SENATE DEMOCRATIC APPROPRIATIONS COMMITTEE
Analysis of the 2008-09 Budget
The key to understanding the 2008-09 fiscal year budget is to look to the national economy. Many difficult choices were made in crafting a budget in these tough economic times. The expected recession has not been officially declared but it is clear that revenue growth was not sufficient to carry out the Governor’s vision of February. An expected $427 million revenue surplus for 2007-08 was, at $167 million, much less robust. The economic slow down is expected to continue into the 2008-09 budget year. Projected revenue for 2008-09 was reduced by $300 million. Since the 2007-08 surplus becomes the 2008-09 beginning balance the loss of revenue for this budget year was essentially $560 million.
The official revenue estimated for 2008-09 will be $28.694 billion, an increase of 2.77% over the previous year. An additional $70 million will be transferred from various other funds to provide significant revenue to the general fund to support the budgeted expenditures of $28.217 billion. The expenditure growth in this budget is 3.8%. Most general government appropriations were automatically reduced by 1.3% to help bring expenditures in line with the reduced revenue. The level of expenditure is $149 million less than the Governor proposed in February.
Funds Transferred to the General Fund
Three other fund balances were tapped to supply the revenue needed to balance the budget. The Rainy Day Fund was not one of the funds that were utilized. The statutorily required transfer of the 2007-08 surplus which would have been $138 million will not be made into the Rainy Day Fund. Instead the State Liquor Stores will transfer an additional $40 million. The Banking Fund and the Recycling Fund will each transfer $15 million to the General Fund.
Because the available revenue was less than was expected there were very few tax changes. In fact only one change, a small volunteer firefighter tax credit, reduced tax revenue. This credit reduces active volunteer firefighter’s income tax liability by up to a maximum $100. The credit is designed for only this fiscal year. The total amount of the credits is capped at $4.5 million.
The recipient of the funds from the PIT checkoff for breast cancer research was also changed. The money had gone to the Department of Health, who had sent the money on to a non-profit organization known as the Breast Cancer Coalition. The change will remove the Department of Health from the chain and the donated money will go to the Breast Cancer Coalition.
The bill also authorizes the Joint State Government Commission to conduct a study on the what the effect of various poverty programs would be on the poor in the commonwealth.
The Lottery Fund sold $13 million more in tickets in 2007-08 than in the previous year. While ticket sales were below the amount estimated last July they were $162 million higher than the revised estimate in February. This increase has alleviated some of the concern about the fiscal health of the fund. While the Governor was projecting a 2008-09 ending balance of only $34.5 million, a more healthy $90 million balance is now projected.
The Lottery Bureau plans several adjustments to the games that they feel will return the fund to balances over $100 million in several years. One of the changes that they had planned was to get legislative approval for lower the profit margin on their overall ticket sales. With a lower profit margin, which in effect gives their players higher earnings, the Lottery professionals hope to increase the sales of instant tickets which are their bigger seller. They would essentially sell more of the tickets that bring in less money but the higher volume will increase overall revenues.
Expenditures for programs for senior citizens will grow by 6.7% over the previous budget year.
The budget includes $100,000 in lottery funds for a new initiative entitled “Improving End of Life Services”, as part of his Prescription for Pennsylvania plan. Funding will be used to assess the opportunities for increasing the availability of hospice and pain management care services.
Family Caregiver Support
The Family Caregiver Support Program appropriation is $12.1 million. This program is also supported by $10 million in federal funds. The program assists families who maintain frail relatives in their home. Working through AAA’s, the program provides benefits counseling and, depending on income, financial assistance including supplies, services and home adaptations and devices. It is anticipated that 7,925 families will receive these services in 2008-09.
Alzheimer’s Outreach Services
The budget includes $250,000 for Alzheimer’s Outreach Services. It is also 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 $1.4 million, to provide for additional assessments. 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 2008-09. Referrals to nursing homes are also expected to increase.
The PENNCARE program provides home and community based services to older Pennsylvanians to enrich their lives and enable them to delay or avoid moving to a nursing home. This budget includes $247.6 million for the lottery funded PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 260 recipients. Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports. As part of this appropriation, $3.0 million is available to provide additional services to reduce reliance on institutional long-term care and promote growth of high quality home and community based services.
Home and Community-Based Services – Tobacco Settlement Fund
A total of $25.8 million in Tobacco Settlement funding is included in the budget to provide home and community-based services to older Pennsylvanians. This includes an increase of almost $3.0 million to continue current home and community-based services, as well as nursing home transition activities, and an increase of $1.5 million to provide waiver services to additional recipients.
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 Medicare prescription drug program. PACE Plus Medicare enables cardholders to take advantage of the features of both PACE and the 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 co-payments. 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 budget includes funding for 2008-09 that will allow the average number of seniors covered by PACE, PACENET or PACE Plus Medicare to rise to 407,575, an increase of 49% over the last 5 years. It is estimated that 24,000 additional seniors will be served in 2008-09.
At the time of this report, Senate Bill 4 was pending passage. The bill would maintain the eligibility for PACE and PACENET enrollees who would otherwise be disqualified from participation in the program solely due to a Social Security cost-of-living adjustment. The exemption for PACENET would be retroactive to December 31, 2007. The act would become applicable to PACE enrollees on December 31, 2008. This moratorium is extended for both until December 31, 2010.
The bill would allow approximately 1,400 persons enrolled in the PACENET program, as of December 31, 2007, to remain eligible for the program. For 2008-09, the number of PACENET enrollees impacted by the Social Security exemption is projected to increase to 2,925. The bill also allows approximately 4,475 persons enrolled in the PACE program, as of December 31, 2008, to remain eligible for the program.
Reforming the Long-Term Living System
The budget includes a total of $4.2 billion in total funds among departments for nursing home and community based services, including funding to enable 2,100 additional seniors to remain in their homes as an alternative to nursing home care.
Pennsylvania has the third oldest population of any state, and is experiencing demographic changes that many other states will not experience for another 10 to 15 years. 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 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.
The goal of this administration is achieving a balance of 50% institutional care to 50% home and community based care.
General Government Operations received $31.34 million in this budget which is a 1.5% decrease from the Governor’s budget but an increase of 5.2% from last year. Much of this increase will be directed for the administration and support of programs that were cut back such as the Animal Health Commission and Agriculture Research. (See above chart) Additionally, General Government Operations received $375,000 to strengthen the Food Safety program which has wide ramifications upon the health of millions of Pennsylvanians who buy and eat prepared food at grocery stores and restaurants.
Crop Insurance remained at level funding in this budget at $1.5 million compared to the available year. This program which has existed in the last decade has helped farmers deal with adverse weather conditions that have seriously impacted crops across the state.
The 2008-09 budget provides that Agricultural Promotion, Education and Exports program be funded at $1.34 million. This is 14.63% decrease from last year’s funding level. Despite this cut, the Department plans to continue to increase the number of Pennsylvania exports beyond the $1.8 billion that was exported last year.
The State Food Purchase Program is funded at $18 million for the 2008-09 fiscal year. Much of these dollars will be used to purchase federal surplus food and to leverage additional money for food programs throughout the state. During the downturn in the economy, this program has provided significant food resources to countless families.
The Animal Health Commission will receive $6 million in the 2008-09 budget as compared to $6.625 million in the 2007-08 fiscal year. The Commission will be able to absorb the cut with help from the General Government Operations line item in the area of administration. The Commission ensures the quality of Pennsylvania’s livestock even during times when the state faces such diseases as brucellosis and bovine tuberculosis.
State spending for the Department of Corrections will reach $1.65 billion, an increase of $39.3 million, or a 2% increase from the 2007-2008 fiscal year. This increase is partially due to the expansion at the Community Correction Centers and at current SCI facilities.
The SCI appropriation has increased $29.8 million over FY 07/08 to $1.34 billion. The inmate population is the single most important factor affecting costs in the correctional system. By the end of FY 08/09, the inmate population is projected to grow to 48,731, an increase of 2,700 from June 2008. When factoring in the cost of inmate health care, education and training expenses, the current average cost per inmate is $37,515.
The Medical Care appropriation is $214 million, an increase of $9.9 million. Following a National trend, every year sees an increase to the cost of providing adequate healthcare to the inmates, especially the elderly population.
The increase in the inmate population is the biggest challenge facing the Department and the Commonwealth. Inmate population forecasts show the State prison population will grow to more than 56,500 offenders by 2013, an average increase of 2,027 inmates per year. Some statistics about the current inmate population:
1) Admissions for less serious offenders has increased at twice the rate of admissions for violent offenders over the last seven years
2) 36% of PA prison beds are filled with less serious offenders
3) The recidivism rate in PA is 46%, meaning almost half of all inmates return to prison within 3 years of their release
In order to begin to deal with prison overcrowding crisis, the Governor proposed enactment of comprehensive legislation: HB 4, 5, 6, and 7. This legislative package passed both chambers during final budget negotiations. These bills are directed at lowering the recidivism rate in the following ways:
1) Increasing offender access to crime reducing drug treatment programs
2) Provide incentives to less violent offenders to complete programs that provide them with tools to live crime-free in society
3) Enhance Probation & Parole’s ability to focus more on offenders during their first year of parole.
4) Authorizing PA Commission on Sentencing to recommend necessary changes to legislation and develop guidelines for offenders who violate parole, probation, or State Intermediate Punishment program (SIP)
Probation and Parole spending will total $114.8 million in FY 2008/2009, which is an increase of approximately $5.1 million from last year.
In the enacted 08/09 budget, the General Government Operations appropriation received an increase of approximately $5.2 million or 5.7% above the Governor’s FY 07/08 budget.
Funding for the Sexual Offenders Assessment board was reduced by $82,000 from the Governor’s February budget proposal of $4.2 million. In addition, funding for Adult Probation services received $251,000 less than the Governor proposed in his February budget. These and other reductions were necessary in order to bring spending in-line with projected revenues.
The final budget agreement includes a $2.865 billion Economic Stimulus plan that will make substantial capital investments in local communities, public infrastructure, alternative energy investment, and transportation programs. See chart on following page for a breakdown.
Raising the RCAP Debt Ceiling - $800 million
The General Assembly increased the Redevelopment Capital Assistance (RCAP) authorization ceiling an additional $800 million, from $2.65 billion to $3.45 billion. The increase will enable more than $1.6 billion in development projects to proceed, including local matching fund investments. According to the Governor, there are $500 million in projects that are ready to break ground immediately.
Rebuilding Pennsylvania - $250 million
Bridge Repair - The Governor proposes an additional $200 million for each of the next 10 years to repair commonwealth bridges. Over the past 5 years the commonwealth has repaired 1,381 commonwealth bridges. In spite of this effort an estimated 5,900 state owned bridges remain structurally deficient. The budget agreement authorized $350 million in bridge borrowing for the next fiscal year.
Water & Sewer - The budget agreement included the dedication of $800 million in Gaming Economic Development and Tourism Fund support for water and sewer grants, dam repair, and flood control, along with $400 million in additional water and sewer infrastructure financing through PENNVEST. The PENNVEST borrowing will have to be approved through a public referendum during the November election.
Rail Freight Program – Capital funding for rail freight assistance will be increased from $20 million to $30 million.
Aviation Grants – Capital Assistance for Aviation projects for medium/small city/regional airports will be increased by $5 million next year.
Keystone Opportunity Fund Expansion
Legislation was approved to authorize the extension and renewal of unused portions of existing undeveloped portions of Keystone Opportunity Zones, Keystone Opportunity Expansion Zones and Keystone Opportunity Improvement Zones, along with the authority to establish 15 new zones. Local governments will have the flexibility to request 7 year extensions, or 10 year extensions, effective only when a business occupies the tax zone.
Rising oil prices, a struggling housing market, declining consumer confidence, and lower projected GDP growth provide a cautionary note for the state economy, making commonwealth investments for new jobs and expanded commerce even more important this year. The final budget agreement includes an ambitious stimulus plan to further spur our state economy. In addition to that plan, economic investments through the Department of Community and Economic Development will continue to bolster our state economy.
The final budget includes $22.5 million for Infrastructure Development, $28 million for Opportunity Fund grants, $19.7 million for Customized Job Training, and $27 million for Infrastructure Facilities Improvement Program grants. A proposal to consolidate the Machinery and Equipment Loan Fund (MELF) and the Pennsylvania Industrial Development Authority (PIDA) was not adopted by the General Assembly. However, the Stimulus plan has already lowered interest rates for both programs to two percent below the prime interest rate and did the same for an estimated $37 million in loans through the Small Business First program.
Technology programs would receive $50.7 million through the Ben Franklin Technology Development Authority. These funds include $4 million for the creation of 4 to 6 new Keystone Innovation Zones (KIZs). There are currently 26 KIZs throughout the commonwealth.
The budget agreement consolidates regional grants for tourism marketing initiatives currently funded through three different appropriations, to provide $9 million, a $4 million increase for Regional Marketing Partnerships. Funding for Marketing to Attract Business would be reduced by $500,000 and local grants for Tourist Promotion Assistance would be cut by $3 million to fund this consolidation. Tourism is estimated to contribute $27 billion to our state economy annually, a 17.5% increase since 2002.
The Film Grant program would be discontinued in the proposed budget. The state now provides $75 million in film production tax credits.
The Governor’s request to redirect 4 percent of Tobacco Fund revenue currently supporting the PACE program to provide additional resources for biotechnology commercialization for the Life Science Greenhouses ($7.4million), and additional funding for the Health Venture Account ($7.4 million) was again rejected by the General Assembly. Instead, $12 million will be transferred from the Machinery and Equipment Loan Fund, to support these programs. The Health Venture Investments were initially capitalized with $60 million in Tobacco Settlement proceeds.
Commonwealth venture capital investments through the Commonwealth Finance Authority, DCED, and our state retirement boards have stimulated significant new venture capital funding throughout the commonwealth. Since 2002 these investments have grown by nearly 70%, a $778 million increase.
The budget provides more than $14 million for international trade development. Funding for trade activities has been expanded significantly since 2002. These investments have produced significant growth in commonwealth trade activity adding an estimated $10.5 billion to our state economy, a 70 percent increase.
Several community assistance programs received modest 1.3% cuts in the final budget. These programs include $33.5 million for Housing and Redevelopment Assistance, $17.7 million for New Communities, $2.37 million for Shared Municipal Services grants, and $4.17 million for Land Use Planning Grants.
Legislation was enacted to consolidate wage tax collections by local governments and school districts on a countywide level. The consolidation is expected to significantly increase local collections and provide a more efficient system for employers.
In the budget for fiscal year 2008-09, funding for General Government Operations has increased by approximately 11% or $2.2 million making the total funding $21.7 million. Of this increase, it is proposed that $ 2.2 million is used for the general operation costs of this Department. The remaining $50,000 will be from the lease and moving costs of the Philadelphia State Office Building.
This budget reduces the appropriation for state parks by $296,000 which makes the total funding $61 million. The Commonwealth has 117 state parks which offer a variety of outdoor recreational and educational opportunities for visitors. In addition to Pennsylvania’s natural resources, visitors are provided with the opportunity to learn about the Commonwealth’s natural heritage. The state park system covers 62 counties and 3 million acres throughout the Commonwealth.
One of the largest increases in this Department is for State Forests Operations in the amount of $2 million. Throughout the Commonwealth there are 2.1 million forest acres. In fact, our forests comprise one of the largest tracts of forest in North America as certified by the Forest Stewardship Council. The Department works diligently to protect and conserve these forests. Through the harvesting of hardwood timber, the Commonwealth boasts a $5 million forest product industry and employs approximately 100,000 people.
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 budget for 2007, funding was provided for enhancements to be made to our parks facilities and operations. The Heritage Parks also received funding however in the budget for 2008-09 this program’s appropriation has been reduced by $7.6 million because the majority of the projects have been completed.
The budget also provides for an increase of $2.4 million for Infrastructure Initiative Mapping. This proposal is to increase the amount of information available for flood mapping. The long term sustainability for Pennsylvania’s natural resources is the responsibility of all and the Department assists local communities and counties in this important process. This is a component of Rebuilding Pennsylvania’s Infrastructure plan.
In addition, grant programs that are administered through this Department have been recommended in this proposed budget to receive increases as well. Some of these programs include: $2.9 million for the Community Conservation grants, $1.7 million for Local Recreation Grants and $689,000 for Land Trusts grants.
DEP got one of the largest general government increases at 3.63% of any agency in 2008-09. The two other line items that contain most of the personnel costs of the Department also got hefty increases. Environmental Program Management has a proposed $1.9 million or a 4.7% increase. While Environmental Protection- Operations will receive a $3.5 million or a 3.6% increase.
These increases are more than offset by two reductions in the proposed budget. The safe water appropriation which received $12 million in 2007-08 is not funded at all in the proposal. A savings of $12.8 million is also realized from DEP’s budget because revenue from the capital stock tax will be used to fund the hazardous sites clean-up fund. With these reductions the total state commitment to DEP actually decreases by $18 million or 4.3%.
The appropriation for flood control is increased from $2.7 million to $5.7 million. The increase is in conjunction with the Governor’s goal of protecting and upgrading the infrastructure within the Commonwealth.
The budget increases basic education spending by more than $400 million. The new funds follow spending during the past 5 years that has increased basic education subsidies by more than $2.4 billion. These increases have included $600 million in targeted investments in early learning programs, tutoring assistance, science and math instruction, classroom technology, and high school restructuring. The investments have provided results. Pennsylvania is now one of only nine states continuing to demonstrate significant improvement in assessment results for math and reading instruction, with 90 percent of the commonwealth’s school districts meeting national proficiency standards.
Last year Act 114 of 2006, required the State Board of Education to complete a study of the adequacy and equity of school funding and to determine what educational resources and related expenditures are necessary to provide a quality primary and secondary education for each student in the commonwealth’s public schools. The report determined the need to increase state and local support by an estimated $4.6 billion to insure all school districts within the commonwealth provide an adequate education to their students.
The final budget agreement provides a $274.7 million increase in the basic education subsidy to begin what the Governor hopes will be a six year state phase-in of the recommended adequacy spending targets. These targets establish an adequacy goal of $8,355 per student with supplements for low income, English language learners, school district size, and cost of living within the geographic region. The recommended targets, including adjustments for local wealth and tax effort, would increase total state support by an estimated $2.6 billion during the next six years.
While the final budget agreement stops short of mandating the full six year funding formula, as suggested by the Governor, the omnibus school code bill expresses the will of the General Assembly to set a six year goal to meet the adequacy spending targets.
The Governor’s proposed budget would have increased Special Education grants to school districts by 3%. Across the board 1.3% reductions in spending throughout the budget reduced this increase to $16.8 million, a 1.66% increase.
Spending for several other education initiatives begun during the Rendell Administration also were reduced by 1.3% below the original amount requested by the Governor, including $271.4 million for the Accountability Block Grant Program, $65.1 million for tutoring assistance, and $39.48 million for state Head Start assistance. The final budget provides $10.8 million for High School Reform, and $45 million for Classrooms for the Future.
In spite of these investments 40 percent of 11th Grade students are currently unable to read or complete math assignments at grade level. Earlier this year the State Board of Education took action to require new graduation standards for graduating seniors. The General Assembly, through the regulatory review process, must review and approve these new standards prior to their implementation. While the original budget requested by the Governor would have included $15 million to begin to implement this system, the final budget agreement provides only $9 million.
Moreover, the General Assembly placed a moratorium on the adoption of any mandatory new set of graduation test requirements during the next fiscal year, although the Department may continue to develop assessments that may be used voluntarily by local school districts.
Dual Enrollment payments total $10 million in the new budget. The Education Department estimates that 20,000 college credits will be awarded to dual enrollment students this year. The budget provides $14.5 million, a $1 million increase, for Science: It’s Elementary instruction.
Funding for Approved Private Schools would be increased by $1.7 million, while funds for PA Charter Schools for the Deaf and Blind would rise by more than $1.5 million. The budget includes $3.1 million for final audit resolutions.
Charter School Reimbursements would increase by $65.67 million, totaling nearly $227 million in the proposed budget. The increased funds reflect an estimated 22% increase in charter school enrollments and would continue to reimburse school districts for 30% of their costs for charter school enrollments. Three school districts with a high concentration of charter school students will receive higher reimbursements.
The budget agreement includes a legislative change making charter school students living inside school district boundaries eligible for reimbursement through the Nonpublic and Charter School Pupil Transportation appropriation. The change results in an additional $9.7 million in reimbursements budgeted for the new fiscal year.
Services to Nonpublic Schools would be increased by nearly $2.6 million. Funding for Textbooks, Materials and Equipment for Nonpublic Schools would increase by $793,000.
Other major increases in the education budget include, $22.7 million for assessment programs, $11.4 million, to total $86.4 million for Pre-K Counts, $12.19 million, totaling $42.5 million for Teacher Professional Development, $9.5 million, totaling $516.6 million for Pupil Transportation, and $12 million, totaling $185 million for Early Intervention Services.
The Public Library Subsidy will remain at $75.75 million for the new fiscal year.
The budget includes a 3.0% increase in operating funds for community colleges, or an additional $6.9 million. Funds for capital projects are level funded at $44.5 million. In total, the budget includes $280.7 million for community colleges, as the Governor recommended in February.
Funding for the community colleges is shared by sponsoring counties or school districts, the students through tuition payments and the commonwealth. Commonwealth appropriations are based on a formula that ensures predictable base operating funding, provides a supplement for enrollment growth, provides a stipend for students enrolled in economic development programs that focus on high priority occupations and recognizes the capital costs of the colleges.
Technical College Programs
Funding for Technical College Programs is included in the amount of $1.0 million. Technical college programs were established in 2007 to increase access to high quality, affordable college-level education in areas of the state that are educationally underserved. Westmoreland County Community College received the first grant. It is estimated that programs will be established in three to four educationally underserved areas off the state and will serve approximately 200 students who previously did not have access to affordable and high quality postsecondary education.
State System of Higher Education
The State System of Higher Education institutions received an additional $15.0 million, or a 3.0% increase. 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 total, the State System universities received $519.2 million.
In addition, the System will receive $16.0 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance projects.
The Pennsylvania State University will receive a 1.5% increase in its General Education line, and a total budget increase of $4.15 million. The University of Pittsburgh’s General Education line is increased 1.5%, and a total budget increase of $2.57 million. Temple University will receive an increase of 1.5% in its General Education line, and a total increase of $2.59 million. Lincoln University received a 5.13% increase for an additional $707,000. Combined, state support for the state-related institutions increased by $10.0 million for a total of $699.1 million.
Funding for the state-aided institutions was reduced by varying amounts, including 50% reductions for the medical lines. In total, these institutions would receive a total of $75.4 million.
The budget includes an initiative entitled “Federalizing Physician Practice Plans” which will achieve savings by claiming $8.8 million in new federal Medicaid funds for the university-affiliated physician practice plans affiliated with the Philadelphia Health and Education Corporation, the University of Pennsylvania and Thomas Jefferson University.
* See non-preferred printout for a listing of individual Institutions.
Grants to Students
The budget includes a 5.5% increase, or an additional $21.2 million, in the Grants to Students appropriation for a total of $407.4 million. 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.
In 2007-08, PHEAA was able to contribute approximately $70.0 million from its business earnings for the Student Grant program. Due to the negative situation in the financial markets affecting student loan agencies across the nation, no additional funds will supplement this appropriation.
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 164,960 students, the average award amount is $3,100 and the maximum award is $4,700 for students attending the highest cost institutions. It is anticipated that the there will be 171,560 grant recipients in 2008-09.
Institutional Assistance Grants
The budget includes level funding 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 $1,046 for an estimated 40,172 students at 85 institution.
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, will receive a 1.3% decrease in state funding.
Agricultural Loan Forgiveness Program
The budget continues the Agricultural Loan Forgiveness Program. The budget includes an appropriation of $84,000. The program forgives up to $2,000 each year with a maximum forgiveness of $10,000 per recipient.
The budget includes a 1.3% decrease in funding for the SciTech and Technology Scholarships in the amount of $4.3 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 4,765 students will receive these scholarships in 2008-09.
Cheney University Keystone Academy
An appropriation of $1.97 million is included for the Cheyney University Keystone Academy to recruit gifted students to enroll at the university.
Nursing Shortage Initiative
The Nursing Shortage Initiative is part of the commonwealth’s workforce development efforts and will help increase the number of nurses in the labor force. Funding is decreased slightly to $2.4 million.
The budget provides for an appropriation of $33 million for the operation of the Gaming Control Board. This funding will be used for the operating and personnel costs of the Board. The Gaming Board is responsible for the operation of up to 14 operating facilities and up to 61,000 active slot machines. Currently there are 6 venues open with approximately 13,000 active slot machines. In addition, the Board now has 243 positions filled and it is anticipated that an additional 77 employees will be hired, which will make the Board’s compliment 320.
A breakdown of revenues for the operating facilities as of June 29, 2008 is as follows:
*This amount includes the $50 million licensing fee from each of the 6 operating facilities, totaling $300 million.
State Gaming Fund
The following amounts are appropriated from the State Gaming Fund to the Pennsylvania Gaming Control Board. * This appropriation includes $11,126,000 which will be taken for the restricted revenue accounts. In addition, this appropriation also includes a loan in the amount of $22,184,000 which will be made from the State Gaming Fund. The total amount appropriated to the Pennsylvania Gaming Control Board is in the amount of $33,310,000.
In addition to the appropriations made, this bill will also prohibit any transfer for the State Treasurer, Secretary of the Budget, Secretary of Revenue or the Pennsylvania Gaming Control Board to transfer any monies within or between the appropriations.
Gaming Board Support Agencies
Several state agencies provide support to the Gaming Control Board. Their budgets are submitted to the Board who then has the responsibility of approving their budget requests or not. There are three agencies that are closely involved with the day to day operation of operating facilities. The Department of Revenue is the manager of the central computer system which keeps track of all operating facilities in the Commonwealth. The Office of Attorney General and the Pennsylvania State Police work with the Board as well assisting with background checks, investigations and legal issues. Below are the enacted budgets for fiscal year 2008-09:
Department of Revenue: $9,754,000
Attorney General: $914,000
Pennsylvania State Police: $14,228,000
Status of facilities
The chart below shows the number of operating venues and their date of opening. It is projected that within 2008-09 six new facilities will open. This will make the total number of open facilities 13.
Number of Active Slot Machines through June 29, 2008
Mohegan Sun: 1,201
Philadelphia Park: 2,912
Harrah’s Chester Downs: 2,873
Presque Isle: 2000
The Meadows: 1,825
Mount Airy: 2,522
Penn National: 2048
Projected Opening Schedule for FY 2008-09
This year’s budget once again highlights the Governor’s health initiative, Prescription for Pennsylvania. Much of the Department’s budget and subsequent increases in certain line items reflect this concern.
In 2007, Pennsylvania adopted the most comprehensive plan in the nation for the eradication of health care associated infections. Act 52 of 2007 is Pennsylvania’s first law in history requiring health care facilities to report all incidents of infections. The 08-09 budget provides $4.5 million for health care infection-reduction initiatives whereby last year it received $2 million; this is more than a 100% increase.
The Quality Assurance is funded at $19.06 million for the 2008-09 fiscal year. Last fiscal year it received $18.3 million or an increase of 4%. This program reviews and analyzes formal health care plans for new construction and remodeling of health care facilities. Quality Assurance is the agency that sets up and reviews each health care facility to ensure that the facilities provide the level of health care that it is licensed to give.
The Pennsylvania Injury Reporting and Intervention System in the 2008-09 budget will receive $1.3 million for this program, which will assist in implementing coordinated care across the Commonwealth.
The 2008-09 budget provides that $5.5 million be used to purchase and stockpile antiviral medicine. This effort is part of the Commonwealth influenza pandemic preparedness planning efforts that have been recommended by the federal government.
$493,000 has been appropriated in the 2008-09 budget for Health Care Equity Strategies. This program will examine what is the most effective health care model to provide health care to minorities, who tend to receive lower quality health care than others. The Prescription for Pennsylvania – Health Equality Strategies is an initiative that will be developed and implemented to address this pressing need.
The AIDS program will receive level funding in this budget at $10 million. Much of this money will be allocated to those areas of our state that have high incidents of AIDS. This money will be used for testing and case management.
The Historical and Museum Commission provides state and local museum assistance.
Museum Maintenance Program
The Commission’s Maintenance Program funding would no longer be a separate appropriation, as the budget rolls it into the General Government Operations Appropriation.
Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to be $11.5 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 Commission also receives federal funding for historic preservation programs.
Museum Assistance Grants
The budget includes $3.79 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 2008-09 fiscal year, although the number of grants awarded may vary depending on the average award amount.
The budget includes a 1.3% decrease for the individual Non-Preferred Museums that historically receive funding.
*See non-preferred print out for a listing of individual museums.
All of the appropriations within the Insurance Department were reduced from the levels proposed by the Governor in his February Budget.
The Cover All Kids legislation was adopted by the legislature in the fall of 2006. For FY2008-09, the budget includes $86.9 million in state money and $247 million in federal money to cover a total of 17,866 additional children. Current enrollment in the CHIP program is 167,581 as of June 2008.
Current enrollment in the adultBasic program is 54,094 with approximately 144,000 people on the waiting list. The Governor’s budget proposed funding only half a year of the adultBasic program as it would then become part of Cover All Pennsylvanians/Access to Better Care. Given that Cover All Pennsylvanians/Access to Better Care has not been enacted as part of the budget, adultBasic will be funded for the entire fiscal year as it has been in the past.
The FY 2008-09 budget provides $8 million to repay the loan to the General Fund made by the Underground Storage Tank Indemnity Fund. This is a $2 million increase over the enacted funding in the FY2007-08 budget.
The recommended appropriation for Judiciary in this budget totals $221 million for the court system. The Commonwealth’s Court System includes the Supreme Court, Superior Court, Commonwealth Court, Court of Common Pleas, Philadelphia Municipal Court, Pittsburgh Municipal Court, Traffic Court of Philadelphia and the Magisterial District Judges.
This funding is for the operation of these courts including administration costs, various judicial committees and judge’s expenses.
The Administrative Office of Pennsylvania Courts (AOPC) is the administrative arm of the courts. APOC provides services for 2100 members of the judiciary and their staff.
Recently the Supreme Court initiated a variety of programs in order to facilitate the administration of justice in the Commonwealth. An example of one of these programs is the creation of the Office for Children and Families in Court through APOC. This program assists courts throughout the State which provides for abused children with safe and permanent homes for as quickly as possible.
Another goal of this Department is to become completely computerized. Currently automated systems are in place for the Magisterial District Judges which serve 548 offices throughout the Commonwealth. The next phase of this project will be to integrate the Civil Courts. The Judiciary in Pennsylvania is also active with the Integrated Criminal Justice Network, which is a system that involves multiple agencies.
The budget for fiscal year 2008-09 holds the majority of programs in this Department at the current levels. The funding for general government operations is $16 million having received a modest increase over FY 2007-08. In addition, both Occupational & Industrial Safety and PENNSAFE received slight increases as well, $65,000 and $102,000 respectively. Also included in this budget is a reduction for the Self Employment Assistance program in the amount of $500,000.
Employment Services, which had not received funding in the proposed budget, has now been restored in the amount of $10.5 million. This is a program that has now been established through the ‘Job Ready” program which was initiated in 2004-05. Currently throughout the Commonwealth, Local Workforce Investment Boards are those who oversee and assist in planning for the delivery of local job services. These Boards identify providers of training services, monitor performance of both the employer and employee and assist in youth training and development. 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 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 one another’s needs.
The Office of Vocational Rehabilitation serves approximately 540,000 citizens of the Commonwealth who have physical or mental impairments. Each year this number continues to grow. In 2007 over 87,000 new customers were referred to this office. In this budget, however some of the programs that are administered through this office have been reduced. One exception is the Centers for Independent Living. This appropriation has received a 20% increase making their funding in the amount of $2.3 million. In comparison, the appropriation for assistive technology has been increased to approximately $1.3 million. The ultimate goal of having devices available is to empower persons with disabilities to gain employment, reach a new level of independence and the ability to be self sufficient.
In addition, the budget includes an appropriation for the Administration of Workers’ Compensation in the amount of $13 million. The goal is to further economic development in the Commonwealth by assisting in stabilizing the income of those who have become unemployed. This program allows for income and medical services to those who qualify. Included is workers’ compensation, unemployment compensation, occupational disease payments and Social Security disability payments.
Act 147 of 2006 amended the Workers’ Compensation Act to create an Uninsured Employer Guaranty Fund. This fund will provide benefits to injured workers whose employers do not have workers compensation insurance and were not approved by the Commonwealth to self-insure.
The 2008-2009 budget includes $20.6 million for the Department’s general government operations. This is an increase of $800,000 or 3.9% above FY 2007/2008.
Due to the Commonwealth’s fiscal constraints in FY 08/09, the Veteran’s Homes appropriation was reduced by $5.9 million when compared to current year funding level from $90.9 million in FY 07/08 to $85 million in FY 08/09.
The Scotland School for Veterans’ children appropriation has increased by $162,000, which will help to serve children of Commonwealth veterans who are considered to be “at risk.”
The enacted budget funds the Educational Assistance program at $7.9 million, which is a slight decrease from the current year. This program provides 100% tuition grants for National Guard members in Pennsylvania who attend approved two or four year colleges in the Commonwealth.
The Disabled Veterans Transportation program was level funded for FY 2008/2009.
The Civil Air Patrol, eliminated from the Governor’s FY 08-09 budget request, will again receive $492,000 in the enacted budget for the coming year.
Infrastructure Investment Authority
This budget includes funding in the Pennsylvania Gaming Economic Development and Tourism Fund for a minimum of $35 million to provide funding for repairing unsafe high hazard dam projects to be completed by the Commonwealth, independent agencies, municipalities or municipal authorities. No more than $20 million may be granted if the applicant is the Commonwealth or an independent agency.
PENNVEST maintains other funds as well that combine Federal money with State money and are maintained as either repositories for loan payments and investment incomes or as a revolving fund, such as the Water Pollution Control Revolving Fund, which combines the state matching funds with federal funds.
The following is a breakdown of the total loans and grants awarded by PENNVEST through December 2007:
The appropriations for the Offices of the Attorney General, Auditor General and State Treasurer see no significant changes with the following exceptions:
Reimbursements to counties for full time district attorneys in the amount of $5.4 million for the Attorney General’s Office have been zeroed out of this budget.
An appropriation increase of $1.2 million for the Auditor General’s Office.
The Treasury Department likewise received only slightly more revenue this year than last budget year increasing by $511,000 or 2%. The Treasury budget was expecting $2 million for computer integration which it did not receive.
Dollar Amounts -Thousands
(above programs include Act 44 monies)
Act 44 of 2007 will provide $500 million in the 2008-09 fiscal year to the Department. In the 2007-08 fiscal year Act 44 (Turnpike Allocation) provided $450 million to PennDot. Of these funds, 45% has been used for bridges and 55% for highway projects. In the 2008-09 fiscal year the $500 million from Act 44 will be allocated to the Department to largely fund bridges.
The 2008-09 budget contains an additional $50 million to be appropriated for the Expanded Highway and Bridge Program. This program funds a number of bridge reconstruction projects that addresses the structural deficiency of 26% of all state bridges throughout the Commonwealth.
Additionally, the General Assembly and the Governor provided a one time infusion of $350 million of bond money which will be allocated also for the reconstruction of bridges. The substantial level of funding reflects the serious commitment that the legislature and the Governor have made for the bridge program. This is intended to reduce the backlog of bridges that are in poor condition. The Governor with the help of the legislature expects that over 1,000 bridges will have been reconstructed or will be in the process by 2010.
In this budget The Bureau of Safety Administration and Licensing received $132.4 million which was a slight cut of 1% or $1.2 million from the 2007-08 fiscal year. REAL I.D., which is a federal mandated program, has received more support from the Commonwealth than the federal government. This program is being implement by this Department will see an appropriation of $3 million in the 2008-09 fiscal year. The legislature would like to see more complete and concrete benchmarks from the Federal government before additional funds are realized.
Highway maintenance received a $39 million increase in this fiscal year (08-09) as compared to last fiscal year. In the 2008-09 budget this appropriation will receive $809 million. The on- going repair is critical if Pennsylvania intends to keep its roads and highways in good condition. This money is allocated by a formula that takes a number of factors into consideration including road surface, winter maintenance, and condition of the berms along the roads and highways. The conditions of our highways are continually being inspected, with the National highway system being evaluated every year.
Act 44 now provides dedicated operating assistance to mass transit agencies through a dedicated portion of sales tax revenue. The budget anticipates these sales tax receipts will provide $704 million for transit operating grants for the 2008-09 fiscal year. Dedicated capital funding will provide an additional $100 million for capital improvements, and more than $90 million for other capital asset programs.
The enacted 2008-09 budget contains a number of revisions in the Governor’s projections in revenue for the 2007-08 fiscal year and the 2008-09 fiscal year. The Governor’s latest figures indicate that revenue from the Motor License Fund will be $2.669 billion for the 2007-08 fiscal year instead of $2.757 billion, which was the Governor’s original budget number. This is a reduction of $88 million. The Governor intends to use $97.1 million in lapsed money to arrive at an ending balance of $112.4 million in 2007-08. The estimate for the 2008-09 fiscal year is $71.3 million lower than the Governor’s budget. In the 2008-09 fiscal year the Governor plans to cut $46 million from Motor License Fund money that is appropriated to state agencies. He indicated that this action will keep in balance the 2008-09 fiscal year because of the anticipated loss of revenue.
The Commonwealth’s General Fund total expenditures are projected to grow by $1.1 billion or 4%, while DPW’s General Fund spending will grow by $633 million or 7%, almost twice the rate of growth for the entire Commonwealth’s budget.
Despite constrained general fund revenues, the Department’s budget still contains expansion in program spending and does not include any client or service reductions in the Medical Assistance (MA) program.
The most significant spending and issues in the Department’s budget relate to the Medical Assistance program. This is part of a NATIONAL TREND. In fact, Pennsylvania has one of the largest elderly populations in the country and the largest number of persons over 85. In addition, there is a growing trend by employers to cut back on employer sponsored health insurance, particularly for low wage workers.
Medical Assistance Appropriations
($ are in thousands)
FY 07/08 FY 08/09 Difference
The following is a comparison of the major components of the Governor’s proposed Medical Assistance budget with the enacted budget.
Services for Children
Child Welfare funding will increase from $967 million in 2007-08 to $1.1 billion 2008-09. The primary reason for the $87 million increase is due to approved costs in the county needs-based budgets and the loss of available federal TANF funds.
In 2008-09, the TANF Child Welfare Transition appropriation will be phased out. The phase-out of the TANF Transition funds was part of an initiative the Administration originally proposed in the 2005-06 budget.
The Child Care Services appropriation has received an additional $26.9 million in State funding over FY 2007/2008 funding level. Approximately two-thirds, $16.8 million, of the increase will be used to cover increased service costs.
The Child Care Assistance line item contains $224.1 million in state funding for FY 08/09. Approximately $15 million of that amount will be used to cover increased service costs and to maintain the number of funded child care slots ensuring access to quality care.
Mental Health and Mental Retardation
The Mental Health program will receive a $9 million increase over FY 07/08. This increase provides for a 1% cola and for full year funding of home and community based services for up to 75 individuals with mental illness currently residing at Mayview hospital.
In the Governor’s February budget proposal, $4.4 million was recommended to provide a half year of home and community based services for 91 individuals currently residing in state hospitals. The enacted budget provides approximately $2 million for this initiative in order to bring spending in-line with projected revenues.
The Mental Retardation program will receive a substantial increase in funding in the enacted budget including: $46.7 million or 5% for Community Mental Retardation Services. The Community Mental Retardation expansion proposed in the Governor’s February budget proposal and funded in the enacted budget allows for the following:
1) Six month funding for home and community based day and individual support services for 506 individuals on county waiting lists
2) Daytime program activities for 750 special education graduates
3) Six month program funding for 66 individuals in special service categories
4) Six month funding for services to 80 individuals with MR aging out of the EPSDT program
5) Six month funding for community residential services for 416 individuals on county waiting lists
6) Money Follows the Person - Five month funding for start-up costs related to the July 1, 2009 transfer of 30 individuals from State Centers to waiver programs
The Community Mental Retardation proposed expansion cost approximately $28.3 million to implement in FY 08/09. Due to General Fund revenue constraints, expansion funding was reduced in the enacted budget. It is too soon to know how each of the expansion components will be affected by this reduction.
In his February budget, the Governor proposed to increase the Early Intervention appropriation by a net $1.8 million, part of which would have been used to provide services to 1,453 additional children from birth to age 3. This increase was reduced by $1.3 million during final budget negotiations due to overall revenue constraints. It is too soon to know how many additional children will be served by the $.5 million increase provided in the enacted budget or for what time period.
The enacted budget includes $20.1 million for Autism Intervention and Services, an increase of $10.1 million over the current year. The additional funding will provide resources to continue program and service expansion started in FY 07/08 and to provide services to approximately 400 additional individuals with autism.
Other Social Programs
The budget provides substantial increases in funding for the Services to Persons with Disabilities ($21.4 million) and Attendant Care ($10.2 million) in the General Fund and for the Home and Community Based Services program funded with Tobacco Funds.
$7.1 million has been provided in Services to Persons with Disabilities appropriation to provide services to approximately 576 additional individuals.
$ 7.4million will provide Attendant Care to approximately 1,200 additional individuals.
The final budget provides for a 1% COLA for the following programs:
2) Early Intervention
3) Services to persons with Disabilities
4) Attendant Care
5) Women’s Services
6) Residential services for the mentally retarded in Lansdowne area
7) Childcare services, including cash grants
8) Domestic Violence
9) Rape Crisis
10) Breast Cancer screening
11) Legal Services
12) Homeless Assistance
13) County Child Welfare
14) Autism Services
15) Behavioral Health Services
16) Childcare Assistance
17) Nurse Family Partnerships
18) Community Based Family Centers
19) Breast Cancer Screening
The Governor’s alternative energy is basically contained in SHB1. Essentially $40 million annually will be used from the existing Gross Receipts tax to pay the financing on a $500 million bond issue that will be issued over the next two fiscal years. Also from the gross receipts tax an additional $20 million annually will be used for green energy projects for consumers. The expenditures are listed below.
$500 Million Bond Financing:
Clean Energy Projects $165 million CFA Capital purchases by businesses and municipalities a) switching to renewable energy b) equipment that conserves energy c) Green Building d) ESCO.
Start up Company Seed Money $40 million Ben Franklin Revolving loan program to provide capital money to emerging technology energy companies.
Liheap $40 million DPW Emergency Weather Assistance.,
Solar Energy Projects $100 million DEP residential and small businesses solar panels and passive solar projects. Rebate maximum of 35% up to 20 kw systems.
Solar Capital $88 million CFA Loans and grants for solar businesses for development or construction of facilities.
Pollution Control Equipment $25 million DEP Coal burning electrical generators for pollution control equipment to
$50 Million Direct Spend Allocation:
Consumer Energy Conservation Projects $92.5 million DEP Homeowners and small businesses a) Windows and doors b) heat pumps c) Insulation or other projects d) Energy efficient furnaces and air conditioners e) Pellet or coal burning efficient stoves f) Efficient lighting systems.
Home Energy Loan Program $5 million PHFA a) Home sealing, insulation and duct work b) Windows and Doors c) Repairs of energy Efficient heating and cooling d) Roof repair This program is part of the Consumer Energy Conservation Projects.
Virtual Servers $2.5 million PEDA Loans or Grants for purchase of virtual servers which increase energy efficiency.
Tax Credit $50 million Department of Revenue for Alternative Energy Products projects.
Two bills were passed that will aid the renewable fuels industry in Pennsylvania. House bill 1202 provides a market for bio-diesel and cellulosic ethanol by requiring retailers to sell their fuel with an increasing percentage of bio material as target levels of production are being made.
The first such trigger for gasoline is that when in-state production of cellulosic ethanol reaches 350 million gallons all gasoline sold in Pennsylvania must have 10% of bio content in it.
For bio-diesel production, the first trigger is 40 million of in-state production all diesel sold in Pennsylvania must have 2% of bio content in it. When 100 million gallons is produced the content must be 5% bio material. Renewable diesel, which is a type of bio-diesel, may only provide 25% of the gallons at each trigger amount.
Special Session Senate Bill 22 creates 75 cents a gallon rebate for in state bio-diesel production up to 7 million gallons for the next three years. The total amount of the rebate will be $5.25 million out of the Alternative Fuels Incentive Grants program. The total rebate will be $1.75 million annually.
The bill also provides $100,000 annually to award grants up to 50% for the installation of nitrogen fill stations for tires at retail outlets. Each individual grant will be limited to $5,000.
Copyright 2008 Sen. Vincent J. Fumo