SENATE DEMOCRATIC APPROPRIATIONS COMMITTEE REPORT ON THE FISCAL YEAR 2005-06 STATE BUDGET
The enacted budget will expend $24.150 billion in 2005-06. That is an increase of $1.1 billion or 4.8% over the enacted 2004-05 budget. The highlights of this additional spending will be detailed throughout this report. Tax revenues are estimated to increase by $660 million over the current year’s tax collections through natural growth.
The final revenue surplus for the General Fund for the just completed 04-05 fiscal year was $442 million. That extra tax revenue created a $377 million General Fund surplus to begin this current fiscal year.
Items in the Tax Bill HB 176
Ticket sales are expected to grow by 5.8% for 2005-06. That would match the growth that was achieved in 2004-05. Prior to Pennsylvania joining the Powerball multistate game ticket sale growth was usually around 2% per year. The fund’s expenditures are anticipated to grow by about $95 million which would be an 8% growth rate over the current year.
The amount transferred to PACE is expected to grow by $30 million to $400 million. What is noteworthy about the Lottery’s GGO is not the proposed amount, which is $57 million a 1.6% decrease from last year, but that the money will come completely from the Lottery Fund and not a split between the General Fund and the Lottery Fund as it has for the past 2 years. Due to the increased ticket sales from the Powerball game the Lottery is now healthy again and the general government operations will be paid for by the Lottery Fund.
This change will result in a $27 million increase in the Lottery Fund’s expenditures this year. Also $7 million that had come from the General Fund for Nursing Home Pre-admission assessment will now be funded by the Lottery Fund and another $3 million will come from the Lottery Fund for capital improvements to senior centers throughout the state. Senior citizen fixed transit will also be paid for out of the Lottery Fund for the first time. This will cost the fund $16 million.
Health Choices rates must be actuarially sound. It is expected that the range set by the actuary will be between 2% and 6%. The department will select the lowest rate allowed.
Hospital Rates will be increased 2%
Nursing Home Rates will be increased 3%.
TOBACCO FUND/ADULT BASIC
Tobacco Settlement payments are decreasing by approximately 2% per year due primarily to reduced tobacco usage. At the same time, some programs supported by the fund have increasing costs due to increased caseload and higher unit costs. The programs that are most affected by declining revenues are the Adult Basic Insurance program and Medical Assistance for Workers with Disabilities (MAWD) which currently share 30% of the revenues.
The Governor proposed a number of changes to the Tobacco Fund which would provide 5% for MAWD and 32% for Adult Basic. Among those changes was the reduction in the support for research and for Prevention and Cessation.
In addition to the changes proposed in the Tobacco Fund, the administration has entered into agreements with the four Blue Cross/Blue Shield plans that provide for the creation of fund established by a 1.6% charge on commercial premiums and a 1% charge on medicaid-medicare premiums. From that total amount, each company can deduct state taxes attributable to those lines of business.
For the four plans the total amount created is approximately $145 million. 60% of that amount is to be transferred by the Blues to the Department to be used to support health insurance for low income people, with the understanding that it is not to be used to prop-up medicaid. The original plan was to apply this $85 million to Adult Basic, increasing the caseload by approximately 30,000 persons. The Agreement is for six years.
The Republicans have strenuously objected to method by which the Governor made these agreements and have wanted to participate in the use of the money. At the same time, the Blues do not want these funds to substitute for medicaid funding.
A compromise has been reached, partially due to budget exigencies, which makes the receipts from the Blues agreement a restricted account in the Tobacco Fund. In addition, for the current fiscal year, Prevention and Cessation support in the Tobacco Fund has been reduced from 12% to 9%. Those savings and all interest and earnings of the Tobacco Fund and the Endowment Fund will be transferred to the General Fund for Health Purposes. As the result the following will occur:
Funding for the basic subsidy will be increased by 3%. Special education and vocational education programs will grow by 2.5%, while targeted initiatives will provide an additional $43 million in new funds to local school districts.
The increased funding will continue to reverse a trend of declining support for public education that had continued for more than 25 years in the commonwealth. Two years ago Pennsylvania ranked 49th among our 50 states in school funding equity with state funds accounting for only about 34% of the annual costs for our public education system in Pennsylvania. More recently, this state share has increased to about 37% of school district expenditures.
The basic subsidy increase of $129.5 million includes a $22.3 million foundation component targeted to low spending school districts. School districts with current expenditures below $8,500 per student would receive additional supplements, with increased subsidies based upon the relative wealth and tax effort of the school district. Additional supplements are provided for growth, high tax effort, limited English proficiency, and small districts. Total basic subsidy spending would grow to nearly $4.5 billion.
The budget provides $200 million for the Accountability Grant program. That would maintain funding at the current year level. New initiative funding will include $30 million in state funds to supplement Head Start, a $15 million increase, and $66 million for tutoring programs, a $28 million increase. Together the increases provide an additional $43 million for early learning and remediation initiatives.
School districts have the flexibility to choose from a menu of eligible uses for the Accountability Grant program. These options include support for pre-kindergarten, full day kindergarten, and reducing class sizes during the early grades, as well as tutoring and other remediation and educational improvement programs. During their first year of implementation school districts allocated more than two thirds of their Accountability Grants for early leaning programs.
Other Public School Funding
New initiatives will include $10 million in professional development funds to improve achievement in struggling school districts, $5 million for dual enrollment programs for high school students seeking course work at higher education institutions, and $4.7 million to further enhance the rigor of high school curriculums. Other significant spending increases for public education programs would include a $5.3 million increase in Pupil Transportation reimbursements, $25.6 million to cover the state share of rising retirement contribution costs, a $5.8 million increase for early intervention services and a $12 million increase for charter school reimbursements.
Aid to Nonpublic Schools
Funding for Nonpublic education providers will also be increased by 3% in the budget. This support will include $79 million for services and $24.16 million for text books, materials and equipment. Non Public and Charter School Pupil Transportation will be reduced by $2.6 million.
Appropriations for Special Education at Approved Private Schools and PA Charter Schools for the Deaf and Blind will both be increased to fully fund the formula driven allocations for all schools. Additional school code language was enacted to insure implementation of last year’s formula funding agreement, guaranteeing annual allocation increases based upon 125% of the increase in prior year special education expenditures. The budget includes an additional $3 million for the reconciliation of prior year audits. Unspent funds from the prior year will also provide nearly $2 million in additional funds to be transferred to the audit resolution fund.
Authority Rentals and Sinking Fund Requirements will be increased by $2 million above the Governor’s request. The additional funds will be necessary to fully fund increased state reimbursements enacted with the budget. The school code changes will increase state reimbursements for school construction projects for the first time in 18 years. Current building reimbursement limitations would be increased by slightly more than 20%. New 10% reimbursement incentives would be created for renovation projects, the use of prototype designs, and designated green buildings. The increased reimbursement formula will apply retroactively to projects approved on or after January 1, 2005.
The Library Services program supports and improves state and local library services and ensures access to these services. The budget includes a total of $61.4 million, a 6% increase over the prior year. This represents an overall restoration of 82% of the amount libraries received in FY 2002-03 when the library appropriation was at its highest level.
Under the FY 2005-06 spending plan, General Fund support for the Department of Environmental Protection would fall by more than $20 million from current year levels. If special fund expenditures are included, however, overall DEP spending would actually increase by over $35 million, to a total of $660.8 million. The difference between these two figures is almost entirely attributable to the passage of Growing Greener II.
The administration’s original proposal contained a number of reductions and outright eliminations within DEP’s General Fund appropriations. The line items for the Cleanup of Spare Tires ($6.8 million in 04-05, $2.75 million Appropriated 05-06), Black Fly Control and Research ($4.4 million 04-05 and 05-06), Safe Water ($7.5 million for both 04-05 and 05-06), and all were reinstated. Nutrient Management ($0.25 million), the Susquehanna River Basin Commission ($1.2 million for both 04-05 and 05-06) and the Northeast-Midwest Institute ($0.06 million) were eliminated under the Governor’s proposal and were no funded as part of the budget. The budget also contains significant cuts for General Government Operations (5%) and the Sea Grant Program (20.0%). The Environmental Program Management line item was reduced by 3.3%, to $37.049 million.
The only major increase in DEP’s General Fund appropriation is the additional $2.0 million slated for Environmental Protection Operations, although the spending plan also contains another $173,000 for Chesapeake Bay Agricultural Source Abatement.
Growing Greener II
The Growing Greener II proposal distributes the entire $625 million in voter approved bonds to the Departments of Environmental Protection, Conservation and Natural Resources, Community and Economic Development and Agriculture and the Fish and Boat and Game Commissions for acceptable environmental programs and grants that are with some exceptions, the same ones that were allowed in Growing Greener I.
The bond proceeds will be distributed as shown in the table below:
The differences between the projects allowed under Growing Greener I and II are:
1. Under DEP advanced energy projects done by PA Energy Development Authority, brownfield remediation projects and geological hazards.
2. All of the projects under DCED which are to include existing community redevelopment and housing programs under their direction and also under the PA Housing Finance Authority.
3. The monies to the Fish and Boat Commission for capital improvements to existing land and facilities.
4. The monies to the Game Commission for capital improvements to existing land and facilities.
An amount of $90 million will be available to the counties for their discretionary spending on projects that qualify as environmental projects within the criteria set for the above Departments. The Department will have approval over what projects will be funded. Counties must continue any environmental spending they have been previously doing. The county block grant will be distributed based on the county’s class. The breakout is as follows:
There are no new fees proposed in this legislation but the existing $4 tipping fee is redistributed to provide $30 million to the Hazardous Sites Clean-up fund in 2005-06 and $30 million in 2006-07. The money needed for payment of the debt service is also to come from the existing tipping fee. Once all the bonds are sold the cost of debt service is expected to be about $55 million annually. If there is a sales tax holiday for energy efficient appliances and a tax credit for historic home preservation the money to pay for those will be reimbursed to the general fund from the tipping fee. The tipping fee was slated to sunset in July of 2012 and that sunset is repealed so that the funds will be available to repay the bonds.
DEPARTMENT OF AGING
The budget transfers $9.8 million of those General Government Operations costs relating to PACE claims processing, from the General Fund to the Pharmaceutical Assistance Fund, funded from lottery revenues.
Family Caregiver Support Program
The budget provides for the continued general fund appropriation for the Family Caregiver Support Program at the prior year’s appropriated level of $11.5 million. This program is also supported by $10 million in federal funds. The program assists families who maintain frail relatives in their home. Working through AAA’s, the program provides benefits counseling and, depending on income, financial assistance including supplies, services and home adaptations and devices. It is anticipated that 5,200 families will receive these services in 2005-06.
Alzheimer’s Outreach Services
The budget includes $250,000 for Alzheimer=s Outreach Services. Federal funds used for Memory Loss programs are anticipated to decrease by 33%.
Funding for the Pre-Admission Assessment Program is increased by 19.2% for a total of $7.3 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. It is anticipated that assessments and referrals to nursing homes and community services will increase in 2005-06.
This budget contains a $6 million increase in the lottery funded PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 136 recipients. Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports. The increase will also be used to provide a 2% cost of living adjustment for direct care workers and to fund a Falls Prevention Program.
Home and Community-Based Services
A total of $20.5 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.
PACE and PACENET
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 2005-06, the transfer of $400 million in Lottery funds and $32 million in Tobacco Settlement funds will provide assistance to 316,400 older Pennsylvanians. It should be also noted that the cost per prescription is expected to increase as is the number of prescriptions per person.
The PACE program is for older Pennsylvanians whose annual income is at or below $14,500 for single persons and $17,700 for married persons. PACE pays the entire cost of the drug after a mandatory copayment of $6 for generic and $9 for brand-name prescriptions is made. The PACENET program is available for older Pennsylvanians whose annual income is between $14,500 and $23,500 for single persons and between $17,700 and $31,500 for married persons. PACENET pays the entire cost of prescription drugs after a claimant meets a $40 per person per month deductible and a mandatory copayment of $8 for generics and $15 for brand-name prescriptions. The $40 deductible is cumulative if it is not met each month.
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. In addition, cost containment initiatives were enacted which will help to support the enrollment and prescription cost and use increases. As of May 2005, 191,186 seniors were enrolled in the PACE program and 98,668 seniors were enrolled in PACENET. Act 219 of 2004 allows for PACENET enrollees to maintain their current level of coverage if the March 2005 Social Security COLA puts them over the income limit.
The Federal Medicare pharmacy program which will go into effect in January 2006, is expected to result in savings to the lottery fund for 2005-06 as much as $94 million. It is estimated that as many as 80,000 PACE enrollees will be eligible for the Medicare Low Income Subsidy and a Part D plan.
DEPARTMENT OF AGRICULTURE
The Governor requested $2.1 million for the Agriculture Research program for the 05-06 state fiscal year. However, the recently approved budget provides $3 million. This appropriation provides for research performed at Penn State University and the University of Pennsylvania. The research conducted at the universities examines problems facing animal and plant agriculture to protect agriculture’s economic vitality.
The Pa. Animal Health Commission for the 05-06 fiscal year will receive $5.25 million. Basically this is the same level of funding as in the available year. This appropriation provides funding for laboratories that provide animal health services for domestic animals with an emphasis on infectious, nutritional and toxic disease. The Commission conducts surveillance to detect emerging diseases and detecting biological chemicals that pose a threat to Pennsylvania’s agriculture community as well as the entire population of the state.
Found within the new budget is an appropriation of $4.4 million for the 05-06 fiscal year to provide grants to counties that conduct Pennsylvania fairs. The Pennsylvania Fair programs assist various counties to hold fairs that showcase that county’s agriculture products and handiworks.
The 05-06 budget will fund $18 million for the Pennsylvania State Food Purchase program. In the available year (04-05), this appropriation received $17.45 million. The state funds leverage federal funds to help Pennsylvania’s indigent who need food. The Pennsylvania’s food banks are direct recipients of this program. They allocate food reserves and funding to the people of Pennsylvania located within certain regions of the state where the food banks exist.
COMMUNITY AND ECONOMIC DEVELOPMENT
Continuing efforts to stimulate economic growth in the commonwealth are demonstrating measurable success, as our state economy continues to strengthen. A state revenue surplus of nearly $450 million was buoyed by personal income and business tax receipts that significantly exceeded estimates during the past fiscal year. Establishment employment continues to rise, reaching a four year high of nearly 5.7 million jobs, while unemployment has fallen to 4.8%, significantly below the national average.
Last Spring the General Assembly enacted the Governor’s $2 billion Economic Stimulus package. As the newly created Commonwealth Finance Authority (CFA) continues to implement this package of programs, the new budget includes only modest additional initiatives for community and economic development spending. Given limited fiscal resources, the budget insures 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 all funded at or near current year levels including $49 million for the Opportunity Grant Program, $30 million for Customized Job Training, $22.5 million for Infrastructure Development, and $50 million for the Ben Franklin Technology Development Authority Fund. These commitments, combined with other special fund resources, will provide more than $400 million for business and technology development.
The new communities appropriation was reduced to $18 million, a $1 million decrease from the current year. Housing and Redevelopment Assistance is maintained at $30 million in the final budget agreement.
Economic Stimulus Legislation
The Commonwealth Financing Authority (CFA) has currently approved nearly $140 million in Business in Our Sites projects, more than $6.5 million for First Industries projects, and nearly $40 million for PENNWORKS water and sewer infrastructure assistance. The selection process for hiring venture capital fund managers will begin this month. The CFA’s first bond financing is expected later this month to support the stimulus program initiatives. Authorizing legislation restricts the authority from issuing more than $250 million each fiscal year. The budget provides $8.294 million for debt service during the 2005-06 fiscal year.
Following is a summary of the programs funded through the economic stimulus package.
New Ventures Investment Guarantee Program - $250 million
This program will provide up to $250 million in guarantees to venture capital partnerships. The guarantees would apply to the first 50% of principal invested in qualifying Pennsylvania companies. Up to $50 million of these guarantees could be invested with SERS or PSERS as a limited partner.
Direct Venture Capital Investments - $60 million
A second venture program will contract directly with Pennsylvania Investment firms to invest as much as $60 million in bond proceeds through venture capital managers. This program would target a minimum of 50% of these venture investments outside of the Pittsburgh and Philadelphia regions.
Real Estate Acquisition and Development Program – $150 million
This program will authorize $150 million in bond proceeds to be invested by professional fund managers in gap financing for real estate projects throughout the commonwealth. The investments could include industrial, commercial and multi-use projects.
Business in Our Sites Program – $300 million
This program provides grants and loans for site preparation and development for future private investment. Up to $300 million would be provided to municipalities, related authorities, or other local economic development organizations. Grants for predevelopment planning and feasibility studies would not exceed $10 million in total funding from the program. As much as $100 million could be committed for grants through the program.
TIF Loan Guarantee Program – $100 million
This program will provide up to $100 million in loan guarantees to encourage tax increment financing throughout the commonwealth.
The Pennsylvania First Industries Program – $150 million
This program will provide comprehensive financing of up to $150 million through loans, loan guarantees, and grants to businesses involved in production agriculture up to $100 million, while providing an additional $50 million for tourism.
Keystone Innovation Zones - $10 million, $25 million tax credit program
KIZs will be established near higher education institutions to encourage new development opportunities through local partnerships with area business. DCED will offer priority funding through department programs, and provide operating grants of as much as $250,000 per zone to hire a coordinator and administer zone programs. A companion tax credit program would provide $25 million in annual tax credits to firms between 2 and 7 years old operating within the zones.
Core Industries Programs – $75 million
These funds will capitalize the Machinery and Equipment Loan Fund (MELF) to allow the maximum loan ceiling to be raised to $5 million and fund a special loan program to aid hospitals with FDA required pharmaceutical management technology.
Secondary Stage Financing – $50 million
This program will provide relatively small working capital loan guarantees to small businesses to encourage private financing for manufacturing, high tech and other growth industries. The guarantee could apply to as much as $1 million or 50% of the amount being financed, whichever is less.
Water and Sewer Capitalization Program – $250 million
This program will authorize $200 million in financing for water and sewer infrastructure projects. As much as $100 million of this total could be grants. The program, administered through the CFA, would be established to fund municipalities or municipal authorities to improve or construct water and sewer facilities related to an economic development opportunity. An additional $50 million in water and sewer financing will be authorized through Pennvest.
Redevelopment Assistance Capital Funding – $700 million
This initiative raised the cap on Redevelopment Assistance capital funding to $2.15 billion, a $700 million increase. The Governor has announced nearly $500 million in new Redevelopment Assistance commitments since taking office.
CONSERVATION AND NATURAL RESOURCES
The budget includes a $2.0 million decrease for the General Government Operations line item, which would fall to its lowest level since the 2001-02 fiscal year.
The appropriation for State Parks Operations is decreased $74,000. State Forests Operations is cut by roughly $400,000. It is worth noting that the administration is expecting state park user fee revenue to slip by nearly $1.9 million from the $16.2 million forecast for 2004-05. If only a quarter of this decline should fail to materialize, then overall funding for state park operations is likely to remain at or above 2004-05 levels.
General Fund support for Heritage and Other Parks receives a $2.4 million increase.
Since the last of the Key 93 bonds were issued in FY 1997-98, the Keystone Recreation, Park and Conservation Fund’s revenue has almost exclusively come from a dedicated portion of the Realty Transfer Tax. Funds from this source were expected to decrease by 5.5% in the current year, to $73.5 million. On the expenditure side, this would translate into an $11.2 million reduction in DCNR’s share of overall Key 93 spending, which the department uses for parks, local recreation, and grants to land trusts. However, Key 93 lapsed tens of millions of dollars from 2004-05 into the new fiscal year, therefore the administration’s anticipated reduction will not occur.
Under Growing Greener II, DCNR is slated to receive $217.5 million or 34.8% of the bond proceeds. Of this amount $100 million must be used for state park and forest improvements, and $90 million must be used for open space conservation. A portion is set aside for grants for counties, municipalities, council of governments, conservation districts and authorized organizations for the purposes of: planning, education, acquisition, development, rehabilitation and repair of greenways, recreational trails, open space, natural areas, river corridors, watersheds, community and heritage parks and recreation facilities; community conservation and beautification projects; forest conservation; and other conservation projects.
State spending for the Department of Corrections will reach $1.35 billion, an increase of $7.8 million, or a 1.7% increase from the 2004-2005 fiscal year.
The SCI appropriation has decreased by $2.5 million for 2005-2006 fiscal year, despite the fact that most of the institutions are at maximum capacity. The inmate population is the single most important factor that affects cost in the correctional system. The offender population had reached 40,965 inmates by the end of December 2004. It is forecast that the inmate population will slightly grow in 2005 to 41,628 or a growth of 1.6% (665 inmates). When factoring in the cost of inmate health care, education and training expenses, the current average cost per inmate is $29,900.
The Medical Care appropriation enacted for fiscal year 2005-2006 is $182 million, essentially parallel to the Governor’s February proposal. Furthermore, the Inmate Education and Training appropriation received an increase of $4.5 million from the 2004-2005 fiscal year for a total appropriation in fiscal year 2005-2006 of $42.4 million.
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 $ 99.9 million in the 2005-06 budget, which is an overall increase of approximately $2.3 million from last year. The State Parole population is projected to reach approximately 29,258 offenders by the end of the upcoming fiscal year, which is an increase of over 2,400 new offenders on parole.
In the enacted 2005-06 budget, the General Government Operations appropriation received an increase of approximately $4.3 million or 6% above the Governor’s 2004-05 enacted budget. The Sexual Offenders Assessment board remained at the Governor’s February budget proposal of $3.2 million. However, the Adult Probation services appropriation decreased by $1.9 million from fiscal year 2004-2005.
HIGHER EDUCATION INSTITUTIONS
The budget increases community college funding by nearly $23 million, or 10 percent. This includes $252.1 million for 2005-06 and an additional $1.8 million in a supplemental appropriation for 2004-05 for capital leases and debt service payments. In addition, the budget also creates a new way of funding community colleges, by providing predictable revenue to community colleges to support their operations. It changes the way workforce development funds are used by targeting resources to create career opportunities. The Governor, under his “Job Ready Pennsylvania” initiative, emphasized placing greater emphasis on incentives to develop and offer courses in well-paying, high demand occupations. Additionally, each community college will report to the Department of Education on key performance measures which will help the state evaluate community college student success.
Capital funding will also increase dramatically as a result of this year’s budget. A Community College Capital Fund is established for funding approved capital projects. The fund will contain nearly $38 million, a 15 percent increase in capital funding from the prior year.
State System of Higher Education
The State System of Higher Education would receive an additional $11.6 million, or a 2.6% increase over the prior year. 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.
In addition, the System will receive $14.1 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance projects.
Penn State, University of Pittsburgh, Temple University and Lincoln University each are slated to receive a 2.5% increase over the prior year appropriation for their Educational and General appropriations lines. Combined, state support for the state-related institutions E & G line items is increased by more than $14 million.
The Governor’s initiative entitled “Federalizing Academic Medical Centers” will reduce the amount of state general fund support for the medical schools at Penn State, University of Pittsburgh and Temple University and claim an increased amount in new federal Medicaid funds for the university-affiliated medical centers in the amount of $24.9 million. The result would be an overall increase in funding for these medical centers.
Overall and on average, state support for the State-Aided Colleges and Universities will increase 2 percent.
PA HIGHER EDUCATION ASSISTANCE AGENCY
Grants to Students
The budget includes a 2.5% increase in state funding for the Grants
to Students Program or an additional $9 million. 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. A new funding formula was adopted by the Board, increasing the maximum grant award from $3,300 to $3,500, while providing grant aid to an additional 8,000 students.
The new formula will provide grant awards to approximately 161,000 Pennsylvania students during 2005-06 academic year.
The budget includes a new $10 million PHEAA grant program for 10,000 independent adult students to help them obtain certificates in high school priority occupations. Current PHEAA grant guidelines exclude adults who are not enrolled in an approved two-year program. They also exclude students who are taking only one course at a time. Under the new program, adults participating in programs leading to a certificate in a high priority occupation will be eligible, even if they are enrolled on a less than part-time basis. Funding for this initiative will come from PHEAA revenues.
In addition, the budget includes $10 million in new funding to increase the number of qualified nurse educators, expand the number of clinical training opportunities for student nurses and implement a plan to improve the pass rate for RN and LPN candidates. This is the first year of a 4-year commitment by PHEAA to address the shortage of nurse educators in Pennsylvania and will be funded from PHEAA revenues.
Institutional Assistance Grants
The budget includes a $788,000 increase for the Institutional Assistance Grants Program, or a 2% increase. These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions. This funding level will slightly increase the per capita grant from $962 to $994 for an estimated 40,535 students.
Matching Funds Program
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, is slated to receive no increase in state funding.
Agricultural Loan Forgiveness Program
The budget includes $85,000 for the Agricultural Loan Forgiveness Program. The program forgives up to $2,000 each year with a maximum forgiveness of $10,000 per recipient.
Included is $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.
Cheney University Keystone Academy
An appropriation of $2 million is included for the Cheyney University Keystone Academy, to recruit gifted students to enroll at the university.
The Medicaid budget is discussed in an earlier portion of this material.
Child Welfare and Child Care
Child Welfare funding will increase from $632 million in 2004-05 to $838 million in 2005-06. The primary reason for the increase is the loss of $225 million in available federal TANF funds. For the last few years, the Commonwealth has had a TANF reserve built-up in the early years of the implementation of the federal Welfare Reform Act creating the Temporary Assistance for Needy Families Block Grant. While caseloads went down and services grew slowly, there was more than sufficient funding available.
In the last years of the Ridge-Schweiker administration and the first two years of the Rendell administration, the reserve was used to support the Child Welfare program. In 2003-04 and 2004-05, $295.94 million was substituted for state funding. This had two effects: (1) it reduced the state obligation and (2) it eliminated the need for county matching funds for those programs supported by TANF.
In 2005-06, only $67.88 million in TANF funds will be available to support Child Welfare. The gap will be made up with state funds. Of the $225 million, $180 million will be in the Child Welfare appropriation and will require county match. However, $45 million will be placed in a separate appropriation called Child Welfare-TANF Transition. Originally these funds were to be used exactly like TANF funds, but language has been added which will allow the counties to use the funds to match other state child welfare funds.
Unlike the 2004-05 presentation, the Child Welfare budget has a realistic estimate of the availability of federal IV-E funds. Overestimation of revenue from this federal program was the source of considerable difficulty for the counties. Estimated IV-E funding in the 2005-06 is $200 million less than that estimated this time last year in the 2004-05 budget.
The department now requires the counties Needs Based Budget presentation to provide an integrated presentation with Mental Health and Substance Abuse. As the result, it became readily apparent that many services provided by the counties, particularly in the Mental Health and Substance Abuse fields, could be paid for by medical assistance. During the summer and fall of 2004 and continuing this year, the department and the counties are working on Medicaid Realignment. This will save the counties approximately $40 million in 2005-06.
The Governor’s budget provides for a 2% COLA on purchased services.
For the first time in a number of years, the budget contains substantially more state funds for Child Care Services. The appropriation will increase from $60.8 million to $80.2 million Approximately one-half of the increase will be used to provide subsidized child care services 1,540 additional low income children and to improve payment levels.
Mental Health and Mental Retardation
The Governor has announced the closing of the Harrisburg State Hospital and the Altoona Mental Retardation Center effective January of 2006. The savings of approximately $17 million in state funds from the closing of Harrisburg State Hospital will be offset an expenditure of $16 million ($5.6 million-state funds) for expanded community mental health services. Of the 185 persons helped by this initiative, 135 will come from closing of Harrisburg.
The Mental Retardation program will receive substantial increases: $23 million more for Community Mental Retardation Services and nearly $9 million more for Early Intervention.
The closing of Altoona will save approximately $2.1 million in state funds. There will be a $19 million initiative to provide home and community based mental retardation services for 855 persons on the waiting list, 55 children aging out of Early and Periodic Screening, Diagnostic and Treatment programs and 45 persons now living in the Altoona Center. The Early Intervention appropriation supports expanded services for 1,217 additional children birth through age two.
All Community MH/MR Programs contain funding for a 2% cost-of-living adjustment for direct care workers.
Other Social Programs
The budget provides substantial increases in appropriations for Services to Persons with Disabilities and Attendant Care in the General Fund as well as Home and Community Based Services in the Tobacco Fund.
· $8 million has been provided in the Persons with Disabilities appropriation to provide services to an additional 724 persons.
· $3.7 million is recommended to provide Attendant Care to an additional 778.
· Both the Persons with Disabilities and Attendant Care appropriations contain support for a 2% COLA for direct care workers.
· There are no increases for Domestic Violence, Rape Crisis, Breast Cancer Screening, Legal Services or Homeless Assistance.
When compared to the 2004-05 appropriation and the proposed supplement, the amount requested for Cash Grants in 2005-06 will be slightly lower than the current year. This is despite a caseload increase of 12,000 more persons per month. The $4.3 million decrease will be due to:
· A non-recurring match for Federal disaster relief
· A reduction in unreimbursed assistance payments
· An diversion program initiative which will address the immediate needs of family in crisis and prevent the need for ongoing cash assistance.
These three items will save approximately $16 million. Another initiative improving the payment levels for child care paid on behalf of families on public assistance will cost $2.7 million.
The appropriation for Supplemental Grants for the Aged, Blind and Disabled will be reduced by $12.6 million, reflecting the savings from directly issuing SSI supplement checks as an alternative to paying the federal government to issue the checks. That will save $16.8 million. Additional caseload will cost $4.2 million.
There is no provision for a state supplement for LIHEAP.
New Directions is reduced by $3.2 million, reflecting a reduction in administrative expenses, elimination of non-recurring projects, and a change in job retention and enhancement activities.
HISTORICAL AND MUSEUM COMMISSION
The Historical and Museum Commission provides state and local museum assistance.
Museum Maintenance Program
The Commissions Maintenance Program is slated to receive $1.0 million, as in the prior year.
Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to decrease by $3.7 million in 2005-06 from $14.3 million to $10.6 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.
Museum Assistance Grants
The budget includes $5.1 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 205 museum assistance competitive grants and 110 general operating support grants will be awarded in the 2005-06 fiscal year, although the number of grants awarded may vary depending on the average award amount.
The budget includes no increase in funding for the individual non-preferred museums that historically receive funding.
Despite the fiscal constraints that the Commonwealth faced in the 05-06 budget the Department of Health did see a number of programs that had their funding restored. Additionally, two new programs were created that will facilitate services provided to the citizens of Pennsylvania.
The proposed budget for the 05-06 state fiscal year funds AIDS programs at $6.8 million. The approved appropriation for this program has been increased to $7.8 million for the same fiscal year. The additional dollars will be used in urban parts of our state that specifically address AIDS services to minority populations. Blacks, Latinos, and women have been hardest hit by AIDS in the last decade and need additional support.
The proposed $38.6 million for Drug and Alcohol programs in the 05-06 state fiscal year will remain at that level in the approved budget. The department allocates this money to “Single County Authorities” throughout the state. These county agencies have the best understanding for the needs of the local communities. However, the largest service provider for drug and alcohol treatment is losing their largest facility in the state which is located in Philadelphia. Legislators throughout the state are working with the Administration to find a viable location which will serve the needs of the clients of this large facility.
There is a new program in the Health’s budget, “Pa. Injury reporting and Intervention System”. This program has been appropriated to receive $1.3 million for the 05-06 fiscal year. The Health department will be collecting data from hospitals from throughout the state. The data collected from the department will include the types of injuries, the number of injuries, the nature of the injuries, and any violent crimes that were committed. The data will be examined to determine what injuries are preventable and how this can be done in a cost effective manner.
The 05-06 state budget revealed that there were a number of programs that were not funded or had their appropriation reduced in the proposed 05-06 budget; but did receive full funding in the final 05-06 budget. The programs that were funded in the approved budget include: Trauma Program Coordination, Rural Trauma Preparedness and Outreach, Emergency Care Research, Regional Cancer Institutes, the Rural Cancer Outreach program, and a new program entitled, “Charcot-Marie-Tooth Syndrome. This last program addresses the needs of those people in Pennsylvania who suffer with this very painful syndrome. This disease affects the neurological systems of the human body rendering the victim unable to physically take care of themselves.
INFRASTRUCTURE INVESTMENT AUTHORITY
Including all state and federal funds, the budget includes $452.4 million of PennVEST expenditures. Roughly one-third of this total ($143.0 million) reflects the federal contribution, with resources from PennVEST’s various revolving funds making up most of the rest ($282.4 million).
Under the Growing Greener II spending plan, programs currently funded from the Environmental Stewardship Fund (ESF) continue at current levels. This is made possible by some use of bond proceeds for capital eligible ESF projects.
Given current fiscal constraints the appropriation for the Judiciary only includes approximately $6.1 million in new General Fund monies for Fiscal Year 2005-06. The Judiciary was, however, granted the authority to transfer money out of the Judicial Computer System Restricted Receipts Account and use those funds for other purposes at their discretion.
Three other things should be noted about the Judiciary budget for Fiscal Year 2005-06:
First, the appropriation for Unified Judicial Security has been made into a continuing appropriation and a small increase was made to the funds still outstanding after Fiscal Year 2004-05.
Second, the appropriation for the Philadelphia Gun Court Reimbursement was a continuing appropriation of $525,000 which will not lapse until the end of Fiscal Year 2005-06. This appropriation has been augmented by an additional $125,000.
Finally, included in the Fiscal Year 2005-06 budget is a $949,000 Court Consolidation Grant. These funds will be provided to Allegheny County for costs incurred beginning January 1, 2005 related to the transition of employees from Pittsburgh Magistrates Court to county employment.
LABOR AND INDUSTRY
The budget maximizes federal participation and makes other administrative reductions to cut General Government Operations for the Department of Labor and Industry by $2.7 million. The budget restores several recommended cuts requested by the Governor including a $1 million reduction in the Vocational Rehabilitation Fund transfer, the elimination of $2.5 million for the Self Employment Assistance program, and $650,000 for Centers for Independent Living,
Job Training Assistance
One of the largest new initiatives in the Governor’s proposed budget was the investment of $101 million in new state funds combined with the reinvestment of $71 million in redirected state resources and $26 million in private match to provide $198 million to fund Job Ready Pennsylvania. The training initiative includes programs funded through the Department of Labor and Industry, Education, Public Welfare, and the Pennsylvania Higher Education Assistance Agency, working in concert with our local Community College system. The final budget agreement funds $91 million of the Governor’s request, reducing only $10 million of the requested $38 million increase for secondary tutoring programs.
The Department of Labor and Industry is the lead agency in administering training programs for Pennsylvania’s adult labor force and youth. Within the Department, the budget agreement funds a $20 million increase for Workforce Investment programs, including $15 million for direct training programs and $5 million to strengthen the Commonwealth’s industry partnerships. These industry partnerships will be encouraged to better align training programs to meet the demands of employers, thus providing a skilled workforce for the Commonwealth’s most competitive business sectors and employment opportunities for Pennsylvania’s citizens.
MILITARY AND VETERANS AFFAIRS
The Department of Military and Veterans’ Affairs 2005-06 enacted budget received an increase of $4.42 million from the current year funding level. The budget includes an increase of $355,000 in state funds for the Department’s general government operations.
The Department also received an additional $4.4 million in state funds to support the six veterans’ home facilities located across the Commonwealth. New to the 2005-06 budget is a consolidated appropriation for the six veteran’s homes. It is believed that by consolidating the veterans’ home appropriations, the Department will be able to improve program management and enhance their operational efficiencies.
The Scotland School for Veterans’ children received an additional $630,000 in state funds, which will help to serve children of Commonwealth veterans who are considered to be “at risk.”
In 2004, the Educational Assistance Program Fund was established by Act 12 to allow for money and related investment income to be transferred into the Educational Assistance program. This program provides 100% tuition grants for National Guard members in Pennsylvania who attend approved two or four year colleges in the Commonwealth. The enacted budget provides the Educational Assistance program a $10 million appropriation, a slight decrease in funding from the 2004-05 budget.
The Disabled Veterans Transportation program was targeted for total elimination in the Governor’s 2005-06 budget proposal, 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 level of $450,000.
In the final 05-06 budget, the appropriation for General Government Operations from the General Fund is $137.2 million. In the 04-05 fiscal year this appropriation was $155.7 million or a decrease of 11.8% from the available year (04-05). However, in the approved 05-06 budget $372.110 million was appropriated from the Motor License Fund.
This budget provides for the hiring, training and deploying of 180 state troopers. Of the 180 troopers to be hired 120 troopers will be newly hired. The remaining 60 troopers will come from the ranks of those troopers who were hired previously but were not performing their responsibilities through patrol duties. Sixty of the newly hired troopers will be utilized to patrol the state interstate highways of the city of the first class. This 05-06 budget provides $3.066 million from the General Fund and $8.289 million from the Motor License Fund. For many years the State Police have seen their responsibilities in the Commonwealth expand exponentially. The additional hiring of 180 troopers will address these expanded responsibilities.
The 05-06 budget provides $11.885 million from the General Fund for the appropriation entitled, “Law Enforcement Information Technology”. Accordingly, in the 05-06 budget, this appropriation received $32.1 million from the Motor License Fund. This program provides state-of-the-art technology to fully automate a full range of State Police data management functions. Specifically, the Incident Information Management System is funded by this appropriation. This information management system allows for the installation of computers inside patrol vehicles. The computers located inside the patrol vehicles gives the State Police officers a wide range of information from the Pennsylvania Criminal Intelligence Center. Additionally, this Center provides officers with traffic information that may impact their assignments, but more importantly the officers have access to various state and national intelligence databases.
The 05-06 budget includes funding of $10.478 million for the replacement of patrol vehicles, including those patrol vehicles that the 180 newly hired troopers will use in their patrol activities. This appropriation is funded solely from the Motor License Fund. In previous years, patrol vehicles were funded by both the General Fund and the Motor License Fund.
STATE ROW OFFICES
The Governor provided no increases for the Attorney General, Auditor General or State Treasurer.
This budget provides increases totaling $6.2 million for the Office of the Attorney General. Increases have been provided for General Government, Drug Law Enforcement, Local Drug Task Forces, the Drug Strike Force and Tobacco Law Enforcement. In addition new appropriations are provided for Witness Relocation, Gun Violence Reduction/Witness Relocation, and the Child Predator Unit.
Additional funding has been provided for the Auditor General’s General Government Operations. Funding for Computer Enhancements, which was omitted in the Governor’s budget, was reinstated at $1 million.
The Treasurer’s general government is increased by $1 million or 4% over the amount for the 2004-05 fiscal year. Greatly increased was the computer integration program which had been at $.3 million and the Governor had wanted zeroed out. For 2005-06, $1.8 million will be available.
General obligation debt service was reduced from the Governor’s proposal of $758 million to $712 million for the 05-06 fiscal year. In 2004-05 almost half of the Commonwealth’s debt service was paid with the money received from the federal government as part of their program to provide fiscal relief to states hurt by the continuing recession.
DEPARTMENT OF TRANSPORTATION
The 05-06 budget provides $594 million for six highway and bridge construction programs; they are as follows: Highway and Safety Improvements, Security Wall Pilot Program, Highway Capital projects, Highway Capital projects (EA), Highway Bridge Projects, Bridges, Excise Tax. In the 04-05 fiscal year, $581.2 million was appropriated for the same highway and bridge construction projects. Therefore, the 05-06 state budget provided an increase of $13 million for major highway and bridge programs. The funding for the highway and bridge programs comes from various accounts in the Motor License Fund. All state highway and bridge projects use both state and federal funds. However, approximately 80% to 90% of construction costs for state highway and bridge projects are funded by federal funds. Therefore, state funds are important to leverage federal funds.
In the Governor’s budget for the 05-06 fiscal year there are new appropriations representing new programs. The new appropriations and their corresponding funding levels are: ‘Disaster Recovery’ ($50 million); ‘Bridge Preservation’ ($28 million); ‘Emergency Highway and Bridge Repair’ ($5 million). The funding for all highway maintenance programs emanate from the Motor License Fund.
Additionally, for the 05-06 budget year, the Governor is recommending funding these established programs and their corresponding appropriations: ‘Highway Maintenance’ ($770.5 million) ‘Sec. Roads – Maintenance and Resurfacing’ ($65.2 million); ‘Highway Maintenance Safety Projects’ ($10 million). This 05-06 budget reveals that there is $76 million more in the Highway Maintenance Program as compared to the amount requested by the Governor’s budget for the 05-06 fiscal year.
In the 05-06 budget there exists an appropriation entitled, ‘Disaster Recovery’. This appropriation is being funded at $50 million to mitigate the damage caused to state roads, highways and bridges by the “August 2004 Storm Disasters”. The money is expected to be allocated to the various PennDot Districts that exists throughout the state based upon actual damage reported.
The budget provides a 2 percent ($5.8 million) increase in the Mass Transportation Assistance line item, for a total of $293.6 million. This is the core appropriation for mass transit.
The budget assumes an estimated $173.6 million will be available for grants from the Public Transportation Assistance Fund, which is in line with current year levels.
The approved spending plan provides a $2.3 million increase for Fixed Route Transit, above the $25 million budgeted this year. However $16.5 million of this funding is provided through the Lottery Fund. Since the Commonwealth’s per-trip costs for the Shared Ride and Free Transit programs continue to increase, the plan contains slight increases in the Lottery Fund appropriations for those programs ($0.2 million and $0.6 million, respectively).
The General Assembly’s reluctance to provide any long term fix for significant operating deficits for mass transit systems throughout the state forced the Governor to impose his authority to flex significant federal transportation subsidies as a short term solution to fund these needs. The flexed dollars are expected to give transit agencies sufficient funds to cover these needs through 2006 without forcing severe.
Copyright 2000 Sen. Vincent J. Fumo