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THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS FISCAL YEAR 2007-08 BUDGET PROPOSAL ANALYSIS Prescription for Pennsylvania The Governor’s Fiscal Year 2007-08 budget proposal for the Insurance Department is dominated by his comprehensive health care reform proposal Prescription for Pennsylvania, or Rx for PA. The Governor’s Rx for PA proposal comes at a time when states across the nation are beginning to enact bolder and bolder reform initiatives to tackle the problems of burgeoning health care costs and growing uninsured populations. Governor Rendell’s plan is in many ways the most ambitious and all-encompassing of any that have been proposed or enacted. The Rx for PA will cost a total of $150.9 million in state funds in FY2007-08 with an addition $104.4 million in leveraged federal matching funds, a portion of these funds will be raised through an increase in the Cigarette Tax, and a new tax on other tobacco products which will raise a combined $77.5 million. Funds for the Rx for PA plan will be disbursed through various state agencies including the Departments of Insurance, Health, Education, Labor and Industry, and Public Welfare, the Health Care Cost Containment Council, and the Office of Health Care Reform. The majority of the funding issues for the Rx for PA, however, revolve around the Governor’s Cover All Pennsylvanians initiative. Cover All Pennsylvanians At the heart of the Governor’s plan is the Cover All Pennsylvanians initiative which will offer an affordable basic health insurance plan for small businesses and the uninsured. A recent study conducted by the Pennsylvania Insurance Department found that there are approximately 767,000 Pennsylvanians who do not have health insurance. The survey also found that most of these 767,000 people are employed, and that most of them do not have health insurance because of the prohibitively high costs for both small businesses and individuals. Finally, of the 767,000 uninsured people in Pennsylvania, almost 581,000 earn less than 300% of the Federal Poverty Level. Cover All Pennsylvanians will be an insurance program that is supported by the state and offered through private insurance companies. Employers can participate in the program if they have not offered health insurance to their employees for the past six months, they have 50 or fewer employees, and on average these employees earn less than the state average wage. Additionally, all uninsured individuals will be eligible to purchase insurance through the program. Those earning less than 300% of the Federal Poverty Level ($62,000 for a family of four) will receive help from the state in paying part of their premiums. The health care premium and administrative costs of the CAP program in fiscal year 2007-08 are expected to be approximately $235 million, of that amount $104 million will be provided by the federal government. This figure is based upon an expectation to enroll 153,600 adults in the Cover All Pennsylvanians program in FY2007-08. Enrollment is expected to increase to 431,300 by FY2011-12 at which time the cost of the program will be significantly larger and dependant upon future health care costs and the mix of people taking part in the program. The Governor plans to fund the program in FY07-08 from a variety of sources: existing money from the tobacco settlement agreement totaling $31.3 million; existing money from the Community Health Reinvestment Agreement totaling $52.2 million; Federal matching funds totaling $104 million; and $60.4 million from a new Fair Share Assessment tax. The Fair Share Assessment will be a 3 percent tax levied on the payrolls of businesses that do not offer health insurance to their employees. The Community Health Reinvestment money will be available because the adultBasic program will be collapsed into the Cover All Pennsylvanians plan. In addition to Cover All Pennsylvanians, the Rx for PA has provisions designed to address the three issues of Affordability, Access, and Quality. Rx for Affordability · $268,000 to expand the Commonwealth’s premium rate review authority to all insures providing coverage in the individual and small employer market. · Require hospitals to immediately screen and redirect patients who go to emergency rooms but do not require emergency room care to more appropriate places within the hospital. · $120,000 to develop recommendations and criteria for the review and approval of health care services and facility planning. · $810,000 to develop standardized policies and reporting and auditing procedures for non-profit hospitals required to meet community benefit obligations. · $510,000 to develop and enforce standardized hospital admission criteria and fair billing and collection procedures for uninsured and underinsured patients. Rx for Access · Eliminate the barriers in existing laws, regulations, and insurance reimbursement policies that limit the ability of health care providers- such as nurses, nurse practitioners, midwives, physician assistants, pharmacists, and dental hygienists- to practice to the fullest extent of their training. · $5.4 million to increase access to primary health care in underserved rural areas. · Provide incentives to increase the number of care centers that offer services in the evening and on weekends. Rx for Quality · $2.3 million to standardize identification and reporting of hospital acquired infections and to provide training in infection-control best practices. · Commonwealth will lead a coalition of other health care purchasers from the private sector to align provider payments with their expectations for quality care and will introduce a pay-for-performance program into state funded health care programs. · $2.5 million to develop a chronic care information system with the ultimate goal being the implementation of a nationally recognized and proven chronic care model. · $719,000 to promote health literacy by enhancing the delivery of health-promotion and risk-reduction messages. · $1 million to reduce health disparities by increasing the number of health professionals equipped to address the needs of racial and ethnic minorities. Overall Wellness Initiatives · Ban smoking in all Pennsylvania workplaces, restaurants, and bars. · $6.5 million to increase the number of school breakfasts served and to provide incentives for schools that adopt best-practice nutritional guidelines.
·
$30,000 for elementary school
teachers to integrate healthy living concepts into lesson plans.
ENERGY INDEPENDENCE FUND One of the Governor’s major policy initiatives is the creation of a fund expected to total $850 million for enhancing Pennsylvania’s energy independence. This bold initiative will work on both the supply and demand side of the energy crisis. In order to decrease the demand for energy the plan will provide $244 million as grants to aid consumers in replacing old refrigerators and air conditioners with energy efficient ones. $44 million would be available to replace 440,000 energy wasting units with new units that utilize at least 15% less energy. There will also be rebates of up to 50% of the cost of solar energy units. This money will be available for both business and residential users. Money available to increase the supply of energy will include $106 million for research and development of the next generation of alternative fuels and technology that will conserve energy. The largest portion, $500 million, will be used to aid the clean energy industry. These industries include the renewable sources, wind, solar, geothermal and bio-diesel and ethanol and the more abundant sources such as clean coal. The chart below shows the relative amounts that will be available under the Governor’s proposal.
The funding for this proposal is to come from a .005 cents/kilowatt hour system benefits charge for all consumers of electricity. The administration estimates that the average residential consumer would pay $5 more for electricity annually. They expect that that same residential user will save $73 per year from the proposal in reduced energy usage and cost of electricity. Large commercial electricity users will pay an extra $840 due to the system benefit charge but are expected to save $10,500 a year. Other goals of the proposal include: requiring at least 10% ethanol in every gallon of gasoline sold in the commonwealth by 2017, a modernization of the act that deregulated electric generation to prevent huge increases in the cost of electricity when rate caps expire in 2012, installation of smart meters that allow consumers to save money by using electricity at off peak times and ultimately reducing the amount of Pennsylvania money that currently is spent on foreign oil by two-thirds. 2007-08 Fiscal Year The Governor’s proposed general fund budget contains modest expenditure growth of 3.6% or $27.27 billion for the 2007-08 fiscal year. However, he anticipates revenue growth to be only 2.25% so he proposing a tax increase of $921 million to balance the budget. The tax increase revenue will primarily come from a 1% increase in the sales tax. Each 1% of sales tax brings in over $1.4 billion in revenue, the Governor’s plan, however, diverts $420 million to Property Tax Relief Fund so only $826 million goes to the General Fund. The remainder of the tax proposal will be detailed later in this report. 2006-07 Fiscal Year (Current Year) The Governor’s budget book shows two changes to the 2006-07 fiscal year. First the amount of requested supplemental appropriations increases from $39.5 million expected in December in his mid-year briefing to $211.6 million. These additional supplementals are entirely for spending in the Public Welfare realm and will be listed elsewhere in this report. The second change is there is $161.7 million more revenue expected in this fiscal year. This revenue results from a reduction of $95 million in the amount of money expected for tax refunds and an expected revenue surplus of $66.7 million at the end of the fiscal year. In order to balance the budget the Governor is recommending $921 million in additional taxes and revenues. As the chart below shows 90% of the expected new revenue is from a 1% increase in the sales tax.
Sales Tax The sales tax increase should raise about $1.424 billion annually. The increase would be effective July 1, 2007. Since there is a one month delay from the time the sales tax is collected by the merchant and when it is sent to the Commonwealth the first year will only contain 11 months of collections. The Governor’s proposal transfers $420 million to the Property Tax Relief Fund, which leaves $826 million for the General Fund. For all subsequent years half of this sale tax increase or about $700 million will go into the Property Tax Relief Fund. Transfer from Oil Company Gross Profits Tax The Governor’s transit plan creates a new tax that will be utilized to fund that proposal. There is, however, a small impact on the General Fund: If oil companies are going to be paying this new tax they will be exempted from the CNI collected into the General Fund. This transfer of $17 million simply makes the General Fund whole. Cigarette Tax There is a10 cents a pack increase proposed for the cigarette tax. That increase is expected to raise $49.7 million. Other Tobacco Products A new tax is proposed on other tobacco products such as snuff, pipe tobacco and cigars. These items are current only taxed under the sales tax and not by an excise tax. Abusive Tax Shelters The Governor continues his campaign against abusive tax shelters used by corporations to avoid paying taxes to Pennsylvania. This proposal is expected to raise $10 million this year. There will be additional costs to the Department of Revenue in order for them to raise this additional money. Educational Improvement Tax Credit A small increase of $1.4 million is proposed for this popular tax credit. Fee Increases Within DEP Various fees that have not been adjusted in some time are slated to be raised to bring in an additional $9.1 million. Fees such as inspection of dams are the fees to be raised here. The Governor proposes funding all general fund line items, with the exception of the Alzheimer’s Outreach program, from the lottery fund. This would save the general fund in excess of $19.0 million. Family Caregiver Support Program The Family Caregiver Support Program appropriation contains a small increase to provide for a 3 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 5,545 families will receive these services in 2007-08. Alzheimer’s Outreach Services The Governor’s budget includes $250,000 for Alzheimer’s 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. Pre-Admission Assessment Funding for the Pre-Admission Assessment Program is increased by 34 percent for a total of $10.3 million in lottery funds, in the Governor’s recommended budget. This increase reflects the transfer of assessment activities from PENNCARE to maximize federal earnings. 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 community services will increase in 2007-08. Referrals to nursing homes are expected to decrease. This budget proposal includes a $15.0 million increase in the lottery funded PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 346 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 3 percent cost of living adjustment for direct care workers and to provide services as a result of nursing home transition activities. In addition, the Governor is proposing an initiative – Reforming the Long-Term Living System – aimed at reducing reliance on institutional long-term care and promoting growth of high quality home and community-based services. The PENNCARE appropriation includes $4.8 million to fund this initiative. Home and Community-Based Services – Tobacco Settlement Fund A total of $21.3 million in Tobacco Settlement funding is included in the Governor’s budget to provide home and community-based services to older Pennsylvanians. This includes an increase of almost $2.0 million to continue current home and community-based services and expansion to additional recipients, as well as nursing home transition activities. In addition, $4.6 million is proposed to be used for the Governor’s Reforming the Long-Term Living System initiative, to reduce reliance on institutional care. Federal funds in the amount of $2.4 million are also provided for this initiative. Reforming the Long-Term Living System The Governor’s budget includes a total of $12.9 million in lottery, tobacco and federal funds under the Department of Aging to fund an initiative to reduce reliance on institutional long-term care and promote growth of high quality home and community-based services. An additional 2,200 individuals over the age of 60 will be able to remain in their homes or a community-based setting rather than moving to a nursing home. Pennsylvania has the third oldest population of any state, and the fastest growing segment of this population is over age 85. The demand for services is expected to grow over the next several years until the 85+ population stabilizes in 2011. Providing services for the rapidly growing number of seniors, especially those 85 and older, will present a major challenge for the commonwealth in the coming years. The number of seniors using home and community-based services has increased 70 percent since 2002-03. An additional 14 percent increase is projected in the current year. The problem will come to a head in the near future, as 2006 was the year that the first wave of baby boomers, many struggling to care for elderly parents, joined the ranks of the 60-plus year olds. By the year 2020, one in every four Pennsylvanians will be age 60 or older. 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. The commonwealth has expanded its PACE and PACENET programs to make them compatible with and complementary to the new Medicare prescription drug program. PACE Plus Medicare enables cardholders to take advantage of the features of both PACE and the new Federal Medicare Part D benefit by filling the gaps encountered by cardholders in Medicare Part D including deductibles, the donut hole phase of no Medicare coverage, and co-payment differentials between the Part D plan coverage and the PACE and PACENET copayments. PACE Plus pays the Medicare premiums for Part D coverage PACE cardholders, while PACENET cardholders pay the Part D premium.
With a heavier reliance on lottery funds and a
reduced use of tobacco settlement funds, the Governor’s budget proposes funding
for 2007-08 that will allow the average number of seniors covered by PACE,
PACENET or PACE Plus Medicare to rise to 357,725 which represents an additional
32,000 seniors. This represents a 10 percent increase over those receiving
services in 2006-07 and a 60 percent increase since 2002-03. The budget
includes $276.4 million in state funds to continue these programs. The Animal Health Commission, which protects the quality and safety of food, has been funded at $6.675 million. 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. Given the threat of pandemic additional funds may be necessary. The Pennsylvania Food Purchase program is flat funded at $18.7 million in the 2007-08 fiscal year. There is a new initiative in the department’s 2007-08 budget entitled, Farm School Nutrition Management Initiative for $500,000. This program is to provide financial support to schools for agricultural and nutrition education programs. DEPARTMENT OF ECONOMIC DEVELOPMENT Economic Stimulus programs, community and business incentive spending, and other investments in education and training initiatives continue to produce an expanding state economy. Nearly 3,000 stimulus project commitments, totaling $3 billion, have created nearly 193,000 new jobs and retained an additional 17,731 jobs during the past four years. Total nonfarm employment reached another high of 5,787,600 by the end of 2006. However, Pennsylvania’s rate of annual growth of 50,000 net new jobs was only about half the national average in a US economy where payrolls increased by more than $2.2 million. A slowing housing market and lower expected GDP growth provide a cautionary note for the 2007 state economy, making commonwealth investments for new jobs and expanded commerce even more important this year. Commonwealth Financing Authority Economic Stimulus resources invested through the Commonwealth Finance Authority (CFA) have already committed $300 million in infrastructure financing to prepare new sites for business development, and $200 million for water infrastructure improvements. Other CFA programs have provided nearly $45 million for venture investments, $50 million for commercial development targeted to rebuild town centers throughout the commonwealth, and nearly $45 million for new agricultural development opportunities. CFA costs, including debt service payments to finance the bonds issued to support these investments will rise to $61.6 million, an increase of $24.7 million above current year expenditures. Business Financing Programs A recapitalized Machinery and Equipment Loan Fund (MELF), through a $75 million transfer from the Commonwealth Finance Authority, $49 million Opportunity Grant program, $22.5 million Infrastructure Development program, a revitalized Small Business First Fund, and revolving loan investments through the Pennsylvania Industrial Development Authority will combine to provide an estimated $400 million for business investment and job development. Pennsylvania’s aggressive array of business financing programs remains among the largest in the country. These investments continue to be vital to attract and retain jobs here in the commonwealth. In 2005 the commonwealth lead the nation in attracting new manufacturing facilities. Last year these projects accounted for 10 percent of all projects locating in North America, mitigating the loss of total manufacturing employment continuing to decline here in the commonwealth (net loss of 12,000 jobs), and throughout the country. Since 2000 manufacturing employment in the commonwealth has declined by 248,000 jobs. This decline has reduced the manufacturing share of our workforce from 16.3% to 11.9%. Long term stability of our manufacturing sector will depend upon strategic investments to strengthen our competitiveness of these industries. Among such investments, the proposed budget would redirect 4% of annual Tobacco Settlement Fund payments ($13.4 million) to invest $6.7 million in new Health Venture Account projects, and $6.7 million for biotechnology commercialization. The budget recommends a $7.5 million increase for Infrastructure & Facilities Improvement Grants, providing $22.5 million for the 2007-08 fiscal year. Technology Programs The budget would increase support to the Ben Franklin Technology Development Authority Fund by $2.5 million, to total $52.7 million. The increase would support the creation of up to 6 new Keystone Innovation Zones, created to foster business, higher education and community collaboration to spur development. Film Grant Program The budget recommends a $10 million increase in the Film Grant Program. The grants are used to stimulate film production here in the commonwealth, including early project development work. Community Revitalization The budget would include $35 million, a $5 million increase, for Housing & Redevelopment Assistance. New community initiatives included in the proposed budget include a $1.9 million increase in Land Use Planning Assistance, and a new $2 million appropriation to the Community Action Team to support downtown development, merger, and other consolidation initiatives to improve local service delivery. DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES In the proposed budget, funding for state parks operations is increased by approximately $5.3 million. Of this increase, it is proposed that $3.3 million be used to maintain operations of state parks at the current level. In addition, it is recommended that the appropriation for state parks be increased by $1.8 million. There is also a recommended increase for Forest Pest Management in the amount of $648,000. One of the main pest problems that affect the Commonwealth’s forests is the gypsy moth. The growing number of these moths, along with other insects in the 2.1 million acres of forest land represents the need for additional funding for forest pest control. DCNR manages almost 2.4 million acres total of state park and forest land. The state park system consists of 116 parks and 2 conservation areas within 62 counties in the Commonwealth. In addition to managing facilities, the department is also responsible for upgrading facilities where needed. These services are needed to provide quality visitor services which would allow for increased tourism and enhance revenue opportunities. Included in the proposed budget is a new initiative of almost $2 million for these state park enhancements. This initiative’s purpose is to provide for enhancements to state park operations which include the added expenses of seasonal staff. The budget for 2007-08 also includes funds from the Growing Greener II bond initiative. Growing Greener II was established in May 2005 and will provide the department with $218 million over the next six years to improve state parks and forests, community park and recreation grants and for open space conservation. Also included in the proposed budget is an increase in the municipal waste disposal fees. These fees, when collected, are dedicated to the Environmental Stewardship Fund. It is anticipated that in FY 2007-08 these fees will contribute $8.4 million and in the following years $11.2 million annually and will contribute to the debt service cost in the amount of $625 million that was incurred by the Growing Greener II environmental bond issue. The following chart shows the improvement project totals through July 2006 that were accomplished with Growing Greener II monies.
This $625 million, six year Growing Greener II plan is providing: · A total of $217.5 million to DCNR for the projects like above. · Programs that have already received this critical funding include: · $40.6 million for 63 community parks, recreation and state park & forest improvement projects. · $26.1 million in order to preserve 13,214 acres of open space · In order to ensure continued funding to maintain expenditure levels, this budget proposes a $0.50 per ton increase to the municipal waste disposal fee. Through the Environmental Stewardship Fund there are also increases in some appropriations. They are an increase in the amount of $1.2 million for Parks and Forest Facility Rehabilitation, $1.3 million in Community Conservation Grants and $230,000 for Natural Diversity Conservation Grants. The Keystone Recreation, Park and Conservation Fund are used for rehabilitation, repairs and upgrades of facilities and for land acquisition for state park and forest lands. In the proposed budget this transfer is reduced by approximately $5.3 million. In the Governor’s proposed budget, state spending for the Department of Corrections would reach nearly $1.6 billion, an increase of $155.4 million or 11% over current year funding level. Increases in the daily inmate population have required the Department to request a $163 million increase for the State Correctional Institutions. The increase is necessary to house an offender population that reached nearly 44,365 inmates in December 2006. Currently, there are 4,313 inmates in excess of operational bed capacity. Inmate population forecasts show an average increase of 1500 inmates per year over the next five fiscal years. Of the $163 million, $11.7 million is for The Community Corrections Centers, which will also see a capacity increase and require additional housing unit needs. The 2007/2008 cost per inmate is projected at $34,021, an increase of $3,185 per day per inmate over current year funding level. The increase in the inmate population is the biggest challenge facing the Department and the Commonwealth. In order to begin to deal with prison overcrowding, the Governor is reactivating SCI Pittsburgh, with an initial capacity of 750 beds by July 2007. The cost to reopen SCI Pittsburgh is $32.5 million. The Governor has proposed two new initiatives to reduce prisoner recidivism. The Vocational Education Improvement initiative will receive $2.4 million to better equip offenders with vocational skills to increase their chances at employment and lessen their chance of recidivism. Another initiative, Reintegration Program, will receive $792,000 to enhance inmate skills and treatment in order to improve their chances of success outside of the prison environment. As the inmate population continues to rise so do the medical care expenses for the inmates. The Department has requested a $12.6 million (6.6%) increase in the medical care appropriation for the continuation of current medical services. The Governor has recommended an increase in General Government Operations spending by $12.6 million, or 17% from last fiscal year. The $12.6 million increase includes $8 million to continue current programs and two new initiatives for $4.6 million. The Enhanced Community Re-entry initiative will provide additional resources to individuals to enhance community re-entry preparation and offender management. The second initiative, Enhancement of Parole Supervision Services will provide additional resources to maintain a favorable agent to parolee ratio. The Sexual Offenders Assessment Board received an additional $480,000 to continue current program, while the Drug Offenders Work Program received a minor increase of $40,000. The Improvement of Adult Probation Services has been recommended at the current year funding level. The State Parole population is projected to be 31,312 by June 2008, an increase of 2,169 offenders on parole from FY 2006/2007 projection. The estimated State Supervision Fee Collections for FY 2007-2008 are $2.8 million, which is an increase of $83,000 over current year collections. The proposed budget would provide a $525 million increase in basic education spending. This increase would boost funding by $2.3 billion above spending levels when the Governor’s first term began. These investments continue to demonstrate results. The commonwealth was one of only 7 states where 4th graders progressed significantly between 2003 and 2005 in both math and reading tests, while 8th graders have improved scores above tests taken three years ago in 5th grade (6% in math, 13% in Reading). Budget highlights include a 3.5% increase of $166.7 million in the Basic Education Subsidy, including foundation funding of $58 million targeted to the lowest spending districts within the commonwealth. This year’s foundation proposal would include a second tier targeting funds to relatively poorer lower spending districts with higher education costs. Accountability Block Grant funding would be increased by $100 million, and science and technology initiatives would grow by $75 million. Early Childhood Assistance Targeted initiatives to fund early education programs would be maintained or expanded. These investments have already enabled 4,287 additional students to enroll in pre-kindergarten, while an additional 5,800 students are now able to participate in Head Start. The budget targets $75 million of the requested increase for the Accountability Block Grant for school district expansion of Pre-K programs. The other $25 million of the requested increase would fund new full day kindergarten programs. Head Start funding would remain at $40 million. Science & Technology Initiatives The elementary science initiative begun this year would receive $15 million, a $5 million increase. The program supports efforts to improve elementary science instruction through hands on learning and new curriculum training. Classrooms for the Future would receive $90 million to fund the second year of a multiyear program to place internet-equipped laptop computers in math, science, English, and history classrooms and equip teachers with multi-media technology. High School Reform High school reform, through the Project 720 initiative, created to insure more rigorous curriculum standards and graduation requirements, would receive $11 million, a $3 million increase above the current year. The budget would also provide $10 million for dual enrollment programs, a $2 million increase above the current year. An estimated 10,000 college credit courses were taken this year by high school students through dual enrollment programs. The budget also includes $2 million to open 2 new post secondary technical colleges in underserved rural areas. Special Education Special Education programs would receive an additional $29.4 million, a 3% increase. Early Intervention funding would be increased more than $30.9 million, totaling $173 million. Approved Private Schools would receive $89.9 million for the next fiscal year, a $3.4 million increase. Chartered Schools for the Deaf and Blind would receive $34.2 million, more than a $1.2 million increase. The budget would also request $5 million to resolve prior year audits for approved private schools and chartered schools for the deaf and blind. Aid to Non-Public Schools & Charter School Reimbursements Aid to Nonpublic Schools would be increased by 3.4%, including $86.5 million for Services to Nonpublic Schools and $26.45 million for Textbooks, Materials and Equipment. Charter school reimbursements to public schools would be increased by nearly $30.5 million, with a request of more than $157.26 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. Last year’s budget increased the subsidy to $75.5 million dollars, a ten year high. The Governor’s budget proposal for FY2007-08 suggests slightly increasing the Public Library Subsidy to $75.75 million dollars. Other Increases Other significant funding increases would include a $7 million increase for Teacher Professional Development, to total $30.37 million, a $7 million increase for Pupil Transportation, totaling $514.46 million, a $20.18 million increase, totaling $494.8 million for School Employees’ Social Security costs and a requested $452.17 million appropriation for School Employees’ Retirement costs, a $83.4 million increase to cover increasing employer contribution rates. The budget would include a new $6.54 million school food services initiative to increase the number of school breakfasts served and fund incentives for schools that adopt best practice nutritional guidelines, and $1 million to encourage school districts to explore better service delivery through shared services with other districts. The Governor is also recommending a consolidation of all school district health care plans. Property Tax Relief Plans The Governor officially reopened the debate over expanding property tax relief by recommending an increase in the state sales tax, in part to be used to provide more funds for property tax relief. Special Session Act 1 of 2006 will provide tax relief this summer to eligible senior citizens through an expansion of the Property Tax Rent Rebate Program. However, tax relief for all other homeowners, funded through gaming revenue, is not expected before the 2008-09 fiscal year. The Governor’s new proposal would provide an additional $420 million to the Property Tax Relief Fund and insure property tax relief will be provided to all homeowners during the coming fiscal year. The additional funds would be sufficient to provide an estimated $643 million in homestead tax relief to homeowners, while $257 million will fund expansion of the Property Tax Rent Rebate program for eligible seniors and disabled. Income eligibility will be increased to $35,000, reaching an additional 420,000 claimants. Maximum benefits will be increased from $500 to $650, plus residents of Philly, Pittsburgh, and Scranton and homeowners with relatively higher property tax burdens, in excess of 15% of annual income, will receive an additional 50% benefit increase. Spending limits are now in place for all school districts. For the 2007-08 school year districts must limit future tax increases to an inflation index that has been set at 3.4%. Less wealthy school districts receive a modest increase in that index, based upon their school district aid ratio. All school districts also have a list of exceptions from the index for expenditure increases beyond their control such as mandated special education and pension costs. Tax increases above the school district’s allowable index may only be approved by voter referendum at the Spring Primary. During the Spring Primary voters will also be given the option to vote for a local tax shift to provide greater property tax relief. These local referendums, as determined by local school districts in consultation with local tax study commissions, will ask voters if they favor increasing local earned income taxes or shifting to a personal income tax to fund additional tax relief. Community Colleges The Governor’s budget includes a 3 percent increase for operating funds for community colleges, or an additional $6.7 million. In addition, a total of $44.5 million is included for the commonwealth’s annual share of approved capital debt service and lease payments. Together this represents an overall 3.5 percent increase in spending on community colleges. Funding for the community colleges is shared by sponsoring counties or school districts, the students through tuition payments and the commonwealth. State appropriations are based on a formula that ensures predictable base operating funding, provides a stipend for students enrolled in economic development programs that focus on high priority occupations and recognize the capital cost of the colleges. The Governor has included a $2.0 million initiative to create new opportunities for postsecondary education and training in underserved regions in high-demand technical fields by launching the state’s first two Technical Colleges. The Technical Colleges will be located in parts of the state where students do not currently have access to affordable certificate and associate degree programs to prepare for high-skill technical occupations like engineering. State System of Higher Education The State System of Higher Education would receive an additional $16.4 million, or a 3.36 percent increase over the current year overall; however funding for the Education and General line is increased by 3.5 percent. 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 $15.5 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 2.0 percent increases over the current years appropriation for their Educational and General appropriation lines. Combined, state support for the state-related institutions is increased by more than $12.0 million. State-Aided Institutions Overall and on average, state support for the State-Aided Colleges and Universities would receive a modest increase of .5 percent. PA HIGHER EDUCATION ASSISTANCE AGENCY Grants to Students The Governor’s budget includes no increase in the Grants to Students appropriation. This is the commonwealth’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 budget assumes an additional $88.6 million will be provided by PHEAA to supplement the grants to students program. In the current year, PHEAA provided $72.5 million in its earnings revenues for the grant program. The Governor estimates this level of funding will provide for grant amounts which will cover 13.5 percent of a student’s educational cost in 2007-08. 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 166,210 students, the average award amount is $3,100 and the maximum award is $4,500 for students attending the highest cost institutions. It is anticipated that the there will be 173,250 grant recipients in 2007-08. Institutional Assistance Grants The budget includes no increase in the IAG program. These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions. This funding level will provide for a per capita grant of $1,005 for an estimated 41,332 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 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. Sci-Tech Scholarships The Governor is proposing to continue funding the SciTech and Technology Scholarships in the amount of $6.8 million, 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. It is estimated that 4,500 students will receive these scholarships in 2007-08. 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. DEPARTMENT OF ENVIRONMENTAL PROTECTION The Governor’s proposed budget for DEP could be called a return to core functions. There are hefty increases in the Environmental Program Management and Operations line items which increase by 11% and 14% respectively. But total General Fund expenditures actually decrease by 1.9%. The decreases are primarily in the grant programs administered by the Department. The following grant programs are eliminated in the Governor’s proposal: Safe Water, Storm Water Demonstration Project, Water Contamination Remediation, Alternative Energy Initiatives and Chesapeake Bay Education. The Governor’s Energy Independence Initiative clearly makes the Alternative Energy Initiative unnecessary.
Environmental Stewardship and The Governor’s budget proposes two increases in the tipping fees paid for municipal trash. A 50 cent per ton increase will go to the Environmental Stewardship Fund (ESF) to help pay the fund’s share of the debt service on the Growing Greener II bonds. The fee should raise about $8.5 million annually. A more substantial tipping fee increase of $2.25/ton of municipal waste is proposed for the Hazardous Sites Clean-up Fund. This increase should raise $37 million and will keep the fund at a minimal operating level. The appropriation recommended in this budget is for $31.3 million. Prior to the opening of any facilities, the initial funding for the Board was provided through the General Fund in FY 2004-05. The State Gaming Fund, which was established through the Act, is scheduled to repay this initial loan from the General Fund. Because the primary assumption made by the Board, upon which the revenue estimate was based, was the projection that all 14 slot venue licenses would be “issued” during the next fiscal year. However, it is now evident that 11 slot venue licenses will be “issued.” Because of this the estimates made by the administration will now be different. In December 2006 the PGCB issued 11 permanent operator licenses. Five of the licenses issued were to Category 2 applicants and six Category 1 licenses. However, payment of these license fees is not due until such time that the license is issued. Due to the fact that many of these facilities have yet to open, the Board is faced with a short fall of revenue that had not been anticipated. They do expect funds to come in once licensed facilities begin repaying the Board for their investigative fees. However, because the anticipated opening dates are staggered, the return of those fees to the Board will be as well. In order to make up for this shortfall, the PGCB has now implemented a draw down program from the facilities that are already operating. What this entails is that on a weekly basis the Department of Revenue will “draw down” from each facility $800,000 and 1.5% Gross Terminal Revenue (GTR) from each facility. These draw downs are being taken out of the Section 1401 accounts which were created by the General Assembly under Act 71. Each facility is required to deposit $5 million into this account two days prior to opening. Today only three of these accounts exist. This amount will be repaid in the same way as the $36.1 million General Fund loan and will be recovered once all 14 licenses are operating. The draw of 1.5% GTR will continue through the remainder of this fiscal year, ending June 30, 2007. Upon issuance, each $50 million licensing fee will be deposited into the Gaming Fund. At that time, it is anticipated that the Gaming Fund will repay the prior General Fund loans and fund the operations of the Board on an ongoing basis. The revenues from gaming will be used for several different programs. These programs are listed below.
For Fiscal Year 2007-08, it can be anticipated that the total expenditures by the PGCB will be approximately $34.2 million. Of this amount, $6.5 million will be needed for operating costs and $28 million, or 81%, will be needed for personnel costs. In addition to the budgetary needs of the Gaming Board it is also important to bear in mind the budgets for the Pennsylvania State Police, the Department of Revenue and the Attorney General’s office. The State Police are requesting a total budget request if $15 million. This primarily made up of the costs associated with having officers posted at each facility. The total cost for personnel is $14 million, 94% of their required funding. In terms of the Department of Revenue, the majority of their expenditures lie with the administration of G-TECH, the computer system. The cost of DOR’s operations is $6.6 million, and their personnel costs are $2.7 million. The Attorney General’s office comprises the most minimal requirements for their role in gaming. It is estimated that they will need $569,000 for personnel and $231,000 for their operating expenses. The Department of Health’s budget this year is highlighted by the Governor’s Prescription for Pennsylvania. Much of this program is spelled out in another part of this report which deals with the new initiative, Prescription for Pennsylvania, in a comprehensive way. This new health program provides a dramatic increase to affordable health care in a meaningful way. This budget contains $120,000 to develop recommendations for the review and approval of the health care delivery services and facility planning. Pennsylvania can ensure that health care dollars will be effectively used to provide the best access care without being an economic burden. Pennsylvania health care facilities have no way of assessing what proper technique or medical testing is the most cost effective. Both the patient and the health care provider will benefit from efficient resources. $1 million in this budget is appropriated to reduce health disparities by increasing the number of health professionals equipped to address the myriad needs of racial and ethnic minorities. Additionally, $719,000 is recommended by the Governor this fiscal year to enhance the delivery of health-promotion and risk-reduction messages through an integrated and coordinated approach to health literacy. The Department of Health through the initiative, Prescription for Pennsylvania, will address the dearth that exists in mostly rural portions of our state in which many Pennsylvania residents do not receive adequate primary health care. It provides a budget of $5.4 million to increase access to primary health care in under served rural areas through community health care centers, mobile wellness clinics and a long standing loan-forgiveness program. The Prescription for Pennsylvania provides $510,000 within the Department of Health’s budget to develop and enforce standardized admission criteria and fair billing and collective procedures for uninsured and underinsured patients. Having the health care providers re-examine the manner in which they treat patients may also reduce 20,000 cases of hospital acquired infections. These available infections have contributed in nearly 2,500 deaths per year. These cases could be seriously reduced and save $3.5 billion in hospital care. An appropriation of $2.3 million will be used to identify the best practice procedures directed to reduce infections. The Governor recommended that $14.056 million be used to purchase and stockpile antiviral medicine. This effort is part of the Commonwealth influenza panademic perpardness planning efforts that have been recommended by the federal government. In the Governor’s 2007-08 budget there is an increase of more than $2 million in the program entitled, Quality Assurances. In the 2006-07 fiscal year this appropriation received $16.057 million while in the 2007-08 fiscal year the governor is recommending $18.308 million. It is expected that much of this money will be to step up efforts in this Bureau to inspect birthing centers and rural health care clinics. HISTORICAL AND MUSEUM COMMISSION The Historical and Museum Commission provides state and local museum assistance. Museum Maintenance Program The Commission’s Maintenance Program is slated to receive $2.0 million in 2007-08, as in the current year. Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to be $11.2 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 Governor includes $4.1 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 200 museum assistance competitive grants and 155 general operating support grants will be awarded in the 2007-08 fiscal year, although the number of grants awarded may vary depending on the average award amount. Non-preferred Museums The Governor’s budget includes a 9 percent decrease in funding for the individual Non-Preferred Museums that historically receive funding. These amounts are identical to the funding levels the museums received in 2005-06. Although much of the Governor’s proposed budget for the Insurance Department is dominated by the Prescription for Pennsylvania (see Prescription for PA section), there are a couple of other items in the Governor’s Insurance Department budget that warrant mentioning. The enabling legislation for the Cover All Kids program was adopted by the legislature in the fall. For FY2007-08 the Governor’s budget includes $12.2 million in state money and $20.5 million in federal money to cover a total of 21,000 additional children. Current enrollment in the CHIP program is 152,349 as of January 2007. Current enrollment in the adultBasic program is 52,310. This program will be funded for half a year through the Tobacco Settlement Fund ($28.5 million) and the Community Health Reinvestment Agreement ($47.4 million). In the second half of the fiscal year the adultBasic program will be collapsed into the new Cover All Pennsylvanians program. The Governor also proposes spending $6 million to repay the loan to the General Fund made by the Underground Storage Tank Indemnity Fund. This is the same amount that was enacted in the FY2006-07 budget. INFRASTRUCTURE INVESTMENT AUTHORITY Including all State and Federal funding sources, the budget proposal for FY 2007-08 calls for $439 million in Pennvest expenditures. The Federal contribution is $115.6 million and the remainder is comprised of various funds which total $306.7 million. This budget proposes $16.4 million from the Environmental Stewardship Fund for storm water, waste water and sewer grants. This is a special revenue fund that has a proposed increase of almost $2.7 million. This Fund is used for grants for combined sewer overflow, sanitary overflow and nutrient reduction projects. Also included in this fund are interest earnings on the fund’s cash flow and payments made on loans. These funds are used for loans and grants to municipalities and municipal authorities. In addition, loans are available to individual homeowners in order to upgrade their septic systems.
All of the appropriations for the Judiciary are proposed at modest increases of 2% with the exception of the transfer from the restricted account for the Judicial Computer System which is proposed at $49.6 million, an increase of 18.8%. The proposal also suggests splitting the current Judicial Council line item into a new Interbranch Commission line item. Funding for the legislature is proposed at current fiscal year levels except for the following lines: · The Legislative Drafting System and Host State Committee CSG lines are zeroed as they were one time expenses. · The Health Care Cost Containment Council and the State Ethics Commission are given increases of $393,000 and $91,000 respectively. · There is a new $2 million line item, Rx for PA – Hospital Acquired Infections. The largest appropriation recommended in the proposed budget is for the implementation of the Cover All Pennsylvanians initiative. This initiative will receive $20 million. The role of Labor & Industry in this initiative will be to administer the Fair Share Assessment tax. This tax is 3% on businesses that do not offer health insurance coverage to their employees. Another appropriation increase recommended in this budget is for a change to be made in the Worker’s Compensation Program through the Workmen’s Compensation Administration Fund. The appropriation for this fund is approximately $2.2 million. This program provides income and medical services to those who qualify. Included in this program are workers’ compensation, unemployment compensation, occupational disease payments and social security disability payments. In addition to the $2.2 million appropriation there is an additional appropriation in the amount of $869,000 for those individuals whose eligibility falls between certain dates per Act 147 of 2006. Job Training & Industry Partnerships The Department of Labor & Industry is the lead agency in the administration of the interagency employment and training programs for the Commonwealth’s adult labor force and youth. The industry partnerships that were set up through this program received $5 million in this proposed budget. These partnerships have assisted in creating opportunities for a variety of the Commonwealth’s citizens. Included are TANF clients and those who are unemployed. In addition, programs have been established to provide at risk youth with skill development, career education and job placement. These industry partnerships have become a valuable resource that assist both the workforce and workplace as these two groups are now able to fulfill the other’s needs.
New Directions Since 1987 the Departments of Public Welfare and Labor & Industry through this program have had a collaborative agreement to assist individuals receiving welfare.
Other services available to these individuals include:
There are also included in this proposed budget some cuts to various programs. Some of these include a complete funding cut in the amount of $3 million for the Self Employment Assistance program. This program allows individuals to continue receiving unemployment compensation benefits while they also receive training on the ways in which they can open their own small businesses. Since 1998 over 1000 new businesses have been opened through this program. Another cut made in this budget is to the Centers for Independent Living in the amount of $450,000 and $500,000 for the Assistive Technology program. The Lottery Fund is slated to begin paying for the expansion in the property tax rent rebate (PTRR) that was included in Act 1 of last year, the property taxpayer’s relief act. Expenditures for the PTRR program are to increase by $194 million in 2007-08. Expenditures for PACE will also add $74 million to the 07-08 expenditures. Total Expenditures are expected to increase $388 million or 27%. Revenues, which are ticket sales, are expected to grow by only $40 million or 2.4%. The Lottery Fund’s ending balance will decrease back into the range that it had been in 05-06 as the projected ending balance will be $472 million. That is down from the current year’s ending balance of $620 million. In future years the money from gaming will be used to provide the expended PTRR coverage. 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. It is projected that during FY 07/08, 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 $7.8 million to the Veterans Homes, which is a 9.3% increase over the current year’s funding level. Part of the $7.8 million increase is $1.2 million for a new Dementia Unit in the Erie Soldiers and Sailors Home. The remaining $6.6 million will provide additional funding support for Veterans receiving care in the Veterans Homes. The Governor has proposed $688,000 for Scotland School, a school for Veterans children. The school can accommodate 360 students. The 2007/2008 student projection is 340. A new line item, Supplemental Life Insurance premiums, is funded at $1.7 million. Senate Bill 1043 established the Supplemental Life Insurance Premium program. The Commonwealth will pay for the difference in SGLI premiums for Guard soldiers deployed to combat zones between what the federal government pays and the maximum coverage. It also provides the flexibility for the Commonwealth to purchase this coverage under existing state-sponsored life insurance programs rather than reimbursing the soldiers after the fact, as other states have had to do. The programs that provide social services to Veterans are level funded for next year. However, the Civil Air Patrol appropriation has been zeroed out for the 2007/2008 budget year. The General Fund appropriation for State Police General Government Operations will be increased by 1% to $167.391 million. The Motor License Fund share increases by slightly less than 2% to $450.8 million. The State Stores Fund will allocate a 1% increase in State Police support, providing $23.665 million. In the 2007-08 budget, the Governor is not recommending funding any additional state troopers. However, according to the Governor there will be 4,660 troopers serving Pennsylvania, the highest level of troopers in Pennsylvania history. However, the Governor is proposing that local communities receive $10 million to provide funding to twenty cities to hire an additional 200 additional law enforcement officers. The State Gaming Fund will provide $13.629 million in the 2007-08 fiscal year to carry out their duties spelled out in the new gaming legislation. In the 2006-07 this appropriation did not receive any funds. The proposed appropriations for the Attorney General, Auditor General and State Treasurer see no significant changes with the following exceptions:
The Governor and the General Assembly in the 2006-07 fiscal year enacted Act 66 of 2006. 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. The state has been able to expand Adult Basic by 50,000 persons by receiving funds from the Community Health Reinvestment Agreement with the four major Blue cross and Blue Shield plans. For 2007-08 this equates to approximately $99.6 million. The Governor’s Tobaccos Settlement Fund will allocate funding for the following health – related activities. (Dollar Amounts in Millions) Health Care Insurance for the Uninsured: $187.5 Subsidize health care insurance coverage for uninsured adults with incomes under 300 percent of the Federal poverty level upon implementation of Cover all Pennsylvanians and for workers with disabilities with incomes under 250 percent of the federal poverty level. Biotechnology Commercialization $6.7 Provide additional capital for investment in private venture firms that extend financial resources to early stage start ups and emerging life science companies. Long-Term Living: $122.8 Provide home and community-based services and nursing home care for seniors and persons with disabilities based on their clinical need and personal preference. Health Venture Investment $5.7 Expand capacity for the three Life Sciences Greenhouses to invest in companies focused on research, development and commercialization of cutting edge therapies and medical technologies. Health Research $63.6 Fund health-related research proposals from Pennsylvania-based researchers. Fifty percent of these funds will be used to provide accelerated funding of approximately $500 million for The Jonas Salk Legacy Fund-Accelerating Medical Research in Pennsylvania. Life Sciences Greenhouses $3.0 Continue support for the three Life Sciences Greenhouses that invest in companies focused on the research, development, and commercialization of cutting-edge therapies and medical technologies. Tobacco Prevention and Cessation: $30.1 Fund community-based prevention and cessation programs that are based on best practices for effective intervention from the National Centers for Disease Control. Continue annual contributions to a separate account that can be used to maintain Pennsylvania's commitment to health care spending in the event that the annual allocations cease or decrease to a level that the Governor and General Assembly agree must be augmented. Hospital Uncompensated Care: $25.1 Support financially distressed hospitals in the provision of uncompensated care and care to Medical Assistance recipients. Pharmaceutical Benefits for the Elderly: $13.4 Support the expansion of the pharmaceutical benefits for the elderly program implemented in 2001. Pennsylvania has been struggling over the past few years to deal with both a looming funding crisis for mass transit and the continuing deterioration of the commonwealth’s highways and bridges. The Governor mitigated this problem by temporarily flexing federal highway funding to subsidize mass transit. This flexed funding, however, expired on January 1, 2007. The Transportation Funding and Reform Commission Last year, the Governor created a Transportation Funding and Reform Commission to try to comprehensively lay out the problems facing all of transportation and map out a possible solution. The Commission met throughout the past year, finishing their work and presenting a final report in November. The Commission performed comprehensive audits of many of the mass transit agencies across the state and found that the funding crisis which many of them face is both real and immediate. The Commission deemed that funding for public transit is inadequate for a variety of reasons, including an almost complete elimination of Federal operating subsidy, and the lack of growth in the primary state operating subsidies. The Governor’s fiscal year 2007-08 budget proposal uses the recommendations of the Commission as a starting point to offer a menu of options that might be used to address the Commonwealth’s mass transit funding crisis. First and foremost, the Governor makes clear that new funding for both transit and highways should be tied to reform. The Department of Transportation would be responsible for carrying out the reforms as they relate to the maintenance and construction of highways and bridges. These reforms might include implementing more disciplined asset management, streamlining the project delivery process, increasing use of the design/build delivery method, and accelerating implementation of Smart Transportation and right-sizing initiatives. The Governor believes that such reforms could lead to $120 million a year in cost savings state-wide. Mass transit reforms, on the other hand, would have to be accomplished by the various transit agencies throughout the Commonwealth. The reforms necessary vary from transit agency to transit agency but there are also statewide reforms which the Governor suggests. These include strengthening transit accountability, adjusting system service to reflect market demand, a simplification of the funding system which is currently the disjoint result of piecemeal attempts to patch problems over the years, and a rethinking of how the state distributes money to the agencies. The Governor believes such reforms could lead to $60 million a year in cost savings state-wide. Further, the Commission made several proposals that might be used in order to address the funding problems faced by the Commonwealths’ mass transit agencies: First, the Commission Report suggests replacing the current funding streams available to mass transit with a dedicated portion of either the income or sales tax so that it will provide a reliable and growing funding stream. This would be a revenue neutral swap. Second, the report, acknowledging that there is a need for increased state funding suggests raising the Realty Transfer tax in order to provide an additional $576 million. This would require an increase of 0.9%. Third, the report suggests that the local funding for mass transit be increased. In order to accomplish this it suggests raising the total local match from 15% to 25%. This would provide an additional $184 million in local funding for transit. In order to accommodate this, he suggests allowing the counties to choose between raising their sales tax, realty transfer tax, or earned income tax. The Governor also emphasized that any solution to the transportation funding crisis in Pennsylvania must encompass both transit and the highways and bridges. To this end the Commission Report also suggested several ways in which new funding could be generated for the Commonwealth’s ailing highway and bridge system: First, the report suggests the exploration of public-private partnerships, such as leasing the Pennsylvania Turnpike to a private operator. The report suggests that such partnerships might alleviate some of the financial strain on the state. Second, the report suggests that an increase in the Oil Company Franchise Tax (the Gas Tax) might be necessary. An increase of about 11 cents a gallon would generate approximately $750 million in new revenue. Third, the report suggests raising certain license and registration fees could generate an additional $150 million in new revenue. The Governor’s Proposal The Governor’s FY2007-08 budget proposal uses the Commission report as a launching pad from which to offer four options for solving the transportation funding crisis. All four options would generate an additional $760 million for transit and $965 million for roads and bridges each year. Option 1 is to adopt the commission funding recommendations without a privatization of the turnpike. For transit, this means that $576 million would be generated through a .9% increase in the Realty Transfer Tax, and $184 million through increased local match requirements. For roads and bridges, this means that $815 million would be generated through adjustments to the Oil Company Franchise Tax equal to 12.5 cents/gallon, and $150 million through increased PennDOT fees. Options 2,3, and 4 all include leasing the PA Turnpike to supply funds for roads and bridges. The Governor believes this would generate $965 million annually. In Option 2, transit would receive $286 million from a .5% increase in the Realty Transfer Tax, $100 million from increased PennDOT fees, $190 million from a new portion of the Sales Tax, and $184 million from an increase in the local match requirements. In Option 3, transit would receive $300 million from 14 new toll barriers that would be erected on Interstate Highways 78, 79, 80, 81, and 95, $286 million would be generated by a .5% increase in the Realty Transfer Tax, and $174 million would be generated through new PennDOT fees. In Option 4, transit would receive all of its $760 million from a new Oil Company Gross Profits Tax. This tax would first require that oil companies use “combined reporting” instead of “separate accounting” like they do currently. Then there would be a 6.17% tax assessed on the Gross Profits of oil companies attributable to activity in Pennsylvania. Further, the Oil Company Gross Profits tax would be paid in lieu of the Corporate Net Income tax (CNI). The Governor proposes to implement Option 4 because it provides the necessary revenue and it will have the lowest likely impact on Pennsylvania residents. Transit Agencies Budgeting In anticipation of the fact that a solution to this crisis will likely not arrive until June, transit agencies across the Commonwealth are already taking measures to ensure their viability for the rest of the current fiscal year. In both Philadelphia and Allegheny County this is being done by reallocating funds that were earmarked for capital projects in order to maintain operations over the coming months. While this solution does allow both SEPTA and PAT to make it through this fiscal year without any drastic cuts in service or fare increases it will be hurtful in the long term as money is being diverted away from much needed capital maintenance projects. Further, these solutions are only temporary. Beginning in fiscal year 2007-08 SEPTA, PAT, and other transit agencies across the state will face gaping holes in their operating budgets. These operating deficits will likely only be able to be addressed with crippling service cuts and fare increases unless additional state funding is provided. The Governor’s February 2006 budget anticipated revenue for the Motor License Fund (MLF) in 2006-2007 to be $2.322 billion. The Governor in his 2007-08 budget has lowered his revised his Motor License Fund estimates by $28.8 million. Therefore, the Governor is anticipating revenues in the 2006-2007 fiscal year to be $2.293 billion. This will have a modest impact upon PennDot’s aggressive construction and maintenance program for the next fiscal year when anticipated revenues are estimated at $2.302 billion. The Commonwealth’s General Fund total expenditures are projected to grow by $948 million or 3.6%, while DPW’s General Fund spending will grow by $367 million or 3.9%, which is in line with the Commonwealth’s overall budget growth. Of the $212 million in supplemental appropriations requested by the Governor, $201 million or 95%, are in the Department of Public Welfare. The largest supplemental requests are for Medical Assistance. 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. Medical Assistance The most significant issues in the department’s budget relates to Medical Assistance. This is part of a NATIONAL TREND. Caseloads are increasing. Pennsylvania has the 3rd highest elderly population and the fastest growing number of persons over 85. While the elderly and disabled are only 34% of the total Medical Assistance population, they account for 65% of the Medical Assistance dollars. The current demographics for the Medical Assistance system are as follows:
% of Caseload % of Dollars Disabled 20% 33% Elderly 14% 32% Children & Families 61% 27% Adults without children 5% 8% “Big 5” Medical Assistance Appropriations FY 06/07 FY 07/08 Difference
Outpatient $ 677,455 $1,008,562 $331,107 Inpatient $ 489,472 $ 459,391 ($30,081) Capitation $2,724,839 $2,405,083 ($319,756) LTC $ 717,154 $ 799,113 $81,959 Mdcre Part D $338,500 $ 325,029 $(13,471) Total $4,947,420 $4,997,178 $49,758
Medical Assistance Cost Containment Initiatives The Administration is proposing to support the 2007/08 Medical Assistance program through a number of Cost Containment initiatives: 1) Redirect Voluntary Managed Care: Clients will be moved from the Voluntary Managed Care program to fee-for-service system. $65 million savings 2) MCO Pharmacy Carveout: Consolidate Medical Assistance pharmacy services in the Fee-for-Service system. $45 million savings ($94 million savings when fully implemented) 3) Healthy Women Waiver: Additional federal revenue estimated at $24.5 million will provide preventative health services for additional women 4) Behavioral Health Service Expansion: Expand the availability of behavioral health services through the Managed Care program $25 million savings 5) Change Managed Care Contracts: $315 million savings when changes are made to MCO contract payment terms, including performance incentives 6) Nursing Home Resident Assessment Schedule: Change resident assessment from monthly to quarterly $30 million savings 7) Reduce Hospital Payments: $33 million savings due to Prescription for PA initiative Dual Eligible Drug Costs 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 separates these costs from the existing MA Outpatient appropriation. For FY 2007/2008, the Commonwealth’s clawback costs are $325 million, a savings of $13 million over current year payments. Medical Assistance Rates The Governor proposes the following rate increases for Medical Assistance providers: Managed Care Organizations: 3% with the opportunity to earn an additional 2.5% increase based on performance Nursing Homes: 2% Hospitals: 2% Reforming the Long Term Care System In order to meet the challenge of the Commonwealth’s growing elderly population, the Governor is proposing to use over $17 million in state funds to expand long-term living options and the overall long-term living system. Beginning with home and community based service, the Governor is proposing to use $12.7 million to serve an additional 2,200 individuals over the age of 60 and an additional 1,000 individuals with disabilities under the age of 60 in the Medicaid waiver program. The Nursing Home Transition program will receive $3.8 million to build up long term counseling and transition support services for individuals who are able to be served safely in a home and community based setting. In order to educate the public on this initiative, $1.5 million will be used for an outreach campaign to help Pennsylvanians make informed decisions. To help balance of the continuum services, the Governor is proposing $3.7 million for the development of domiciliary care homes; $400,000 for additional housing; and $4.7 million to encourage a balance between institutional care and home and community based care over the next five years. Income Maintenance When compared to FY 06/07, the amount requested for Cash Grants in FY 07/08 will be a significant decrease over the current year. The $157 million decrease is due to moving the TANF and former TANF recipients childcare program to a new line item, Childcare Assistance. This will allow the Governor to monitor the quality and availability of childcare for TANF and low income families. Due to Federal changes to TANF reauthorization, the Commonwealth was required by October 1, 2006 to have 50% of its TANF clientele in some kind of federal approved work activity. In a recent DPW briefing, Secretary Richman announced that Pennsylvania was just shy of the 50% goal. States will not face a penalty for non compliance until State FY 2009/10. The appropriation for Supplemental Grants for the Aged, Blind and Disabled will increase by $2.6 million, including $1.6 million to offset additional caseload costs. There is no provision for a state supplement for LIHEAP for 2007/08. Mental Health and Mental Retardation The Mental Health program will receive a significant increase of 30.1 million over current year funding. Part of the $30.1 million is for a new initiative, Expanding Community Mental Health Services, which will provide 200 individuals currently residing in state hospitals an opportunity to live in a home and community based program. In addition, 2,000 families of children with mental illness will receive respite care services. The Governor recommends a 3% cola for Mental Health Services. The Mental Retardation program will receive substantial increases under the Governor’s budget: $78.5 million or a 9.9% increase for Community Mental Retardation Services and nearly $14.5 million or a 13.7% increase for Early Intervention. The Mental Retardation appropriation includes a $28.9 million initiative, Expanding Community Mental Retardation services to provide home and community based mental retardation services for 3,428 additional individuals on the waiting list. The Early Intervention appropriation includes $8.3 million to provide early intervention services to an additional 1,529 children ages birth to 3 years of age. $1.9 million has been proposed to serve an additional 100 persons with Autism in a home and community based care system. Community MH/MR Programs and the Early Intervention program contain funding for a 3% cost - of - living adjustment. Services for Children Child Welfare funding will increase from $881 million in 2006-07 to $948 million 2007-08. This includes $56.2 million to support county needs-based budgets. In 2007-08, the TANF Child Welfare Transition appropriation will be reduced by $30 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 Governor has proposed to strengthen the Early Education and Care Initiative by providing a $19 million increase to Child Care Services. These funds will provide additional subsidized child care services to 400 low – income children and improve accountability of early learning experiences through the Keystone Stars programs. The Nurse Family Partnership program will receive an additional $587,000 to provide services to 184 additional families. In order to monitor the quality and availability of childcare for TANF and former TANF families, the Governor has proposed a new line item, Childcare Assistance. This new line item is composed of $157 million transferred from the Cash Grant appropriation and $52 million in funding to strengthen the existing program, including funding for a $10.8 million initiative to increase provider rates to ensure access to child care. 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. · $2.9 million has been provided in the Persons with Disabilities appropriation to provide services to an additional 405 persons. · $3.7 million is recommended to provide Attendant Care to an additional 595 individuals. · Both the Persons with Disabilities and Attendant Care appropriations contains funds for a 3% COLA. · In addition, Domestic Violence, Rape Crisis, Breast Cancer Screening, Legal Services, and Homeless Assistance will receive a 3% COLA.
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