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THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS FISCAL YEAR 2006-07 BUDGET PROPOSAL ANALYSIS The Governor’s 2006-07 budget is built on revenue growth of 3.36% or $851.7 million from growth in the collection of current taxes. A further $145 million of new revenue is also expected. The details of these new revenues will be itemized elsewhere in this report. The Governor is requesting total general fund expenditures of $25.425 billion for the 2006-07 fiscal year. Such expenditures would be a 3.8% increase over the current year and would be $934 million higher than the current year’s amount. Utilizing these revenue and expenditure estimates the budget would end the 2006-07 fiscal year with a $2.9 million ending balance. None of the increased spending will be used for general governments of the departments because they are all funded at the current year’s levels. The Governor expects that the commonwealth workforce within his jurisdiction will be reduced by 2,000 employees through out the year due to attrition. 2005-06 Fiscal Year (Current Year) The Governor anticipates three changes to the current year’s budget. He anticipates a revenue surplus of $363.7 million or 1.46% over the official estimate. As of the end of January, the revenue surplus is $306 million or 2.4% above the official estimate. With the major tax collection months still ahead this estimate seems too low. A second change is that the amount of requested supplementals is reduced from $235 million that was anticipated in the mid-year briefing to $197 million that he is actually requesting. The new supplementals will be detailed elsewhere in this report. The Governor is also anticipating $130 million in lapses from the current and previous fiscal years. This is in line with the lapses in other years but this number is sure to change before the budget passes in June. The Governor has proposed three tax reductions as part of the 2006-07 budget. Together they will reduce tax revenues by $35.6 million. He has also proposed three changes to increase revenues into the general fund by $180.5 million. The net effect will be to increase revenues by $144.9 million. The changes are listed below:
The changes that will enhance revenue are:
The Governor has increased the estimate of ticket sales for the 2005-06 fiscal year. When the budget was passed last July the estimated value of tickets was $1.219 billion. But with a string of unprecedented jackpot rollovers and some new games – net ticket sales are now estimated to be $1.304 billion, an increase in $85 million. Consequently, the estimate for net ticket sales in 2006-07 is $1.359 billion or an increase of 4.2%. This is a conservative estimate which should be easily obtained. Expenditures are projected to grow by $44 million or 3.3%. While that is an unremarkable estimate expenditure growth, the components of the expenditures are changing much more dramatically. The PACE expenditure is slated to decrease from $400 million to $190 million due to the availability of the federal Medicare –part D program. The other significant change is that the Lottery Fund will once again begin paying a portion of the long term care program under medical assistance. The Lottery Fund’s commitment will be $210 million. The ending balance of the fund in 2006-07 is anticipated to be $372 million which is about $15 million higher than the estimated ending balance of the current year. The Governor and the General Assembly in the 2005-06 fiscal year enacted Act 41 of 2005. This Act redirected 12.5% of the funds allocated to health care insurance for uninsured adults and 25% of the funds that were going to tobacco cessation and prevention to fund long term care services for senior citizens and persons with disabilities. In 2005-06 the state was able to expand enrollment in Adult Basic (ABC) by approximately 50,000 individuals. The state was able to expand this program by receiving funds from the Community Health Reinvestment Agreement with four major Blue cross and Blue Shield plans. For 2005-06 this equated to approximately $86 million. In the 2006-07 budget, the Community Health Reinvestment Agreement will generate $90 million to supplement the Tobacco Settlement Funds that will be allocated to Adult Basic Insurance. With this money an additional 8,757 uninsured adults will be enrolled in the Adult Basic Insurance program. In the 2006-07 budget the Governor is proposing to use all the interest earnings on the Tobacco Settlement Fund and the Endowment Account earnings again be made available for health care costs. In addition one-eighth of the allocation for Health Investment Insurance (Adult Basic) and one-forth of the allocation for Tobacco Prevention and Cessation be used for Medical Assistance Long-Term Care. Additionally, eight percent of the allocation that would go to the Endowment under the Tobacco Settlement Act would also go for Long-Term Care. In total, a $99 million allocation in Tobacco Settlement Funds will be used for Long Term Care in 2006-07. Other changes reflected in the 2006-07 budget include using one-half of the Department of Health’s research money for debt service on a $500 million bond issue to create the Jonas Salk Legacy Fund. This fund will provide dollar-for-dollar support to Pennsylvania universities and research institutions in biotechnology and bioscience. The $500 million will be available for two years to fund “starter kits” that will permit universities and research facilities to purchase lab equipment and build new research facilities thereby creating jobs and advancing biomedical research. The 2006-07 budget will continue to support three Life Science Greenhouses that invest in companies which focus on research, development and commercialization of cutting edge medical technologies. For FY 2005/06, Act 41 of 2005, the budget used all interest earnings on the Fund and the Endowment; one-eighth of the allocation for Health Investment Insurance (Adult Basic), and one-fourth of the allocation for Tobacco Use Prevention and Cessation for Long-Term Care cost (approx $72 million) which would have otherwise been funded with General Funds. Note: interest earnings would be deposited into the Endowment under current statute (Tobacco Settlement Act).
The Governor proposes transferring $904,000 in PACE personnel costs to the
Pharmaceutical Assistance Fund. The Family Caregiver Support Program appropriation contains a small increase to provide for a 2 percent cost-of-living adjustment. 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 5,055 families will receive these services in 2006-07. Alzheimer’s Outreach Services
The Governor’s budget includes $250,000 for Alzheimers Outreach Services.
Federal Funds used for Memory Loss programs are no longer available, however it
is anticipated that Pennsylvania will receive $350,000 in federal funds for an
Alzheimer’s Demonstration Grant program.
Funding for the Pre-Admission Assessment Program is increased by 6 percent for a
total of $7.68 million in lottery funds, in the Governor’s recommended budget.
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 2006-07.
This budget proposal includes a $10.0 million increase in the lottery funded
PENNCARE appropriation to continue the current Attendant Care Program and
provide services to an additional 240 recipients. Funds are also used for Older
Adult Protective Services to investigate suspected elder abuse reports. The
increase would also be used to provide a 2 percent cost of living adjustment for
direct care workers and to provide services as a result of nursing home
transition activities. A total of $18.2 million in Tobacco Settlement funding is included in the Governor’s 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 commonwealth has increased participation in the 60+ Waiver program by 70 percent since 2002-03 and proposes to serve an additional 2,800 people in 2006-07. 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. Enacted in December 2003, the federal Medicare Prescription Drug, Improvement and Modernization Act created a new outpatient drug benefit as Part D of Medicare. An interim Medicare Drug Discount and Transitional Assistance Medicare Drug Discount Card and Transitional Assistance Program began in June 2004. Low income PACE enrollees, not enrolled in a Medicare HMO, were enrolled into the transitional assistance program permitting PACE to charge to the Medicare Program up to $600 per year for each enrollee’s pharmaceutical expenses in 2004 and 2005. Medicare Part D coverage began in January 2006. The PACE Program acts as the enrollee’s personal representative and is facilitating PACE cardholder enrollments into Extra Help/Low Income Subsidy. Additionally, throughout 2006, the program will collaborate with selected prescription drug plans to facilitate enrollment of PACE and PACENET cardholders into Part D. As cardholders are enrolled in Medicare Part D plans, the new PACE Plus Medicare program will coordinate benefits with the plans and provide coverage including: the gap between Medicare Part D plans basic coverage and catastrophic benefit, co-payment differential, premiums for PACE cardholders and drugs excluded by the Medicare Modernization Act of 2003. Due to Pennsylvania being able to share the cost of prescription drug coverage under the new federal prescription plan, the commonwealth should be able to provide prescription coverage to an additional 120,000 seniors. In addition, by redesigning the PACE program and creating the new PACE Plus Medicare program, the commonwealth will address the gaps in the new federal Medicare Part D benefit for PACE/PACENET recipients so that Pennsylvania’s seniors will not incur more costs than they otherwise would have paid when their prescriptions were covered by PACE/PACENET. The 2006-07 budget creates the line item entitled, “Food Safety and Inspection”. This program is projected to be funded at $300,000. The department conducts over 8,000 food inspections at food establishments across Pennsylvania. It also had issued 18,395 food registrations for food manufacturing firms wanting to do business in Pennsylvania. Additionally, it has licensed over 22,000 public eating and drinking places. The Pennsylvania Food Purchase Program, within the department, is funded at $18 million in the 2006-07 fiscal year. Each county in Pennsylvania receives funds from this program to provide food to the most needy in the state. As gas prices increase, more families are forced to choose between food and heat, and this program provides a blanket of safety to those who help. The Animal Health Commission within the department has been funded by the 2006-07 budget for $5.25 million. The funds for this program will be used to protect the quality and safety of food from animal origin. This agency develops testing for the Chronic Wasting Disease Monitored Herd program as well as the Avian Influenza Monitored Flock program. The department has received $1 million in federal funds to work with other lead state agencies to test flocks for Avian Influenza. DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT The Governor’s $2 billion Economic Stimulus program has begun to produce some significant results as an expanding commonwealth economy has helped to attract more than 130,000 net new jobs during the past two years. Major stimulus commitments totaling nearly $1.25 billion have provided $927 million in infrastructure investments, $257.7 million for community revitalization efforts, and more than $61 million for other business and technology financing programs. Unfortunately, these new investments do not come without a cost. Debt service costs for Commonwealth Finance Authority debt will increase by $28.6 million in the proposed budget to total $36.9 million. New Initiatives The proposed budget would create the Jonas Salk Legacy Fund to provide as much as $500 million to be invested during the next two years in life science industries. The funds would be used to recruit research faculty to Pennsylvania colleges, universities, and academic medical centers, as well as capital investments in bioscience facilities, including laboratories, incubators, and research parks. The initiative would be funded through a securitization of about half ($35 million) of the Tobacco Settlement proceeds currently given to medical research institutions in the commonwealth. A second major initiative would provide $15 million to enhance and promote the commonwealth’s world trade investment activities. The funds would be used to increase Pennsylvania’s share of trade in foreign markets, attract new foreign direct investment here in the commonwealth, and leverage global networks from our college and university system. The initiative would include a realignment of our current international offices, closing an underutilized office in Brussels and opening new offices to better serve far east markets. A significant $10 million increase is requested to provide a $15 million appropriation for Infrastructure & Facilities Improvement Grants. This recently created program provides multi-year grants to debt issuing authorities for the payment of debt service and related costs for economic development projects. Business Financing Programs The proposed budget would maintain current funding levels for the major business financing programs including requests of $49 million for the Opportunity Grant Program, $30 million for Customized Job Training, $22.5 million for Infrastructure Development and $50.2 million for transfer to the Ben Franklin Technology Development Authority Fund. Economic Stimulus Funds through the Commonwealth Financing authority are also expected to capitalize the Machinery and Equipment Loan Fund with a $75 million deposit. This new infusion of funds will allow the program to increase maximum loan amounts from $500,000 to $5 million. Community Development Programs The budget would provide $30 million for Housing and Revitalization Assistance and $18 million for New Communities programs. Shared Municipal Services would receive a $1 million increase to $2.4 million. The Growing Greener Bond Fund is expected to provide $5 million during the current year and $15 million during the next fiscal year to supplement Main Street and Downtown Redevelopment activities. HEMAP The proposed budget requests a supplemental appropriation of $3 million and a new appropriation of $8 million for HEMAP assistance to provide loans to families to avoid mortgage foreclosures. Current program revenues are nearly exhausted without any new commitment of commonwealth funds. DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES In the proposed budget, funding for state parks operations is increased by approximately $2.1 million, a 3.7% increase. DCNR manages almost 2.4 million acres of State Park and forest lands. The State parks system consists of 116 parks and 2 conservation areas within 62 counties in the Commonwealth. This covers over 255,000 acres of land and 33,000 of water. The budget for 2006-07 also includes funds from the Growing Greener II bond initiative. Growing Greener II was approved in May 2005. This initiative will provide the department with $217.5 million over six years. The break down for this funding is as follows:
This funding is to be used to improve the state parks and forests, community parks and recreation grants and for the preservation of open space. It is important to note, that not less than $100 million is to be used for facility and infrastructure improvements and $90 million for open space preservation. Keystone Recreation, Park and Conservation Fund monies are used for rehabilitation, repairs and upgrades of facilities and land acquisition for state park and forest lands. Due to dwindling prior year balances and a one year reduction in the transfer of monies into the fund, there will be a 50% reduction in the availability of these funds in 2006-07. The State Forests appropriation is held at the 2005-06 funding level of $14.6 million. In addition, the Parks and Forest facility rehabilitation program, which is funded through the Environmental Stewardship Fund, has been reduced by approximately $2 million. In the Governor’s proposed budget, state spending for the Department of Corrections would reach nearly $1.4 billion, an increase of $49 million or 4%. The General Government appropriation includes an increase of $2.6 million for a new initiative, Information Technology Enhancement. This initiative will help the Department with their efforts to consolidate information, streamline work process, and support functions transferred from Probation and Parole. Increases in the daily inmate population have required the Department to request a $39 million increase for the State Correctional Institutions. The increase is necessary to house an offender population that reached nearly 42,500 inmates in December 2005. Inmate population forecasts show an average increase of 250 inmates per year over the next five fiscal years. The increase in the inmate population is the biggest challenge facing the Department. As the inmate population continues to rise so do the medical care expenses for the inmates. The Department has requested a $7 million (3.8%) increase in the medical care appropriation for the continuation of current medical services and for medical services to expand housing at SCI Camp Hill, Cresson, Laurel Highlands, and State Regional Correctional Facility Mercer. The Governor recommends a slight reduction for the General Fund Inmate Education and Training appropriation. However, this appropriation and the SCI appropriations will be augmented by funds from the Manufacturing Fund. The Governor has recommended a cut in General Government Operations spending by $2.6 million, or 3.4% from last fiscal year. This cut was due to the transfer of Information Technology resources to the Department of Corrections in order to streamline the work process through both Departments. The remaining appropriations, Sexual Offenders Assessment Board, Drug Offenders Work Program, and the Improvement of Adult Probation Services have been recommended at the current year funding level. The State Parole population is projected to be 30,355 by June 2007, an increase of 782 offenders on parole from June 2006’s projection. The estimated State Supervision Fee Collections for 2006-2007 are $2.3 million, which is an increase of $803,000. This increase is due to the fee increase beginning in FY 2005-2006. The proposed budget would provide an unprecedented $600 million increase in state Education spending, including a $517 million, 6.4% increase in funds for Basic Education. The largest single component of this increase is a $224.5 million, 5% increase in the Basic Education Subsidy, including foundation funding of $64 million targeted to the lowest spending districts within the commonwealth to help them raise per pupil spending above $9,030 per student. The proposed funding for basic education programs would increase state support by $2 billion above spending levels when the Governor’s term began, continuing state efforts to dramatically increase our commitment to local school districts. More importantly, these investments appear to be showing results. Since 2002 the number of 5th grade students meeting state assessment standards in math has increased from 53% to 69%. Reading results have improved from 57% to 64%. Early Childhood & Tutoring Assistance Targeted initiatives to fund early education and tutoring assistance would be maintained or expanded. These investments have already enabled 12,500 additional students to enroll in pre-kindergarten, while an additional 4,710 students are now able to participate in Head Start. The budget requests $250 million for the Accountability Grant Program, a $50 million increase, $70 million for tutoring assistance, and $45 million to supplement federal Head Start programs, a $15 million increase, to build upon these initiatives. Science & Technology Initiatives High school reform, through the Project 720 program, would receive $9 million, a $4.3 million increase above the current year. Several new initiatives were also proposed by the Governor to bolster science and technology programs. A $10 million program would support efforts to improve elementary science instruction through hands on learning and new curriculum training. The budget would provide $20 million as a first installment of a multiyear program to place internet-equipped laptop computers in math, science, English, and history classrooms and equip teachers with multi-media technology. The budget would also provide $7 million for dual enrollment programs, a $2 million increase above the current year. Special Education Special Education programs would receive a $38.1 million, 4% increase. The proposed increase would include a full restoration of the 2% contingency fund for districts with the most significant special education spending needs. Early Intervention funding would be increased nearly $8 million, totaling $131.4 million. Approved Private Schools would receive nearly $86.5 million for the next fiscal year and a $1.3 million requested supplemental appropriation for the current year to meet legislated requirements to maintain total funding levels at 125% of requested increase in funds for special education programs. Chartered Schools for the Deaf and Blind would receive $32.9 million, more than a $1 million increase. The budget would also request $5 million to resolve remaining prior year audits, although this unresolved liability may be as high as $30 million. Aid to Non-Public Schools & Charter School Reimbursements Aid to Nonpublic schools would be increased by 5%, including a request for $82.9 million for Services to nonpublic schools and $25.4 million for Textbooks, Materials and Equipment. Charter school reimbursements to public schools would be increased by nearly $27 million, with a request of nearly $119.5 million. The increase reflects an attempt by the commonwealth to reimburse districts for about 30% of their charter school costs. Rapidly rising charter school enrollments continue to increase these costs dramatically. Public Library Subsidy The Public Library Subsidy Program supports and improves state and local library services and ensures access to these services. The Governor’s budget proposal includes a 23% increase for library services or an additional $14.1 million over the current year’s appropriation, for a total of $75.5 million. This significant increase brings the Public Library Subsidy to its highest level in history and among the three highest funding levels in the country. Other Increases Other significant funding increases would include a $9.5 million increase for Teacher Professional Development, to total $23.4 million, a $17 million increase for Pupil Transportation, totaling $512.7 million, an $18.2 million increase, totaling $474.6 million for School Employees’ Social Security costs and a requested $368.7 million appropriation for School Employees’ Retirement costs, a $114 million increase to cover increasing employer contribution rates. Community Colleges The Governor’s budget includes a 5 percent increase for community colleges, or an additional $12.6 million. Included is $42.0 million in capital funding. Funding for the community colleges is shared by sponsoring counties or school districts, the students through tuition payments and the commonwealth. Commonwealth appropriations are currently based on a formula that includes a hold harmless for Base Operating Costs; an Economic Development Stipend, increased at the same rate as the appropriation and based on community college courses that are focused on High Priority Occupations; a Base Supplement; and a Growth Supplement that recognizes enrollment increases. State System of Higher Education The State System of Higher Education would receive an additional $18.0 million, or a 3.9% increase over the current year overall; however funding for the Education and General line is increased by 4.5%. 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 $18.0 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance projects. State-related Universities Penn State, University of Pittsburgh, Temple University and Lincoln University each are slated to receive a 4.0% increases over the current years appropriation for their Educational and General appropriation lines. Combined, state support for the state-related institutions E & G line items is increased by more than $23.0 million. State-Aided Institutions Overall and on average, state support for the State-Aided Colleges and Universities would increase 3.0%. PA HIGHER EDUCATION ASSISTANCE AGENCY
Grants to Students In addition, PHEAA will continue the commitment made under the GIFTS initiative and will provide up to $52.5 million to supplement the state appropriation, in addition to the $20 million that has been reserved from the 2005-2006 funding to hold renewal applicants harmless during the transition phase of the new formula implementation. The PHEAA Board annually determines the distribution of funds to applicants on criteria including family income, family size and the cost of the institution the student will be attending. Currently the number of grant recipients is 157,630 students, the average award amount is $2,750, and the maximum award is $3,500. It is anticipated that the recommended budget would allow for 175,730 grant recipients. A new grant formula will be implemented in 2006-2007 and is designed to produce grant awards that cover a greater portion of college costs for needy students, regardless of whether a student is attending a community college or a high priced private college. Institutional Assistance Grants
The budget includes a $1.2 million increase for the Institutional Assistance
Grants Program, or a 3% 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 $1,005 to $1,006 for an estimated
41,272 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, is slated to receive no increase in state funding. Agricultural Loan Forgiveness Program
The budget continues the Agricultural Loan Forgiveness Program. The Governor
has included an appropriation of $85,000. The program forgives up to $2,000
each year with a maximum forgiveness of $10,000 per recipient.
The Governor is proposing to spend $6.8 million, a 119.4% increase, to increase
the number of grant recipients in the New Economy Technology Scholarship program
by 500 and to increase the maximum grant award from $3,000 per year to $4,000
per year. Scholarships are awarded to Pennsylvania students to pursue college
degrees in computers, math and science and who commit to work in Pennsylvania
after graduation, thus expanding Pennsylvania’s skilled workforce. An appropriation of $2 million is included for the Cheyney University Keystone Academy, to recruit gifted students to enroll at the university. PENNSYLVANIA EMERGENCY MANAGEMENT AGENCY For PEMA, “terrorism preparedness remains a top priority.” Last year, the federal government appropriated $230 million to “Domestic Preparedness”; and in the 2006-07 budget PEMA is expected to receive from the federal government $87.7 million. Part of these funds will be to develop and maintain a statewide preparedness strategy that includes the organizations of nine regional Counter Terrorism Task Forces across the Commonwealth. This budget also contains $500,000 for PEMA and the Department of Health to coordinate the Commonwealth’s Avian Influenza and pandemic preparedness. Also found in the budget for the 2006-07 fiscal year is $25 million to be used in conjunction with the Volunteer Company Grants program to provide fire companies and first responders with funds to support its emergency services that are vital to the health of any community. The $25 million is to be funded through Pennsylvania Gaming Board. DEPARTMENT OF ENVIRONMENTAL PROTECTION Under the Governor’s FY 2006-07 spending plan, General Fund support for the Department of Environmental Protection would increase by $10 million from current year levels. The administration’s proposal contains a number of reductions and outright eliminations within DEP’s General Fund appropriations. The line items for the Cleanup of Spare Tires ($2.7 million), Safe Water ($8.5 million), Water Contamination Remediation Grants ($.5 million) and the Storm Water Management Demo Project ($2 million) are all zeroed-out. The proposed budget also contains modest cuts for General Government Operations ($183,000), and a not so modest 24% cut in the operations budget for the Hazardous Sites Clean-up Fund, Environmental Program Management (1.1%), the Susquehanna River Basin Commission (40.6%), Local Soil and Water District Assistance (12.7%). Growing Greener II Last year’s passage of Growing Greener II legislation will continue to bear fruit as the anticipated expenditures by DEP will nearly double to $50 million this year for acid mine drainage and clean up, environmental improvement projects and the county initiative grant program. The administration’s projected 2006-07 revenue estimate of $855 million for the Pennsylvania State Gaming Fund is optimistic and is premised upon several unrealistic assumptions. Of the total $855 million revenue estimate, $610 million will be derived from the slot venue license fees ($50 million for each Category 1 and 2 license, $5 million for each Category 3 license) The primary assumption, upon which the revenue estimate is based, is the projection that all 14 slot venue licenses will be “issued” during the next fiscal year. The Pennsylvania Race Horse Development and Gaming Act (Act 71 of 2004) provides that a slot license is not “issued” by the Gaming Control Board until the Board’s decision to approve a license application is “final, binding and nonappealable” and the applicant has satisfied all required conditions for license issuance. Typically, this does not occur until the venue is ready to begin operations and is open to the public. Payment of the $50 million license fee is not due until such time that the slot license is “issued” by the Board. See, 58 Pa. Code § 441.10. It is unlikely that all available slot licenses will be issued within the next fiscal year. A more realistic estimate would assume that 6 Category 1 licenses (only 6 applicants have applied for the 7 available Category 1 licenses) and the 2 Category 3 licenses will be issued within the next fiscal year, yielding $310 million for the State Gaming Fund. Additionally, because the balance of the $855 million revenue estimate is derived from slot machine operations (gross terminal revenue) at those venues that open, the $245 million is also not a realistic estimate. Assuming that 6 Category 1 licenses are fully operational within the next year, $112.5 million is the most revenue that is likely to be derived within fiscal year 2006-07 from slot operations. Accordingly, the Senate Democratic Appropriations Committee projects an estimated $422.5 million to be available in the Pennsylvania Gaming Fund in fiscal year 2006-07. Also important to note is that the original $7.5 million that was loaned to the Gaming Control Board in 2004-05 is thought to have run out by the end of this fiscal year. If in fact this is the case, an additional loan from the general fund may be necessary. The 2006-07 budget finds the Department of Health showing very modest growth from last fiscal year. This year’s budget will fund the AIDS program at $8.1 million; this program is to provide critical testing to at risk populations. Case management and supportive services are funded through this appropriation that assists those who are personally dealing with HIV. The governor plans to fund the Assistance to Drug and Alcohol programs at $41.3 million for the 2006-07 fiscal year. This is an increase of $2.727 million from the available year. This increase will be allocated to the Single County Authorities who administer the various drug and alcohol programs in the counties they serve. The Department of Health has a new initiative in the 2006-07 budget entitled, “Breast and Cervical Cancer Screenings”. This program tests and screens over 4,200 women of low-income, who have high risk factors, no health insurance and are between the ages of forty to forty-nine. This new program carries out the provisions of Act 74 of 2005 to provide certain women with PAP tests and exam screenings. Beside screenings and tests there will be follow-ups and case management for those women who may be found to have cancer. HISTORICAL AND MUSEUM COMMISSION
The Historical and Museum Commission provides state and local museum
assistance. The Commission’s Maintenance Program is slated to receive $2.0 million in 2006-2007. In the current year, funding was $1.0 million.
Funds from the Keystone Recreation, Park and Conservation Fund for historic site
development are expected to be $13.0 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 Governor includes $4.1 million in funding for the Museum Assistance Grant
Program. In the current year, $5.1 million is available. 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 213 museum assistance competitive grants and 115 general
operating support grants will be awarded in the 2006-07 fiscal year, although
the number of grants awarded may vary depending on the average award amount. The Governor’s budget includes level funding for the individual Non-Preferred Museums that historically receive funding. INFRASTRUCTURE INVESTMENT AUTHORITY Including all State and Federal funding sources, the budget proposal for FY 2006-07 calls for $388 million of PENNVEST expenditures. The federal contribution is $130.5 million where the remainder is comprised of the various revolving funds which total $ 242.2 million. This budget proposes $15.3 million from the Environmental Stewardship Fund for storm water, wastewater and sewer grants, which is almost a $2 million reduction from FY 2005-06. This fund is a special revenue fund composed of monies from landfill fees. These funds are used for loans and grants to municipalities and municipal authorities to improve water, sewage and storm water systems they own. Loans are available to individual homeowners to upgrade their septic systems.
The big issues in the Insurance Department relate to CHIP, AdultBasic, and the Blue Cross/Blue Shield plans. As of December 2005, 138,198 children were enrolled in CHIP with no waiting list. Approximately 23,000 children are in Philadelphia and 12,000 in Allegheny County. A recent study suggested that there are 133,589 uninsured children in Pennsylvania. In order to address this issue the Governor has launched a Cover All Kids initiative. As part of this new initiative, the CHIP program will receive $9.2 million in additional funding from a new Enhanced Children’s Health Insurance line which will receive $2.1 million in state funds and be matched by $7.1 million in federal money. There is $14.6 million in total new money for the Cover All Kids initiative in the FY2006-07 budget, with the rest of the funding coming through the Department of Public Welfare, these two departments will work together to administer this new program. This money will be used to decrease the number of uninsured children in Pennsylvania in three ways: enhanced outreach efforts; federally-approved increases in income eligibility for subsidized coverage; and new opportunities for higher income families to purchase health care coverage at-cost. The Governor expects to enroll nearly 15,000 uninsured children in FY2006-07. Adult Basic had 36,653 enrollees in December 2005, with 114,572 people on the waiting list. Of those on the waiting list, 17,300 are in Philadelphia and 10,000 are in Allegheny County. The traditional Adult Basic funding line in the Governor’s FY2006-07 budget sees a slight ($1.4M) decrease. Adult Basic was traditionally funded entirely by the Tobacco Fund. In February of 2005, however, the four Blues plans entered into an agreement with the Insurance Department which made available significant new funding for the Adult Basic program. The Agreement is for six years. For the four plans the total amount created for the Insurance Department is $90 million; that amount is to be transferred by the Blues to the Department to be used to support health insurance for low income people. This $90 million brings the total funding for the Adult Basic program to approximately $162.8 million. In his 2005-06 budget the Governor requested only $5 million to repay the loan to the General Fund by the Underground Storage Tank Indemnification Fund. The General Assembly, increased this amount to $7.5 million. In his budget for 2006-07, the Governor recommends only a $1 million appropriation. All appropriations for the Judiciary and the General Assembly have been proposed at the same levels as appropriated for 2005-06 with exception of the Gun Court Reimbursement ($125,000) and Court Consolidation ($949,000) lines which have both been reduced to zero. The largest increase in funding for Labor and Industry is for a new Nursing Shortage Initiative, which is receiving $10 million to be used to address the shortage of nurses in the Commonwealth by expanding the number of educational opportunities for studies in this field. Department cuts include a total elimination of funding for the Self Employment Assistance program and the elimination of Employment Services funding. It is important to note that during the last fiscal year the Self Employment Assistance program was eliminated and then later restored by the General Assembly. Job Training Fund This fund has received $3 million in the proposed budget. This funding is for the job training programs that have been established through Job Ready PA. Job ready PA was one of the largest initiatives of last year’s budget. For FY 2005-06 this initiative was given $91 million which was dispersed among various programs. Some of these are as follows: -- Job Ready made
the initial investment of $5 million to allow for Dual Enrollment for high
school students. To date, almost 20,000 students are enrolled in college level
courses in over 70 colleges and universities. -- Through the Higher Education Assistance Agency grant program more than 2800 adult students have received grants and are taking courses at 186 institutions. -- The budget for 2006-07 proposes an additional $12.6 million or 5% for community colleges. The Department of Military and Veterans Affairs has two roles in the Commonwealth: to provide services to PA veterans and their families and to provide combat ready units of the PA Army and Air National Guard to protect the citizens of the Commonwealth. With that said, the Governor has proposed a new line item appropriation, Veterans and Military Personnel Services, funded at $300,000. This program will provide assistance to veterans and military personnel and their families when needed. It is projected that during FY 06/07, the Commonwealth will have 20,650 PA National Guard personnel. The American Battle Monuments received a $20,000 increase for repair to the Pennsylvania Monument located in Vareenes, France. The Governor’s budget would appropriate an additional $3.3 million to the Veterans Homes. This is a 4% increase over the current year’s funding level. Maximum Veterans Home resident capacity is 1600. Resident capacity projections for 2006/07 are 1498. The Scotland School can accommodate 360 students. The 2006/2007 student projection is 350. The programs that provide social services to Veterans are level funded for next year. However, two appropriations, Civil Air Patrol and the Disabled American Veterans Transportation have been zeroed out for 2006/2007 budget year. General Government Operations for the State Police in the 2006-07 budget will receive $160.2 million in General Fund Monies and $435.2 million from the Motor License Fund; this is more than $74 million that was received in the 2005-06 fiscal year. The Governor is proposing in the new budget to add 90 additional troopers. This assumes that the state police budget provides funding for 30 new troopers and that the department can transition 68 currently enlisted personnel who are performing desk duties to carry out law enforcement details. In the current fiscal year the State Police is expected to hire and train 180 troopers. The 2006-07 budget includes $8.821 million for patrol vehicles. Iin the 2005-06 fiscal year this appropriation received $10.478 million. It is anticipated that with vigilant car inspections and careful car maintenance that the loss of funds this year will not have a deleterious effect on the reliability of the cars. The 2006-07 state budget provides $3.5 million to implement the Incident Information management System. Data systems are now being installed in patrol vehicles and bar-coding capabilities are being developed to process information collected at the scene of the incident. This system will help troopers increase their effectiveness by supplying critical information to the troopers directly in their vehicles. The State Police is slated to receive $8.375 million for Law Enforcement Information Technology. A portion of this money will be used for the Problem Specific Policing Initiative. This initiative is an incident analysis and police management tool that utilizes case data mapping with the goal of projecting where vehicle crashes may take place and monitors criminal activity. In the 2005-06 fiscal year this appropriation received $11.885 million. However, this program is nearly implemented and hence the diminished need for additional state dollars in the budget year. The proposed appropriations for the Attorney General, Auditor General and State Treasurer are the same as that appropriated in the current fiscal year with the following exceptions: · The $3.8 million Computer Enhancements appropriation ($1 million each for Attorney General and Auditor General, and $1.8 million for the State Treasurer) which had been added by the General Assembly since 2003-04 has been eliminated for 2006-07 · For the Auditor General, an appropriation of $23 million is recommended to continue at current program levels for the Municipal Pension Systems Aid program. This program was established to distribute funding to the municipal pension plans for police officers and paid firefighters. This program is funded through the Municipal Pension Aid fund. · Both the Witness Relocation Program ($437,000) and the Gun Violence Reduction Witness Relocation ($563,000) lines have been reduced to zero in the Attorney General’s budget. Debt service requirements paid by the Office of the Treasury are expected to increase by $140 million or 19%. The increases come, in part, from the bond issuances for both Growing Greener II and the economic development programs. Highway Construction The Governor proposes appropriating $612.759 million in the 06-07 state fiscal year for six state highway and bridge construction programs. In the 05-06 fiscal year, $594.217 million was appropriated for the same construction and bridge programs. Therefore, the governor proposes spending $18.5 million more for highway and bridge construction programs in the 06-07 fiscal year than in the available year. $15 million of the $18.5 million increase for the 06-07 fiscal year will be appropriated for bridge construction. Highway Maintenance In the 06-07 state budget proposal, the governor appropriates $1.063 billion for six highway and bridge maintenance and repair programs. In the 05-06 fiscal year $929.163 million is appropriated for the same programs. Therefore, in the 06-07 budget $134.617 million more is being appropriated for highway and bridge maintenance programs. The maintenance program that had the highest increase from last year to this budget year is the “Smoother Roads and Priority Bridges” program. This program grew from $50 million in the 05-06 fiscal year to $150 million in the 06-07 fiscal year, a growth of 149.66%. Most of this increase will be allocated to the engineering evaluation of state bridges across the Commonwealth and use a portion of this money for the repair of structurally deficient bridges. Additionally, the maintenance program entitled, “Bridge Preservation” will receive a 41.66% increase in the 06-07 state fiscal year’s budget. Again, this funding will be used solely for maintenance of bridges that are in desperate need of repair. The proposed FY 2006-07 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 proposed spending plan calls for a $4 million reduction in the Fixed Route Transit line. The budget assumes an estimate of $179.6 million to be available for grants from the Public Transportation Assistance Fund, an increase of approximately $5 million from the funds available for the current fiscal year. 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. The various transit agencies, however, face a further challenge in that they must enact budgets in the spring of 2006 for FY2006-07, knowing that flexed funding will only be available for half of that fiscal year. This process will be further hindered by the lack of knowledge about what a permanent solution beginning in calendar year 2007 might be. Another emerging funding issue in mass transit is the growing disparity of federal funding for the various agencies, specifically through the Small Transit Intensive City (STIC) line. Through this federal appropriation some smaller transit agencies in Pennsylvania are receiving close to $1 million in additional funding, an amount which sometimes nearly doubles their normal total appropriations. In order to accomplish the formidable task of finding a permanent, sustainable, and equitable 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, at which point the administration and legislature will have to act quickly to find a permanent solution before the currently flexed money is no longer available on January 1, 2007. The Governor certified his 2005-06 official estimate for the Motor License Fund in July, 2005 at $2.229 billion. However, in his 2006-07 budget document he revises his estimate by $11.45 million, bringing the Fund closer to $2.240 billion for the 05-06 fiscal year. The Governor estimates in the FY 2006-07 budget, revenues in the Motor License Fund at $2.279 billion. This is an increase of 2.19% over the 05-06 fiscal year. The Commonwealth’s General Fund total expenditures are projected to grow by $924 million or 3.8%, while DPW’s General Fund spending will grow by $305 million or 3.5%, which is slightly less than the Commonwealth’s overall budget growth. Of the $197 million in supplemental appropriations requested by the Governor, $168 million are in the Department of Public Welfare. The largest supplemental requests are for Cash Grants ($44.3 million), Medical Assistance-Capitation ($10.2 million) and Medical Assistance-Long Term Care ($127.9 million). Despite constrained general fund spending, the Department’s budget still contains expansion in program spending and does not include any client or service reductions in the MA service program. Medicaid The most significant issues in the department relates to Medical Assistance. This is part of a NATIONAL TREND. Caseloads are increasing due to a growing elderly population. Pennsylvania has the 2nd highest elderly population and the largest number of persons over 85. In addition, there is a growing trend by employers to cut back on employer sponsored health insurance, particularly for low wage workers. The current demographics for the Medicaid system are as follows: % of Caseload % of Dollars
Elderly
13% 35% The Department has proposed a program revision that will improve services and reduce program costs. In order to save $126 million, DPW is proposing elimination of the Community Access Fund and Medical Education payments in the MA Inpatient Appropriation. Furthermore, DPW has cut funding in half for Inpatient DSH (disproportionate share) payments and is proposing to change the distribution methodology as well. Medical Assistance Appropriations FY 05/06 FY 06/07 Difference Outpatient $756,334 $649,335 ($106,999) Inpatient $432,693 $388,974 ($43,719) Capitation $2,519,978 $2,600,644 $80,666 LTC $755,890 $753,146 ($2,744) Medicare Part D $164,746 $348,263 $183,517 Total $4,629,641 $4,740,362 $110,721 The Administration is proposing to support the 2006/07 MA program through a number of initiatives including: Increased General Fund Appropriations $110.7 million Lottery Fund Transfer to LTC $210 million Additional Tobacco Funds to LTC $27 million Roll Managed Care Pymt to FY 07/08 $259 million Cost Containment PRR $126 million Medicare Part D Savings $ 43 million Total $776 million Dual Eligible Drug Costs During the current fiscal year, the Medicare Part D Prescription Drug Program took effect in January 2006. The new program moved persons who are dually eligible for Medicaid and Medicare into a new Medicare Part D prescription program. In order to fund the prescription drug costs of these dual eligibles, the Federal Government is requiring States to pay a portion of those costs. This is referred to as the “clawback” provision of the Medicare Part D program. The Administration has separated these costs from the existing MA Outpatient appropriation and placed them in a new line item in the amount of $348 million – a $184 million increase over current year payments. The Administration has a new initiative called Cover All Kids. This initiative provides $2 million in MA funds for health care insurance for 3,190 additional children projected to enroll in MA. These funds will be spent in conjunction with funds in the Department of Insurance in a major expansion in healthcare coverage for children. The Managed Care Organizations and nursing homes will see a rate increase of 4%. Another initiative in MA is the expansion in Behavioral Health Healthchoices. This expansion will provide behavioral health services to 200,000 additional individuals in the Northeast corridor of the Commonwealth at a cost of $43.9 million. Services for Children Child Welfare funding will increase from $838 million in 2005-06 to $881 million 2006-07. The primary reason for the $48 million increase is due to approved costs in the county needs-based budgets. In 2006-07, the TANF Child Welfare Transition appropriation will be reduced by $15 million from current year funding. The phase-out of the funds is part of the initiative the Administration proposed in the 2005-06 budget. In addition, the Early Education and Care Initiative will provide a $27 million increase to Child Care Services. This will help provide additional subsidized child care services to 1,861 low – income children and to improve accountability of early learning experiences of children in Keystone Stars. Mental Health and Mental Retardation The Mental Health program will receive a slight increase of $2.1 million over current year funding. The direct care workers will receive a 2% cola. The Mental Retardation program will receive substantial increases under the Governor’s budget: $60 million or 8% for Community Mental Retardation Services and nearly $16 million or 17.5% more for Early Intervention. Early Intervention appropriation supports expanded services for 2,827 additional children, birth through age three. The Administration has proposed a $17 million initiative to provide home and community based mental retardation services for 805 additional individuals on the waiting list. All Community MH/MR Programs contain funding for a 2% cost - of - living adjustment for direct care workers. Other Social Programs The Governor’s budget provides substantial increases in General Fund appropriations for Services to Persons with Disabilities and Attendant Care, as well as Home and Community Based Services in the Tobacco Fund. · $6.3 million has been provided in the Persons with Disabilities appropriation to provide services to an additional 748 persons. · $5.4 million is recommended to provide Attendant Care to an additional 752 individuals. · Both the Persons with Disabilities and Attendant Care appropriations contains funds for a 2% COLA for direct care workers. · In addition, Domestic Violence, Rape Crisis, Breast Cancer Screening, Legal Services, and Homeless Assistance will receive a 2% COLA. Income Maintenance When compared to 2005-06, the amount requested for Cash Grants in 2006-07 will be a significant increase over the current year. The $38 million increase is due to: · Early Education and Care Initiative. This initiative will provide childcare services to an additional 15,000 children in TANF families receiving public assistance and those former TANF families who are working to gain economic independence. · A 2% cost of living adjustment for child care services. However, the Department’s 2006/07 budget does not reflect the Federal changes to TANF reauthorization. It is assumed that DPW will need to come back to the Legislature for a supplemental request in order to support the work requirement changes in TANF. The appropriation for Supplemental Grants for the Aged, Blind and Disabled will increase slightly by $4.8 million, reflecting the savings from directly issuing SSI supplement checks as an alternative to paying the federal government to issue the checks. Additional caseload will cost $1.5 million. There is no provision for a state supplement for LIHEAP for 2006/07.
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