Impact Analysis of the FY 2006-07 Budget on Philadelphia

 Overview 

            The FY 2006-07 budget includes $26.1 billion in General Fund expenditures, a 5.8 percent increase from last fiscal year.  The FY2006-07 budget has no new taxes or tax increases.  The Budget level funds most general government expenses while providing for sizeable increases targeted in important areas such as Education and continuing to compensate for lost Federal support in Public Welfare.  There is also an added focus on violence reduction in this year’s budget. 

            This year’s budget increases General Fund spending by $1.4 billion, approximately half of this increase is for education.   The increases in the major education subsidies will result in nearly $74 million in additional money for the Philadelphia School District.  Additionally, the School District’s $25 million line item appropriation has been made secure.  

            Unlike last year’s budget process which focused on restoring cuts to Public Welfare proposed by the Governor, the process this year was able to be more focused on increasing Public Welfare spending to target specific needs.  This process provided significant new funds for Philadelphia.  The Human Services Development Fund was increased by $5 million, and the TANF transition appropriation remained at $45 million. 

            This year’s budget also sees significant new money directed towards law enforcement and violence reduction in Philadelphia.  This includes $7.5 million to reimburse the city for the patrol of state highways, and $5 million for a new Gun Violence Task Force. 

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

Human Services

* There is also a $2.5 million supplemental for Fiscal Year 2005-06, so the total new money for the City will be $1 million. 

The Human Services Development Fund continues to be a key issue for the City of Philadelphia.  This year the legislature was able to deliver an increase of $5 million ($2.5 million for FY2006-07 and a $2.5 million supplemental for FY2005-06), which will result in approximately $1 million in much needed money for the City. 

Another important victory was keeping the TANF transition line at $45 million.  It was scheduled to decrease to $30 million for FY06-07 which would have cost the city approximately $7 million dollars.  

            The appropriation for Psychiatric Services in Eastern PA (EPPI), which was completely eliminated in the original FY 2003-04 budget proposal, is continued at the fully restored level of $3.5 million for FY 2006-07. 

New for this year’s budget is the Governor’s Cover All Kids program which will combine $4.4 million of state funding and $10.2 million dollars in federal funding to insure 15,000 currently uninsured Pennsylvania Children in the upcoming fiscal year. 

            Statewide, the funding for Child Welfare is increased from $838 million to $881 million.   There are also increases statewide in Mental Health/Mental Retardation funding.   The general funding trend across the state for the Department of Public Welfare is more positive this year than it was last year, and the City should expect to benefit from this in FY2006-07.
 

Aging Services

             In the City of Philadelphia, state funds for aging services are allocated to the Philadelphia Corporation on Aging.  Services include nutrition, employment, transportation, domestic care, personal protection, long-term care assessment and both basic and intensive in-home services.  Under the FY 2006-07 budget, the Philadelphia Corporation on Aging should expect to receive approximately $50.9 million in FY2006-07.

            The budget also provides for a 2% COLA for direct care workers.    

 Public Library Services

            The FY 2006-07 budget provides for a drastic increase in the Public Library Subsidy, raising it to its highest level ever. 

            Due to the massive increase in Library Funding, the General Assembly decided to fund all libraries at their Fiscal Year 2002-03 levels which was the last time that funding was this high.  This will result in approximately $9.4 million for the Philadelphia libraries, an increase of $1.8 million over last year.

School District of Philadelphia

* Beginning in Fiscal Year 2006-07 this $25 million will be rolled into the Basic Education Funding line for Philadelphia. 

            The FY 2006-07 budget provides for a 5.9 percent increase in the basic education subsidy, which translates into a $39 million increase for the School District of Philadelphia.  State appropriations for special education funding will increase by 2.6 percent, resulting in approximately $3.3 million in additional funding for the city. 

            The $25 million appropriation for the Philadelphia School District, which first appeared in the budget in FY 2002-03 has been a contentious issue in past budget negotiations.  The Fiscal Year 2006-07 budget permanently embeds this money into the city’s Basic Education Funding, ensuring that the city will receive this money in the future.  The Accountability Block Grant program sees an increase of $50 million, which will result in approximately $10 million more for the city.   There is also an increase of $17 million statewide in the Alternative Education Demonstration line which will result in $7 million more for the city. 

            Furthermore, the funds available for the Reimbursement of Charter Schools increase over $34 million which will result in an increase of approximately $14 million for Philadelphia.  

            The Fiscal Year 2006-07 budget will result in nearly $74 million in new funding for the City from the major education appropriations, excluding money for social security, transportation etc.   That increase, coupled with the new security of the City’s $25 million annual appropriation, makes this a banner year for the School District of Philadelphia.  

Higher Education

             The FY2006-7 budget includes modest increases in the appropriations for most state-aided colleges and universities, which includes most of those listed above.   

            The budget also calls for a 4 percent increase in Community College funding in FY 2006-07.  The Community College of Philadelphia can expect to receive roughly $34.4 million next year. 

Health Care Services

* Rounds to less than $0.1 Million

             In FY2005-06 the Governor had proposed many cuts to the above appropriations, most if not all of which were restored by the General Assembly.  The FY 2006-07 budget maintains most of the Department of Health’s appropriations for health research, preventative health, and health treatment services at the levels to which they were restored by the General Assembly for FY 2005-06. 

            The FY 2006-07 budget also provides for a modest increase in the Assistance to Drug and Alcohol Programs line which will result in approximately $300,000 in additional money for the city.           

Transportation Services

                The FY2006-07 budget provides a 2 percent ($5.9 million) increase in the Mass Transportation Assistance line item, for a total of $299.4 million.  This is the primary appropriation for mass transit. 

            The budget assumes an estimated $179.6 million will be available for grants from the Public Transportation Assistance Fund, an increase of approximately $5 million from the funds available in FY2005-06.  SEPTA receives approximately 70% of both of the aforementioned funding sources.

            At present, the significant funding shortfalls for mass transit entities across the state have been temporarily mitigated by the Governor’s decision to flex over $400 million of federal highway funding in order to provide mass transit agencies with much needed relief.  If funds had not been flexed many transit agencies would have faced overwhelming operating deficits and would have had to cease operation.  This loss of service would have affected 1.6 million disabled and 1.2 million elderly riders.  The Governor’s decision provides the necessary funds for transit agencies to remain viable through calendar year 2006 at which point a more permanent solution must be formulated.

            SEPTA should receive approximately $85 million in flexed highway funding over the first half of FY2006-07; at that point if a permanent funding solution is not found SEPTA will face an operating deficit of approximately $70 million for the remainder of the fiscal year. 

In order to accomplish the formidable task of finding a permanent funding solution the Governor issued an executive order forming the Transportation Funding and Reform Commission.  The commission has begun meeting and will continue to do so through calendar year 2006, presenting a final report in November.

Homeowners Emergency Mortgage Assistance Program (HEMAP)

** Includes a $3.0 million supplemental. 

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

            It is estimated that Philadelphians would receive approximately $2.0 million in FY 2006-07 through this appropriation, although that will ultimately depend on the quantity and the magnitude of the applications that are filed for HEMAP assistance. 

Housing and Redevelopment Assistance

            In the FY2006-2007 budget, DCED’s appropriation for Housing and Redevelopment Assistance will remain at the FY 2005-06 level of $30 million.  One-fifth of these funds would continue to be allocated to the City of Philadelphia.

Probation and Parole Services

             The FY2006-07 budget provides level funding for the Improvement of Adult Probation Services line at $19.3 million.
 

Growing Greener II

*** Competitive Grant program. 

            The Growing Greener II initiative was new in last year’s budget.   The state will issue $625 Million in bonds - $100 million in each of the first five years and $125 million in the sixth year.  From this $100 million, a county environmental program block grant of $15 million dollars exists for all counties.  Philadelphia will receive approximately $450,000 for discretionary county environmental programs.  Programs must conform with accepted Growing Greener II project guidelines. 

            Additionally, the Growing Greener Bond Fund will grow $10 million this year to $15 million.  This money will be used to supplement Main Street and Downtown redevelopment activities. The money is disbursed through a competitive grant program so the money available for Philadelphia will depend on the number and quality of applications from the city and the rest of the state.

Port Development

                    The enacted FY2006-07 budget provides $19.9 million in funding for ports across the state, of this amount, Philadelphia will receive $15.8 million. 

PURTA Distribution to Local Governments

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

            Historically, PURTA has been a wildly volatile and unpredictable revenue source for the Commonwealth.  Under present estimates, however, the City of Philadelphia should receive roughly $3.8 million through this appropriation in the upcoming year.
 

Judiciary and Violence Reduction

*   Rounds to less than $0.1 Million

** Continuing appropriation of $525,000 for FY 04-05 through 05-06 and $125,000 from FY 05-06 through FY 06-07, an additional $700,000 was appropriated for FY06-07 in this budget.

*** Funds disbursed to the counties as needed.

            In general, Philadelphia’s appropriations for the judiciary are level-funded in the FY2006-07 budget.

             The $525,000 provided for Gun Court Reimbursements from FY 2004-05 was a continuing appropriation that lapsed at the end of FY 2005-06.  This amount was supplemented by an additional $125,000 appropriation in FY2005-06 which will continue through FY06-07.  An additional $700,000 was appropriated for FY 2006-07 in this budget. 

            In the Fiscal Year 2006-07 budget, there is an added focus on violence reduction.  This manifests itself in several ways, including significant additional money in the Safe Neighborhoods line and a new $5 million Gun Violence Task Force line.  Additionally, the witness relocation money that was eliminated in the Governor’s budget proposal has been fully restored by the legislature.   There is also $250,000 included in this budget in the Violence Reduction Partnership line which will be used in Philadelphia.  All of these should result in new money being directed to the City to combat violence.

            The $7.5 million for State Police reimbursement will be paid to the City in order to offset the cost of having the City’s Police Department patrol the state highways within Philadelphia.  This money will be used to reimburse the City for costs incurred from July 1, 2005 through December 31, 2006 at which point the State Police is scheduled to take over the patrols.