THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS
FISCAL YEAR 2004-05 ANALYSIS
The final budget compromise for 2004-05 spends $23.280 billion. There are no tax changes in this budget. The expenditures will be detailed in this report. Once again the budget plan utilizes the federal recovery money that was made available at the end of July 2004. The budget plan spends the second half of that money or $378 million. The revenue has not been certified yet by the Revenue secretary. It is anticipated that the certification will be $400 to $550 million higher than was contained in the budget book in February.
The 2003-04 fiscal year ended with a revenue surplus of $636 million and a fund balance estimated to be $290 million. After a transfer of $72 million to the Rainy Day fund the Commonwealth should start the 2004-05 fiscal year with an opening balance of $217 million.
While Commonwealth ended the year with a large surplus and revenues are estimated to increase substantially in 2004-05, we face a difficult situation in 2005-06. In addition to the federal recovery money, intergovernmental transfers which have been the source of federal support primarily to the Medical Assistance Long Term Care appropriation, will decrease by 15% next year. Additionally, the reserve built up over the last 7-8 years has diminished. Medical Assistance expenditures are expect to rise in the 100’s of millions.
Facing those realities, the Governor requested the General Assembly to substitute state funds for IGT funds in order to retain a substantial IGT reserve. The Governor requested a total reserve of Rainy Day funds and IGT reserves of $520 million. The adopted budget provides reserves of $440 million, made up of a $190 million transfer to the Rainy Day Fund and the state fund replacement of $250 million of IGT contributions to Medical Assistance programs.
The budget will provide more than a $500 million increase in state support for public schools. Funding for the basic subsidy will rise by more than $150 million, special education will increase by $18 million, and vocational education programs will increase by 2.5%, while targeted initiatives will provide more than $300 million in new funds to local school districts.
The increased funding would reverse a trend of declining support for public education that has continued for more than 25 years in the commonwealth. Today, Pennsylvania ranks 49th among our 50 states in school funding equity. Currently, state funds account for only about 34% of the annual costs for our public education system in Pennsylvania. Throughout the U.S. the average state contributes an estimated 56% of total public education costs.
The basic subsidy will be increased by more than 3.5% for the 2004-05 fiscal year. The increase will include a $33 million poverty supplement, $21.5 million for growing school districts, and a new $11 million supplement for students with limited English proficiency. Other major funding increases include an additional $25 million for charter school reimbursements, and a $23 million increase in funding for Approved Private Schools and Chartered Schools for the Deaf and Blind.
The budget provides $200 million for the Accountability Grant program. Legislators had agreed to provide at least $175 million for the program during the 2004-05 fiscal year, as part of last year’s budget deal. The Governor had proposed an additional $75 million for the program, but the final budget agreement provides only $25 million of that request. Proposed Initiative funding will also include $15 million in state funds to supplement Head Start, and $47 million for tutoring programs, a $13 million increase over prior year funding.
School districts will have the flexibility to choose from a menu of eligible uses for the Accountability Grant program. These options will include all of the Governor’s proposed initiative programs including pre-kindergarten, full day kindergarten, and reducing class sizes during the early grades, as well as tutoring and other remediation and educational improvement programs. School districts will receive their full grant allocations in July of 2004.
The budget appropriates $38 million for the Education Assistance program to provide grants for tutoring assistance to 80 school districts currently not meeting academic performance targets as determined through state assessments to comply with the new federal No Child Left Behind standards.
Education Tax Credits
A new $5 million tax credit program, effective in the 2004-05 fiscal year, will support pre-kindergarten programs. In addition, the budget agreement enacted in December expanded the Education Improvement Tax Credit by $10 million during the current fiscal year. The $40 million program will provide $26.67 million in tax credits for non-public schools, and $13.33 million in credits for public schools.
Other Public School Funding
Other significant spending increases for public education programs would include a $34 million increase in Pupil Transportation reimbursements, $61 million to cover the state share of rising retirement contribution costs, and a $4.5 million increase for early intervention services.
Aid to Nonpublic Schools
Funding for Nonpublic education providers would also be increased by 2.5% in the proposed budget. This support would include $76.4 million for services, $23.37 million for text books, materials and equipment.
Funding for Approved Private Schools was increased by $20 million, including a $6.9 million appropriation for the reconciliation of past audits. A new funding system for both Approved Private Schools and Chartered Schools for the Deaf and Blind will eliminate future Department audits and provide a formula driven appropriation process for future budgets.
The Library Services program supports and improves state and local library services and ensures access to these services. The budget proposal includes s 21.2% increase for Library Services or an additional $10.1 million over the current year’s appropriation, for a total of $57.9 million.
The budget provides for a 10% increase for General Government Operations, mostly to provide for increased claims processing costs related to the PACE/PACENET Program expansion.
fund appropriation for the Family
The budget increases funding to expand the availability of home and community-based services for 3,524 additional older Pennsylvanians as an alternative to nursing home care. A total of $22.9 million in Tobacco Settlement funding is included in the budget to provide 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.
The Pre-Admission Assessment Program is increased by 3.6% for a total of $6.1 million. This nursing home pre-admission screening program helps older Pennsylvanians and their families determine the least restrictive environment needed and assists them in securing and managing intensive in-home services tailored to their needs.
This budget includes a 2 percent COLA in the PENNCARE appropriation above the increase the Governor had recommended, to continue the current Attendant Care Program and provide services to additional recipients. The lottery funded appropriation will be $21,899,000. Lottery funds support a wide array of social services and, along with Federal funds, are allocated to AAA’s in the form of block grants in proportion to each area’s share of the commonwealth’s elderly poor population, elderly rural poor population and the elderly minority poor population. Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports. Each AAA is assured, by law, of receiving at least as much state funding as it received in the previous budget year.
The budget includes $526,000 for Alzheimer"s Outreach Services. In addition, the Legislature included $600,000 for a Legal Advocacy Guardianship Program.
The Pharmaceutical Assistance Program provides help to qualified older Pennsylvanians who are 65 years of age and over and whose cost of drugs is a burden to them. The program is financed by the Lottery and Tobacco Settlement Fund revenue. For fiscal year 2004-05, the transfer of $370 million in Lottery funds and $30 million in Tobacco Settlement funds will provide assistance to at least 277,150 older Pennsylvanians at an estimated cost of $469.8 million.
Act 37 of 2003 provided for an expansion of the PACE and PACENET eligibility criteria, making more than 100,000 additional individuals eligible for enrollment. As of May 2004, 199,823 seniors were enrolled in the PACE program and 79,707 seniors were enrolled in PACENET. These enrollments have been steadily increasing. In May 2003, PACE enrollments were 191,719 and PACENET enrollees numbered 31,589. In addition, cost containment initiatives were enacted which will help to support the enrollment and prescription cost and use increases. In addition, the Federal Medicare pharmacy program is expected to result in as-yet unquantified savings to the Lottery Fund.
The Farmer’s Market Food Coupons program had an increase of $603,000, for a total of $2 million for the 2004-2005 state fiscal year. Under this program, women and children who are nutritionally at risk will be able to access fresh fruit and vegetables from Pennsylvania farmers. These state funds matched with federal funds will generate $8.7 million in benefits to almost 159,000 women, infants and children.
The 2004-2005 final budget provides $5.250 million for the Animal Health Commission, an increase of $1 million from the 2004-2005 proposed budget. The Commission promotes and is responsible for animal research and diagnostic programs within the Commonwealth.
The popular program entitled, Payments to Pennsylvania Fairs, received $4.4 million in the 2004-2005 enacted budget. This is an increase of $1 million from the amount appropriated by the Governor for the same fiscal year. This program allocates capital improvement project grants for eligible Pennsylvania fairs which benefit such organizations as the: county 4-H groups and FFA.
The State Food Purchase program benefited from an increase of $1 million in the approved final budget for the 2004-2005 fiscal year. The $17.450 million that this program will receive will allow each county to purchase food products for the economically disenfranchised.
In the 2004-2005 final budget the Crop Insurance program received $2 million; this is an increase of $1 million from the 2004-2005 proposed budget in February. This successful program encourages farmers to purchase crop insurance and to help them cover a portion of the policy and administrative costs.
Following General Assembly passage of most of the Governor’s $2 billion Economic Stimulus package in the Spring, the final budget includes only modest new initiatives for community and economic development spending. With a struggling, but modestly improving state economy, the budget would insure ongoing support for vital economic incentive programs, while modestly increasing several community development initiatives.
Business Financing Programs
The state’s major business financing programs are funded at current year levels including $50 million for the Opportunity Grant Program, $32.5 million for Customized Job Training, $25 million for Infrastructure development, and $53 million for the Ben Franklin Technology Development Authority Fund. These commitments, combined with other special fund resources will provide more than $300 million for business and technology development. The budget does include a $5 million increase in support for Industrial Resource Centers, providing technical and other consulting assistance to manufacturing industries throughout the commonwealth.
The new communities appropriation was increased to $19 million to provide $2 million increases for both the Main Street and Elm Street initiatives. Housing and Redevelopment Assistance will be increased to $30 million in the final budget.
Other DCED Programs
Other notable funding decisions include a $2.6 million increase in Tourist Marketing programs to enhance Pennsylvania’s image as a tourist destination and $3.3 million for Military Base Realignment and Closures.
State spending for the Department of Corrections will rise slightly above $1.3 billion, an increase of more than $39.3 million, or a 3% increase from the 2003-2004 fiscal year. The inmate population is the single most important factor that affects cost in the correctional system. The offender population reached 41,279 inmates by the end of December 2003. It is forecast that the inmate population will continue to grow in 2004 to 42,409 or a growth of more than a 2.7% increase (1,130 inmates). When factoring in the cost of inmate health care, education and training expenses the average cost per inmate is $28,236.
Our current state corrections system includes 26 institutions, 14 community corrections facilities, and a motivational boot camp. A new institution, SCI Fayette, opened in September 2003. SCI Pittsburgh will continue to downsize during the 2004-05 fiscal year, sending approximately 700 inmates to SCI Fayette. Another new institution, SCI Forest, is planned to open sometime in October 2004 with a capacity for 2,000 inmates. The proposed budget calls for additional funding of $12.9 million for staff, operating expenses, and equipment for SCI Forest.
A proposed initiative, State Intermediate Punishment Program (SIP), involves placing appropriate, less serious offenders in a structured AOD (Alcohol or other drugs) treatment program in a prison followed by treatment in the community. Research findings indicate that treatment for addicted offenders can be effective, reducing recidivism rates by 25% or more. When the program is fully operational, the Department is anticipating an overall savings of approximately $28,000 per inmate, with approximately 1,500 inmates participating in the program each year.
PROBATION and PAROLE
The Department of Corrections works with the Board of Probation and Parole to operate alternative supervision programs. Probation and parole spending will total $97.6 million in the 2004-05 budget, which is a decrease of approximately $2.3 million from last year. There are an estimated 1,460 parolees remaining in state run Community Corrections Centers and private group home facilities. This includes more than 350 parole violators in Ahalfway back@ facilities.
The Sexual Offenders Assessment board received an increase of $387,000 as did the Adult Probation services of $439,000. Despite the decrease in general government support, the funding should be sufficient enough to keep the Board fully functional.
Growing Greener II: Investing in Our Quality of Life
In February, the Governor unveiled his “Growing Greener II: Investing in Our Quality of Life” initiative, which provided for an increase in the tipping fee, along with the establishment of new fees on residual waste and toxic releases. These fees were intended to support another $21.0 million per year of Growing Greener grants, and to shore up the Hazardous Sites Cleanup and Recycling Funds. Governor Rendell also sought approval from the voters for a total of $800 million of bonds in support of Growing Greener II, with the debt service to be covered by the newly-imposed fees.
The proceeds of those bonds were to be spent over the course of four years, in order to support parks, open space, and farmland preservation ($330 million), environmental cleanup ($300 million), and the revitalization of older communities ($170 million).
For the time being, the General Assembly has deferred action on the “Growing Greener II” plan, although it is likely that a restructured version of the plan will be considered during the upcoming fiscal year. A number of legislators are also committed to revisiting the bond proposal this fall, so that the indebtedness question may be submitted to the voters on the 2005 primary ballot.
Overall, the enacted FY 2004-05 budget provides for the same amount of General Fund support for the Department of Environmental Protection as was provided in FY 2003-04, although several appropriation levels within the Department have fluctuated. The $191.0 million contained in the final budget package is $16.1 million (or 9.2 percent) higher than the Governor’s proposal.
As compared to FY 2003-04 funding levels, this budget cuts $2.8 million from the General Government Operations line item, plus another $5.4 million from Environmental Program Management. The appropriation for the Office of Pollution Prevention and Compliance Assistance will be entirely eliminated, with the relevant programs brought under the umbrella of the Environmental Protection Operations line item. Once again, the budget offers no funding for the Sewage Treatment Plant Operations Grant (“Act 339”) program, which received $52.1 million in FY 2002-03.
Most of DEP’s increase (when compared to the Governor’s proposal) appears in the appropriations for Safe Water ($7.5 million) and the Cleanup of Scrap Tires ($6.8 million). There are also minor increases for the Susquehanna River Basin Commission ($500,000), Chesapeake Bay Commission ($450,000), and Delaware River Basin Commission ($250,000).
The FY 2004-05 budget also contains a number of changes for some of the environmental special funds, largely due to the expiration of previously authorized interfund transfers, and the Hazardous Sites Cleanup Fund’s loss of the Capital Stock and Franchise Tax as a recurring revenue source.
For instance, the original Growing Greener legislation (Act 68 of 1999) called for a total transfer of up to $30.0 million per year from the Hazardous Sites Cleanup Fund and the Recycling Fund into the Environmental Stewardship Fund for fiscal years 1999-2000 through 2003-04. In practice, the annual transfer took the form of $5.0 million from the HSCF and $25.0 million from the Recycling Fund. In FY 2003-04, however, the administration reduced the transfer amounts to $0 and $15.0 million, respectively. Beginning in the 2004-05 fiscal year, these annual transfers will no longer take place.
As a result of these transfers, the fund balances of the Hazardous Sites Cleanup Fund and the Recycling Fund have been depleted. Governor Rendell’s “Growing Greener II” proposal called for General Fund transfers of $19.0 million to HSCF and $25.0 million to the Recycling Fund in order to stabilize these funds. Without these transfers, however, neither of these funds will be able to achieve the expenditure levels that the Governor targeted in February.
Support for the Department of Conservation and Natural Resources in the enacted FY 2004-05 budget essentially parallels the Governor’s February proposal. The only change is a $1.0 million increase in the appropriation for Heritage and Other Parks. The budget contains no new state park user fees.
Including special fund cuts, the final FY 2004-05 spending plan reduces support for the Department of Conservation and Natural Resources by nearly 10.6% from the FY 2003-04 level. This reduction is almost entirely a result of a temporary diversion of the Keystone Recreation, Park, and Conservation Fund’s core revenue stream during the FY 2001-02 and FY 2002-03 fiscal years. Since the approval of Act 50 of 1993, the “Key 93” fund has received 15% of the state’s Realty Transfer Tax receipts. This percentage was reduced in FY 2001-02 and FY 2002-03 in order to help bolster sagging General Fund revenues. As a result, the “Key 93” fund – which supports a number of DCNR programs – experienced a multimillion dollar shortfall. The fact that DCNR will receive $29.7 million less in FY 2004-05 for its “Key 93” funds than it did in FY 2003-04 is largely due to the depleted fund balance.
If not for the loss of “Key 93” resources, DCNR would essentially be level-funded under the new spending plan. Although support for Heritage and Other Parks will be cut by $4.0 million under this budget versus the prior year’s level, these resources are being redirected to other DCNR appropriations, such as State Parks Operations ($4.0 million increase) and State Forests Operations ($0.7 million increase).
In FY 2003-04, the State Parks Operations line item was cut by $10.0 million. As a result, the Department was forced to defer a number of critical maintenance projects because of the need to reprogram state parks user fees (which are typically used for capital projects) in order to cover basic operating expenses. The $4.0 million increase for state parks contained within the Governor’s new budget would allow for the resumption of some of the deferred maintenance activities.
The Governor’s FY 2004-05 budget proposal called for $376.9 million of total appropriations for the Pennsylvania Infrastructure Investment Authority (PennVEST), which included a $924,000 increase in stormwater, water, and sewer grants from the Environmental Stewardship Fund, as a result of the Governor’s “Growing Greener II” initiative. The final budget package does not contain the additional $924,000 that was requested by the Governor.
The $376.0 million that was approved includes $130.7 million of federal funds, $219.8 million from the various PennVEST funds, and $25.4 million from the Environmental Stewardship Fund.
Under the enacted FY 2004-05 budget, the Department of General Services will spend roughly $700,000 less than in the prior year.
This expenditure reduction is partially attributable to the achievement of various administrative and operational efficiencies. For instance, the Department expects to save $90,000 by printing fewer copies of the Pennsylvania Manual, and by eliminating the hardcover edition. Another $480,000 will be saved by reducing support for Capitol Police Operations, which for the first time, will be rolled into the General Government Operations line item.
These cutbacks will largely be offset, however, by a $1.7 million increase in Utility Costs. This increase is due not only to higher energy prices, but also to higher consumption levels.
Aside from the consolidation of the General Government Operations and Capitol Police Operations line items, the only other departure from the Governor’s February budget proposal is the amount of the increase for Utility Costs. The Governor had requested another $2.0 million for this line item above and beyond the $1.7 million increase that was ultimately approved. This request was a part of his “Growing Greener II” proposal, and would have been used so that the Commonwealth could purchase 20 percent of its electricity from renewable and other preferred sources of energy (versus the current 10 percent).
The governor proposed that the AIDS Program receive $6.801 million for the 2004-2005 fiscal year. However, the approved budget provides an increase of $1 million for this program so that it will receive $7.801 million. The additional million provided in the 2004-2005 budget is to be allocated for minority AIDS awareness and prevention. Recent statistical data had revealed that the number of minorities in the United States that have been affected with AIDS has increased dramatically.
The 2004-2005 budget has appropriated $40.737 million for Assistance to Drug and Alcohol Programs. The General Assembly added $810,000 for this appropriation bringing the final amount appropriated for this program is $41.547 million. The increase in funding is expected to be used for a COLA for local government units entitled, Single County Authorities who plan and implement community – based drug and alcohol services.
The Regional Cancer Institutes received $2.4 million in the 2004-2005 budget. This amount is an increase of $400,000 from the proposed 2004-2005 budget. This money is used for comprehensive patient care by four in-state cancer centers. Services for this program include cancer prevention, education and treatment.
The governor’s 2004-2005 budget does not contain an appropriation for the program entitled, Health Research and Services. However, the 2004-2005 final budget appropriates $16.469 million. This program provides health research grants to Pennsylvania-based researchers, universities, medical schools, and other institutions.
The final budget agreement includes a 5.8 percent increase for community colleges, or an additional $12.3 million. Historically, community college enrollment tends to increase during tough economic times as people return to school to upgrade their skills. In addition, the budget includes an appropriation of $3.0 million for facilities and capital projects.
Funding for the community colleges is shared by sponsoring counties or school districts, the students through tuition payments and the commonwealth. Commonwealth appropriations are based on a formula that considers the number of students enrolled, the number of students in each of several technical programs for which additional stipends are paid to recognize the high cost of those programs and the capital costs of the colleges.
The budget includes $500,000 to provide assistance in securing dormitory sprinklers. This is fourth-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 includes $1.0 million for Engineering Equipment Grants which are available to public and private institutions of higher education and require a 2:1 match.
The State System of Higher Education would receive an overall $18.8 million increase, or a 4.3% increase over the current year; the operating line for the universities was increased 3.9% specifically. Funding is distributed through the Chancellor’s Office to individual universities in accordance with a formula that considers the enrollment and programs of the school and the cost of operating and maintaining the individual campuses.
The Recruitment of the Disadvantaged appropriation received a $102,000 increase. Funding will be used to address a diverse population. Activities include recruitment, early outreach activities and improving the climate on campuses.
In addition, the System will receive $12.4 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance projects.
Penn State, University of Pittsburgh, Temple University and Lincoln University each will receive a 3% increase. Combined, state support for the state-related institutions is increased by more than $20.2 million.
For each institution, the Recruitment of the Disadvantaged appropriations received a $102,000 increase. Funding will be used to address a diverse population. Activities include recruitment, early outreach activities and improving the climate on campuses.
Overall, state support for the State-Aided Colleges and Universities would increase 2%, with some institutions receiving less than 1%.
The Historical and Museum Commission provides state and local museum assistance.
The Commission's Maintenance Program is slated to receive $1.0 million.
Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to decrease by $3.4 million in 2004-05 from $12.4 million to $9.0 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.
The budget includes $6.0 million in funding for the Museum Assistance Grant Program. 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 260 museum assistance competitive grants and 150 general operating support grants will be awarded in the 2004-05 fiscal year.
The budget includes an average of 2.5% increases for the individual Non-Preferred Museums that historically receive funding.
While not a part of the General Appropriations Act, the budget provides a temporary fix to restore Adult Basic Health Insurance funding. The program is funded entirely by a share of the Tobacco Settlement annual distribution, with no General Fund support. Due to a decline in tobacco settlement revenues, there would have been a reduction of $12 million, from $112.139 million to $99.875 million. The average enrollment was projected to be 42,243 for the 2003-04 and 35,539 in 2004-05. However the Administration has found nearly $18 million in unexpended Tobacco Settlement Funds that can be legally shifted to the Adult Basic Health program in 2004-05.
The budget provides an increase in total funding for the Child Health Insurance Program [CHIP] with an increase of $11.1 million from the General Fund, an increase of $20.1 million in federal funds, and a decrease of $6.3 million in receipts from the cigarette tax. As of December 31, 2003, there were 137,430 children enrolled in CHIP. The average enrollment in 2003-04 was expected to be 143,256 with an increase to an average of 152,000 in 2004-05.
The budget contains a substantial increase for the Insurance Department General Government Operations to continue current program, expand financial examination of insurance companies and to establish a Consumer Liaison Office. The Consumer Liaison Office will enhance the Department’s activity as an advocate for insurance consumers. Legislation establishing a Consumer Advocate has been proposed, but never acted upon by the General Assembly.
The budget responds to a new Judiciary funding request for security particularly in district justice offices. The new appropriation of $5.156 million will provide for three staff and operating costs plus $4.4 million in grants. The grants are intended to meet the most pressing, achievable and affordable security needs of the minor judiciary. Funds will help reimburse counties for nonrecurring expenditures for such items as duress alarms, video cameras and shatterproof glass.
At the request of the Judiciary, the budget provides additional funding for the various Supreme Court Committees, the Court Administrator and the District Court Administrators.
As part of the anti-violence initiative in Philadelphia, $550,000 has been provided for a special court to deal with serious gun-related crimes.
The new budget for the Department of Labor and Industry would fund most programs at or near current year funding levels. The $17.3 million General Government appropriation enacted for Labor and Industry increases funding by more than $250,000 when compared to the 2003-04 fiscal year. The vast majority of the Department’s administrative expenses are funded through several federal programs.
The transfer to the Vocational Rehabilitation Fund was restored, bringing the funding to current year’s level. The Centers for Independent Living received an additional $650,000, bringing their appropriation to $2.25 million for the 2004-05 fiscal year. No increase above current year funding is provided for Vocational Rehabilitation Services or Supported Employment.
The Self Employment Assistance (SEA) program allows individuals to maintain their unemployment compensation while they receive training in business counseling and plan development. In the original 2003-2004 budget, the SEA program sustained an absolute cut of its $2.5 million appropriation. The funds were eventually restored. Once again, the program was targeted for total elimination in the proposed 2004-2005 budget, but the funds were restored to bring the appropriation to current year funding level of $2.5 million.
Employment Services too faced an absolute cut of its $8.2 million appropriation, however the appropriation’s funds were restored to current year’s funding level.
The Department of Military and Veterans’ Affairs 2004-05 budget received an increase of $5.53 million from the current year funding level. A significant portion of the Department’s federal funds require matching dollars from the state. The department receives approximately five federal dollars for every one dollar provided by the state.
The budget includes an increase of $1.192 in state funds for the Department’s general government operations. In addition, the Department received an additional $5.39 million in state funds to support the six state veterans’ home facilities. The Scotland School for Veterans’ children, which serves children of Commonwealth veterans who are considered to be “at risk,” received an additional $193,000.
The National Guard Education Assistance Program will receive an additional $2.1 million in funding for tuition assistance benefits. This program provides 100% tuition grants for National Guard members in Pennsylvania who attend approved two or four year colleges in the Commonwealth.
The Disabled Veterans Transportation program was established to transport veterans to medical facilities who have no other means of transportation. The state provides funding to support the Volunteer Transportation Network in the ongoing replacement of vans. In the proposed 2004-05, this program was targeted for total elimination, but the funds were restored to current year’s funding level of $250,000.
In addition, the Civil Air Patrol was also targeted for an absolute cut of its $300,000 appropriation however the funds were restored to current year’s funding plus received an additional $150,000 for a total appropriation of $450,000.
The year-to-date collections for the 2003-04 fiscal year totaled $1.965 billion and are $61.4 million or 3.2% above estimate. In February, the Governor estimated that there would be $2.051 billion in the Motor License Fund Revenues for the 2004-2005 fiscal year.
The budget includes a 3.8% or $13.1 million increase in funding for the Grants to Students Program. 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. Of this amount, $1,824,699 is from unspent funds within the agency from various line items which will now be used for grants.
The budget includes a 2.5% increase for Institutional Assistance Grants. These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions. This funding level will allow for a per capita increase for more than 41,000 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, will receive a 2.4% decrease in state funding.
The budget continues the Agricultural Loan Forgiveness Program at an appropriation level of $85,000, the amount the agency had requested, which is lower than the current year due to interest earnings and carryover funds that are available. The program forgives up to $2,000 each year with a maximum forgiveness of $10,000 per recipient.
The budget includes $3.1 million to continue the SciTech and Technology 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 $2.0 million is included for the Cheyney University Keystone Academy, to recruit gifted students to enroll at the university.
The line item entitled, General Government Operations, received $1.739 million from the General Fund and $3.695 million from the Motor License Fund in the final version of the 2004-2005 state budget. This additional money will be allocated to help address the vacancies that will be occurring during the 2004-2005 fiscal year. Additionally, language has been placed in the approved budget that will authorize the recruitment and training of cadets based upon anticipated vacancies.
The 2004-2005 approved budget appropriates an additional $577,000 from the General Fund and an additional $1.225 million from the Motor License Fund to be used for the purchase of additional patrol vehicles for the state police. These will be put to use by the new cadets that will be graduating during the fiscal year.
Treasury Department --The Treasury Department will receive an increase of $4.8 million to administer the escheated property program. It is presumed that the increase is needed to collect the additional revenue from the insurance company demutualization.
The Governor’s budget originally requested $780 million for debt service. By utilizing the second half of one-time Federal Fiscal Relief funds that were provided to each state last year, the state dollars have been reduced to $337.619 million.
Attorney General -- All appropriations for the Attorney General were originally proposed at the 2003-04 levels. However the enacted budget provides additional funding for Drug Law Enforcement [$637,000], Local Drug Task Forces [$428,000] and the Drug Strike Task Force [$70,000].
Auditor General -- The Governor has recommended that a $908,000 increase for the Auditor General to continue current program. The enacted budget restores the $2 million appropriation for Computer Enhancements which the Governor had failed to request.
Last year’s Phase I budget was initially passed with a 6.0% ($16.1 million) reduction for Mass Transportation Assistance. In December 2003, spending for this program was restored to the prior year level of $270.0 million.
For FY 2004-05, the Governor proposed a spending plan that included a 3.4% ($9.3 million) increase based upon the final FY 2003-04 level. This would represent the first enhancement to the Mass Transportation Assistance line item since FY 2000-01. The enacted budget goes above and beyond the proposed 3.4% increase, taking the Mass Transportation Assistance line item to $287.8 million in the upcoming year. All told, this is a 6.6% increase in the principal line item for mass transit. The $1.0 million set-aside for Rural Transportation Assistance is consistent with prior year levels.
The Governor’s FY 2004-05 budget book anticipated that receipts for the Public Transportation Assistance Fund in the new fiscal year would be $197.8 million. It is interesting to note, however, that the book referred to PURTA and Gross Receipts Taxes, which are no longer revenue streams for PTAF. This is because Act 46 of 2003 replaced these taxes with a dedicated portion of sales tax receipts, with a retroactive effective date of July 1, 2003. Another problem with the PTAF revenue estimate is that one of the fund’s dedicated funding streams – the 3% vehicle lease tax – has not performed well recently. As a result, it is unlikely that PTAF receipts will reach the administration’s anticipated level.
With respect to those transit programs geared towards Older Pennsylvanians, the expenditures for Fixed Route Transit, Shared Rides, and Free Transit are intended to maintain these programs at their current service levels (although at a slightly lower cost). In FY 2003-04, the Governor’s budget called for an increase for Shared Rides that would be offset by a decrease for Free Transit. This year, the spending plan reverses tack by decreasing support for Shared Rides by $2.0 million and increasing funding for Free Transit by $1.0 million. The enacted budget also contains a $1.4 million reduction for the Fixed Route Transit line item.
In addition to his request for an elevated level of mass transit assistance, Governor Rendell sought more financial support for intercity transit in his FY 2004-05 budget proposal. This included an extra $400,000 for Intercity Transportation (for the Keystone Corridor) and a doubling of the $4.25 million Rail Freight Assistance line item, to provide additional maintenance and capital support for rail lines not owned by the Commonwealth. The final FY 2004-05 budget honors both of these requests.
The most significant features of the Medical Assistance budget are the use of Provider Assessments related to ICF/MR facilities and managed care organizations and the reduced use of Intergovernmental Transfers (IGT). The substitution of state funds for federal IGT funding is discussed in the material relating to the General Fund at the front of this report.
Provider Assessment legislation authorizes the department to assess the revenues of its contracted medicaid managed care organizations and the revenues of public and private ICF/MRs. Federal law permits states to assess “health-care related taxes” without a reduction of federal financial participation. The law requires that the assessments must be broad based, uniformly imposed and not violate hold harmless provisions.
Unlike the nursing home provider assessment, no federal waiver approval will be necessary as modification of rates does not require a waiver. The modification of managed care rates will need federal approval in a much simpler process. Organizations representing ICF/MR facilities and managed care organizations fully support this legislation.
Funds raised through the assessment on managed care organizations will be used to draw down additional federal matching funds ($163.9 million). The additional funds will be used to provide capitation rate increases.
Funds raised through the assessment on ICF/MRs will be used to support community mental retardation waiting list services. Since ICF/MRs receive the cost of providing services, their rates will reflect the assessment.
There are no programmatic cuts in the medical assistance budget. The Community Access Fund in the MA-Inpatient appropriation has been restored. It had been eliminated in the Governor’s proposal. The budget also provides for an ambulance rate increase.
Human Service programs will benefit from a 2% COLA. In the MH/MR, Early Intervention and Child Welfare appropriations language has been added stating that the COLA is for community programs for services not provided by county staff. Homeless Assistance was provided a 2% COLA in addition to the restoration of $1 million cut in the Governor’s budget.
Language has been added to the Child Welfare appropriation directed to the difficulties the counties expect to have in dealing with the department’s apparent over estimation of federal earnings. That language states:
It is the intent of the General Assembly that counties do not experience any adverse fiscal impact due to the department’s Federal revenue maximization efforts.
The TANF caseload has increased by 14.2% from May 2003 to May 2004, from 186,809 to 213,371. During the same period General Assistance has gone up 16.4% from 40,977 to 47,682. As the result, the Cash Grant appropriations for 2003-04 and 2004-05 had to be increased.
New Directions has a $14 reduction in total funding. While state funds remain the same, federal TANF funding is reduced by $11 million and Medical Assistance support is reduced by nearly $4 million. Food Stamp support for this appropriation is increased by $500,000. Even though funding is down, the department is projecting that it will be providing more employment and training services.
The budget contains a number of increases in services to the mentally and physically disabled as well as the aged.
· Home and Community Based Services to 33 persons currently in State Mental Hospitals
· Home and Community Based Services for 531 additional mentally retarded persons
· Early Intervention Services for 1,150 additional children
· Home and Community Based Services to 668 Persons with Disabilities as an alternative to nursing home care
· Attendant Care to 534 additional persons as an alternative to nursing home care.
However, at the same time, due to reductions in available Tobacco Settlement funding, Home and Community Based Services from the Tobacco Fund will be reduced by nearly $12 million.
Total Child Care funding will increase from $265 million to $283 million. State funding will remain constant but federal block grant funding will increase by $18 million. The number of unduplicated children receiving child care services is projected to increase from 188,748 to 194,675.
Copyright 2000 Sen. Vincent J. Fumo