Due to this increase, Philadelphia will receive an additional $1.0 million in the new fiscal year.

State Parks

            The FY 2003-04 budget included an initiative within DCNR that provided $260,000 for operational support and equipment for Benjamin Rush State Park.  This was a one-time commitment that will not be carried forward.

Sewage Treatment

            The Governor’s FY 2003-04 budget proposal completely eliminated the Department of Environmental Protection’s Sewage Treatment Plant Operations Grants program, which had received $52.1 million in the prior year.  Unfortunately, the final spending plan did not provide for a restoration.

Historically, approximately 16 percent of these funds were directed to Philadelphia.  Had this program remained in place, the Philadelphia Water Department would have received a little over $8 million in FY 2004-05.

Homeowners Emergency Mortgage Assistance Program (HEMAP)

            The FY 2004-05 budget is the first since 1998 to include any funding for HEMAP, which offers loans to homeowners who have fallen behind in monthly payments due to unemployment or family medical emergencies.  Since its inception in 1983, over $45 million in HEMAP assistance has been distributed to Philadelphia homeowners.

            Despite the program’s diminishing resources, the weak economy has caused applications for this program to increase dramatically since 1997.  The unfortunate result is that HEMAP has been forced to decrease not only the number of loans it grants, but also the size of these loans.

            It estimated that Philadelphians will receive approximately $1 million from this appropriation, although that will ultimately depend on the quantity and the magnitude of the applications that are filed for HEMAP assistance.

County Court Funding

             In December 1987, the Supreme Court ruled in Allegheny County v. Casey that the local court system has been inadequately and unevenly funded by the General Assembly.  When the General Assembly failed to act, the county commissioners association brought an enforcement action.  In 1996, the Supreme Court appointed retired Justice Montemuro as a special master to submit a plan for implementation.  He recommended a phased implementation beginning July 1998. 

            The 1999-2000 fiscal year budget funded Phase I of the master’s plan, which moved 173 people to the state payroll.  The FY 2004-05 spending plan does not include funding for Phase II of the master’s plan, which would transfer all the court and minor judiciary staff to the Commonwealth’s payroll, along with court reporters, data processing personnel, masters, and administrative support staff.  This was originally slated to have taken place by July 1, 2000.

            The final FY 2004-05 budget contains increases for the appropriations to Philadelphia’s Traffic Court (12.4 percent) and Municipal Court (4.2 percent).  On the other hand, the budget cuts $500,000 from the Senior Judge Reimbursement line item, which will cost Philadelphia roughly $120,000.

            The FY 2004-05 budget also contains a new $525,000 appropriation for special gun courts in Philadelphia, which will exclusively focus on gun-related offenses.