The Governor’s budget as presented to the General Assembly in February became out of balance when the Governor decided that he had overestimated revenues by $267 million over this year and the next. To get the budget back in balance Senate Bill 1 removes $82.5 million in spending for the 2001-02 fiscal year. However, that bill also increases 2000-01 spending by $23 million over the February estimate. Therefore, spending is decreased by a net of only $59.5 million.

The remainder of the money that is needed for a balanced budget comes from three areas: a transfer of $68 million from the tobacco settlement fund, higher lapse amounts and the one year suspension of the transfer of 15% of the general fund surplus to the rainy day fund. The suspension of the rainy day transfer should save the general fund about $50 million.

Given these changes and assumptions the Governor’s budget appears to be in balance. There has not been a balance sheet made available yet.

Total spending is going to grow by only 4% in this budget. This lower level of growth is keeping with the Governor’s concerns about the state of the economy. Obviously the Governor is hoping for a rebound in the economy so that these one year gimmicks will not have to be repeated.

House Bill 334 contains numerous tax changes for the 2001-02 fiscal year. There will also be two other tax bills as part of the tax package this year. The total reductions in all the bills will cost the commonwealth $37.5 million in lost revenues. The two most costly changes are a continuation of what has been done in the past. Another proposal to increase the neighborhood assistance tax credit was enacted as part of the education bill, Act 4 of 2001. The changes included in HB 334 are:

1. A further expansion of the poverty forgiveness provisions of the personal income tax. The income eligibility will be expanded to exempt an additional $1,000 for each dependent claimed. The Governor believes that this will allow a family of four to pay no taxes on incomes up to $30,000. This is estimated, by the Governor, to cost $17.8 million. The SAC(D) estimate is $24 million.

2. Another computer tax holiday as was enacted last year. There is a slight expansion as computer peripherals will be exempted as well in the next fiscal year. The "holiday" will be for eight days from August through August. The estimated loss to the commonwealth is $10.7 million.

3. Repeal of some small "nuisance" taxes. There is a marriage license tax of 50 cents that will be repealed under the Governor’s proposal. Also a writ tax to file various documents at county offices will be repealed.

4. The cap of the job creation tax credit would be raised by $2.5 million to $20 million for all businesses that created qualifying new jobs in the next fiscal year.

5. Creates a fine of $5,000 for cigarette stamping agents for failure to file required reports in a timely manner.

6. Repeal of 3 tax credits that were either not ever used or have expired. The repealed credits are the Economic Revitalization Tax Credit, the New Bank Tax Credit and the Job Creation Tax Credit. The new bank credit was enacted as part of the banks shares tax rewrite that occurred in 1988. The credit was to provide relief for new banks started from 1985 to 1988. Apparently no banks qualified for that tax credit.

The Job Creation Tax Credit was passed in 1986 to encourage businesses to hire new employees even though there was a surcharge from the Federal Unemployment Trust Fund due to a debt that was owed that fund. That debt was repaid in the 1988 so the credit no longer has any meaning.

The Economic Revitalization Tax credit was designed to provide a tax incentive to purchase capital equipment in industries hurt by the 1981 and 1983 recessions. The equipment must have been purchased before 1989 and the credits expired in three years which would be 1991.

7. Repeal of 3 taxes that were alternate taxes in case the actual tax was found unconstitutional. Neither the Alternate Bank Shares Tax or the Alternate Title Insurance Companies Tax were ever triggered by court action. Also repealed is the Excise Tax on Foreign Corporations. This tax was passed into law in 1971 and was shortly thereafter ruled unconstitutional.

8. Increase the time period of an extension for filing a bank shares of mutual thrift tax from 60 days to 180 days which is the time limit for most other business taxes.

9. Changes the definition of business and nonbusiness income as it relates to apportionable income to conform to Department of Revenue’s current practices. This is expected to result in less refunds to some businesses. This change is retroactive to tax year 1999.

10. Clarify last years language creating an insurance premiums tax credit. The credit was for insurance companies that had paid an amount of more than 1% of their premiums written to a fund designed to protect consumers from companies going out of business with liabilities still owed.

11. Change the situs of asphalt and refurbished concrete to be sold at the location of its installation not place of sale. This affects the Philadelphia sales tax only.

12. Close a reorganization loophole that could allow corporations to avoid business taxes in Pennsylvania.

13. Change the name of the Organ Donation Awareness Fund to the Robert P. Casey Organ and Tissue Donation Fund.

14. Exempt airline food from the sales tax.

15. Extend the sales tax exemption for firewood used to heat residential housing to include wood pellets made from compressed sawdust.

16. Increase the refund amount for store credit cards from 66% to 100% of the sales tax charged on uncollectible charges. Last year’s tax bill placed the allowable refund at 66% of the sales tax charged.

17. Exempts equipment purchased for the making of ice from the sales tax and the capital stock tax under the processing exemption.

18. Exempts equipment purchased for unloading trucks at saw mills from the sales tax and the capital stock tax under the processing exemption.

19. Repeals the spiritous and vinuous liquor tax. This tax is collected by wineries and distilleries when they sell liquor or wine directly to the public. This is usually done in conjunction with a tour of the facility.

The table on the next page lists each tax reduction and its estimated effect on Commonwealth revenues.

The bill provides a one-time appropriation of $60 million for the Health Venture Investment Account. The Tobacco Settlement Board may invest venture capital partnerships or other equity or debt interests in health care, biotechnology or any other health related businesses that are expected to grow substantially in the future. Seventy per cent of the investments must be made in companies located primarily in Pennsylvania or in companies willing to relocate substantial business operations to Pennsylvania.

Lapses for all appropriations will be deposited in the Endowment Fund except for the appropriations for Home and Community Based Services and the Adult Health Insurance. Where the funds are not lapsed to the Endowment Fund they remain available for use in the respective programs in succeeding years.

There will be a Tobacco Settlement Investment Board consisting of 11 members, four of whom will be appointees of the caucus leadership. SB 2, PN 690 (Brightbill/O’Pake) now Chapter 3.

The Home and Community-Based Care program provides for programs in the Department of Public Welfare and the Department of Aging. Both programs will support home and community-based services to persons who otherwise would need care provided in a nursing facility. The Public Welfare program is for those who are eligible for medical assistance.

The Aging program is for those who are not eligible for medical assistance but whose income does not exceed 300% of the federal SSI benefit level and whose resources do not exceed a level established by the Department of Public Welfare (but not to exceed $40,000). Those in the Aging program must pay a monthly co-pay on a sliding scale based on income. SB 65, PN 680 (Tomlinson/Kukovich), now Chapter 5.

The Tobacco Use Prevention and Cessation Efforts program establishes a tobacco use prevention program in the Department of Health. It will include statewide, community and school programs designed to reduce tobacco use, chronic disease programs to reduce the burden of tobacco related diseases and tobacco cessation programs with a priority to serve uninsured and low-income populations, along with an accountability and performance evaluation component. The Department of Health will be required to award grants on a statewide and local level. After dividing the Commonwealth into no more than 67 service areas, the department will select contractors who will develop, implement and monitor local tobacco use and prevention efforts within the service areas by awarding grants to local service providers. A Tobacco Use and Cessation Advisory Committee will be established in the department with legislative representation. SB 500, PN 684 (Mowery/Boscola), now Chapter 7.

Commonwealth Universal Research Enhancement (CURE) will establish a program to fund biomedical health services, collaborative, and clinical research projects administered by the Department of Health.

Of the 19% of the funds to be spent in this program, Section 906 sets forth the basic program amounting to all but 1% of the 19%. That section provides that 70% of the funds will be distributed in accordance with a formula based on NIH grants described in section 908; 15% is to be used for clinical and health services research projects and 15% for other research projects. The remaining 1% is to be distributed exclusively on the basis of NIH funding for those entities not receiving NIH formula grants under section 908. A Health Research Advisory Committee will be established and include legislative appointees. The committee will establish research priorities for the program. SB 501, PN 685 (Murphy/Wagner), now Chapter 9.

The Hospital Uncompensated Care program establishes two subsidies in the Department of Public Welfare. 85% of the funds will be distributed by formula to the one-half of the hospitals with the highest proportions of uncompensated care. The formula has been agreed to by both HAP representing all the hospitals and the Urban Health Care Coalition representing the large urban hospitals, many of which are university affiliated and treat large number of low income and uninsured persons. The remaining 15% of the funds appropriated will be used to reimburse hospitals not included in the formula distribution for the treatment of an uninsured who has extraordinary expenses. SB 502, PN 686 (Gerlach/Kasunic), now Chapter 11.

The additional payments would be made as an additional class of disproportionate share payments to hospitals. The disproportionate share approach is used to maximize federal contributions to the program. The aggregate reimbursements for these two additional disproportionate share payments will be limited to the amounts actually appropriated. On June 2, the Department of Public Welfare published a notice in the Pennsylvania Bulletin describing in a general way, how the payments will be computed.

A facility will qualify for an Uncompensated Care payment if the facility’s total percentage of the following factors is above the median for all facilities:

The facility’s percentage of uncompensated care to net patient revenue as reported to the PA Health Care Cost Containment Council over the three most recent fiscal years.

The facility’s percentage of SSI days to total inpatient days over the 3 most recent fiscal years.

The facility’s percentage of MA days to total inpatient days over the 3 most recent fiscal years.

The Department will annually determine a payment percentage for each individual qualifying facility by comparing it to all qualifying facilities.

The Department will also establish a Hospital Extraordinary Expense Payment program to annually compensate facilities which incur extraordinary expenses in treating the uninsured on an inpatient basis. A hospital may qualify for this payment if it does not qualify for and Uncompensated Care payment and the hospital provided uncompensated care to a patient with extraordinary expenses in the most recent fiscal year for which data is available. Extraordinary expenses are those which exceed twice the hospital’s average cost per stay for all patients. The payment will be equal to the lesser of the extraordinary expense claim or the pro-rated amount of the claim based on the amount of appropriated funds.

In addition to the 10% allocation provided in Chapter 3, the legislation provides a one-time appropriation of $15 million.

The Health Investment Insurance program establishes health insurance for low income adults, 19-64, with administration in the Department of Insurance. The department will contract with private health insurers. A participant must: [1] legally reside in the United States, [2] have lived in Pennsylvania for at least 90 days prior to enrollment, [3] have not been covered by health insurance for the three months preceding the determination of eligibility, [4] be ineligible for medical assistance and [5] have income of less than 200% of the federal poverty level. The enrollee must pay $30 per month of coverage and pay any required co-payments required by the benefit package.

The bill limits the total aggregate amount of annual health insurance contract premiums to the amount of annual appropriations. However, the Insurance Department must maintain a waiting list of eligible adults who have not been enrolled due to insufficient appropriations. The eligible adult on the waiting list can purchase the benefit package at the department’s cost. SB 503, PN 737 ( Dent/Hughes ), now Chapter 13.

The Medical Assistance for Workers with Disabilities chapter establishes a program in the Department of Public Welfare for low income workers with disabilities to purchase health insurance benefits under the Medical Assistance program. A non-elderly worker with a disability earning less than 250% of the federal poverty level would be required to pay 5% of the worker’s income as a premium. The person would have to work at least 40 hours per month to be eligible. SB 504, PN 687 (Rhoades/Tartaglione), now Chapter 15.

The Regional Biotechnology Research Centers program provides for the establishment of three regional biotechnology research centers under the Department of Community and Economic Development (DCED). These centers will conduct collaborative research via the sharing of funds, equipment, personnel and other resources. DCED will select the nonprofit corporations to own and operate regional biomedical research centers. Each owner/operator will be required to make financial or other substantially equivalent contributions to the research being conducted in an amount established by the Department. Royalty agreements, or the equivalent, are to be developed by the center board of directors to fund ongoing operations of the center. SB 505, PN 749 (Corman/Schwartz), now Chapter 17.

The legislation provides a one-time appropriation of $100 million for this program.

HealthLink creates a medical and surgical capital equipment grant and revolving loan fund program for rural hospitals in 6^th, 7^th, and 8^th class counties. Equipment could be purchased with grants not to exceed $500,000. Hospitals would have to match the grants dollar for dollar. The program will be administered by the Department of Health. This program was not part of the Governor’s planed use of tobacco funds. SB 506, PN 688 (Scarnati.Stout), now Chapter 19.

The legislation provides a one-time appropriation of $20 million for this program.

The Pennsylvania Health Center and Clinic chapter creates the Community Coordinated Care and Health Improvement Program that will be administered by the Department of Health. Grants will be provided to support health centers that provide outreach to low income individuals and assess and manage their care. Eligible entities will be required to provide matching funds of 25%. There will be two separate grant programs for: (1) community based health care entities and (2) federally qualified or independent rural health centers. This program was not part of the Governor’s planned use of tobacco funds. SB 507, PN 689 (D.White/Kitchen), now Chapter 21.

The legislation provides a one-time appropriation of $20 million for this program.

PACE and PACENET Expansion is provided in Chapter 23. The program provides a two-year moratorium on including COLA increases for determining PACE and PACENET eligibility and raises income eligibility limits for PACENET by $1,000.

Chapter 25 creates the Pennsylvania Medical Education Loan Assistance Program to be administered by PHEAA. Loans may cover up to 100% of the actual cost of tuition, room and board as well as the actual cost of course required textbooks and supplies for either a medical or nursing student. In order to be eligible, the applicant must agree to practice in a designated area and treat patients eligible for medical assistance and medicare. Designated areas may be established either by the Department of Health or the federal department of Health and Human Services and may be anywhere in the United States. PHEAA may forgive 50% of the loan, not to exceed $50,000 if a loan recipient agrees to practice nursing in Pennsylvania for not less than three consecutive years. The legislation provides a one-time appropriation of $3 million for nursing school loans and $5 million for medical school and biomedical graduate school loans.

The general fund appropriation for the Family Caregiver Support Program is

increased by 2.5% over the current year. It is anticipated that 6,585 families will be served. Working through the AAAs, the program provides benefits counseling and, depending on income, financial assistance including supplies, services and home adaptations and devices.

In addition, the budget appropriates state lottery funds and tobacco settlement funds, as well as $3.6 million in federal funds to implement community long-term care system reforms, including home and community-based services for additional older Pennsylvanians as an alternative to nursing home care. Also included is $2.2 million in lottery funds to implement direct caseworker recruitment and retention initiatives.

Specifically, Tobacco Settlement funds, approximately $45.0 million in 2001-02, would be used for the following programs:

home and community-based services for older Pennsylvanians as an alternative to nursing home care.

home and community-based services to older Pennsylvanians on AAA waiting lists.

assistive technology purchases and/or home modifications.

expanding consumer education and counseling.

providing AAA staff training and reorientation.

 

The budget includes a 5.4% increase in the PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 135 recipients and to expand Older Adult Protective Services to investigate an increased number of suspected elder abuse reports.

The budget includes $500,000 for Alzheimer’s Outreach Services, an increase of $300,000 over the current year.

The budget includes $2.0 million for Grants to Senior Centers which is the funding level in the current year This funding provides money to AAA’s for improvements to community senior centers. The maximum grant amount this level of funding provides for is $150,000. In 1998-99 when $4.0 million was appropriated for these grants, the maximum grant was $250,000. The Department of Aging receives $8.0 million in grant requests yearly.

Funding for the PACE and PACENET Programs is increased $69.0 million in the budget to provide for increases in the cost per prescription and the number of prescriptions per person.

Enrollment in the PACE program decreases each year as Social Security cost-of-living adjustments make certain seniors ineligible for the program. As of April 2001, 209,208 seniors were enrolled in PACE, almost 12,910 less than in April of last year. PACE has experienced a significant increase in the cost per prescription due to manufacturers’ increases in drug prices and new drug products coming on the market.

Tobacco Settlement Funds will be used to pay for a two-year moratorium on counting COLA’s as income, which has eliminated seniors from the PACE program. Seniors who were eligible as of December 31, 2000 for the PACE program will be eligible for re-enrollment, until December 31, 2002. PACE is available for older Pennsylvanians whose annual income is at or below $14,000 for single persons and $17,200 for married persons. It is estimated that this will cost an additional $10.0 million in the first year and $16.0 million in the second year, and will re-enroll 12,500 in the first year and maintain 17,000 seniors in the second year, who would have otherwise not qualified.

PACENET is expanded with the use of Tobacco Settlement Funds, by increasing

income limits by $1,000, covering older Pennsylvanians whose annual income is not more than $17,000 for single persons and $20,200 for married couples. The cost of this expansion is $14.0 million per year. It is estimated that 11,000 new enrollees will qualify.

The number of older Pennsylvanians enrolled in the PACENET program decreased from last year’s estimates because HMO’s have aggressively recruited persons in the Medicare plans which provide premium-free prescription benefits. The Administration expects that HMO’s will discontinue this coverage in future years, thereby increasing enrollment in future years. The Administration originally estimated that 49,000 persons would enroll in the program. As of April 2001, 22,658 seniors were enrolled in PACENET. PACENET pays the cost of prescription drugs and insulin supplies after a claimant meets a $500 per person deductible and a mandatory copayment of $8 for generic and $15 for brand-name prescriptions.

The Farmer’s Market Food Coupons program for the 2001-02 fiscal year will receive $1.985 million, this is $485,000 more than that Governor requested in his budget. This additional money will be used for making more agriculture products available to various income eligible individuals, as well as to promote the program.

The State Food Purchase program will also receive $500,000 additional money in the 2001-02 budget as compared to the Governor’s budget. This increase in funding will assist all those food banks across the state with the increased demand for food stuffs.

The Governor recommended that the Horse Racing Promotion program receive no funding for the 2001-02 fiscal year, however the General Assembly has funded this program once again, at $5 million. Last fiscal year it was funded at $10 million.

The 2001-02 budget contains a new program entitled Agricultural and Rural Youth Grant program to be funded at $100,000. This new state program is to take the place of a federal program that provided financial support to youth programs such as the Four H and Future Farmer’s of America.

The Department has a new program that is funded for $50,000 in the 2001-02 budget which is entitled "Beef Quality Assurance". This program will be established to create a quality assurance program for consumers who purchase beef products in Pennsylvania.

This is essentially a no-growth budget for the Attorney General. The General Government and Drug Law Enforcement appropriations will be receiving additional state funds to replace approximately $845,000 in drug forfeiture augmentations. The Attorney General had requested $38.745 million for General Government but the budget adopts the Governor’s request of $37.749 million, an increase of 2.5%.

The Governor had requested $816,000 for computer enhancements, but Attorney General made a claim for $3.69 million. The Conference Committee apparently split the difference at $2.216 million, an amount which is nearly 3 times the amount appropriated in the 2000-01 fiscal year.

The Local Drug Task Force appropriation will receive an additional $300,000 but that is only to ‘continue current program".

The Auditor General’s office received a $1.321 million or a 3.0% increase.

As concerns about a national economic slowdown continue, and job growth in the Commonwealth continues to lag most of the nation, the proposed budget would again rely heavily upon economic incentive programs. Available spending on business and technology programs surpasses $550 million in the new budget.

Technology programs will be restructured within the Department of Community and Economic Development (DCED). Newly enacted legislation provides for the merger of the Pennsylvania Technology Investment Authority (PTIA) with the Ben Franklin Technology program to create the Ben Franklin Technology Development Authority Fund, funded with a $56.397 million appropriation. Industrial Resources Centers will receive a separate $11.2 million appropriation.

Local Economic Development organizations will all receive funding increases. Small Business Development Centers will share a $6 million appropriation. Industrial Development Assistance would be increased to $4.5 million and Local Development Districts will receive $5.64 million. Tourist Promotion Assistance is increased to $11.5 million.

In an attempt to stop the loss of younger skilled workers, the budget funds a new $10 million Brain Gain initiative. The program will use the funds to place qualified students in internship programs with commonwealth employers with the hope that these experiences will ultimately entice them to remain in Pennsylvania.

The final tobacco settlement spending plan would use $100 million to fund three regional biotechnology centers and a new $60 million capital commitment for biotech ventures.

The major business financing programs are all expected to minimally be funded at current year levels. In February the Governor proposed a securitization of both the Small Business First Fund and the Machinery and Equipment Loan Fund portfolios to partially maintain these funding levels. The budget provides $40 million for Opportunity Fund grants and $37.5 million for the Customized Job Training program.

PENNPORTS funding is increased by $500,000 above the amount requested by the Governor, totaling $11.7 million in the final budget. The increase will support operations in the Port of Erie. Additional funds sought by the Philadelphia Regional Port Authority were not included in the final budget agreement.

The final budget funds several new community development initiatives. The Enterprise Development and Main Street programs have been merged into the New Communities appropriation, providing $11.5 million for community improvements, including "anchor building" restorations that are expected to serve as a catalyst for downtown revitalizations in six pilot communities.

Housing and Revitalization funding is increased by $3 million to $18 million. The budget increases Land Use Planning grants by $1 million to $4.6 million. In a major new housing initiative, the final budget agreement appropriates $30 million in federal Temporary Assistance for Needy Families (TANF) funds to expand the availability of affordable housing for low income families. The funds are part of a two year $60 million commitment for the initiative. Project funding will be coordinated in collaboration with the Pennsylvania Housing Finance Agency and the Department of Public Welfare.

Matching funds from the Department of Public Welfare also supplement two other DCED initiatives. A new $1.5 million appropriation for Family Savings Accounts will be augmented with another $2 million in TANF funds. Cyber Start, authorized to receive $1.6 million from the General Fund, is also funded with $8.4 million from the federal Child Care Development Fund Block Grant.

The General Appropriations Act makes no mention of any new provision for assistance to Pennsylvania’s steel industry.

The Department’s General Government appropriation received a $13.890 million or a 43.79% decrease. This decrease is attributable to the nonrecurring $16.025 million which was included in the current years appropriation for the Statewide mobile radio and microwave system. This years appropriation includes $685,000 for a new networking system, $325,000 for PA Outdoors Discovery Maps, $199,000 to provide additional groundwater use assistance to counties in support of the sound land use program, $176,000 to provide administrative support for radio operations, telecommunications and the park reservation system, and $150,000 to create an internet-based information clearinghouse on Pennsylvania greenways.

State Park Operations has increased by $2.350 million or 3.91%. Included in this increase is funds to provide equipment and administrative support for the new Nescopeck State Park facilities, and funds for a national print media campaign to promote Pennsylvania State Parks.

State Forestry Operations has received a $2.797 million or a 20.38% increase. Included in this amount is $2.424 million for improving visitor services in State Forests and full-time Forest Rangers to enhance visitor safety and public safety in State Forests.

Forest Pest Management has received a $1.850 million or a 51.58% increase. Included is a $1.564 million initiative to provide additional gypsy moth spraying to reduce the insect population.

Heritage Parks has received a 58.18% or a $1.3 million over that proposed by the Governor.

The final budget agreement provides nearly $1.2 billion to run our state corrections system. This appropriation would increase spending by nearly $470 million above the $725 million expended for State Corrections institutions during the 1994-95 fiscal year. While the appropriation for State Correctional Institutions appears to reduce spending nearly $60 million below the amount requested by the Governor, the reduction is actually covered by a corresponding amount of one time revenue from other sources related to the financing of leased institutions.

A $4.7 million increase will fund a capacity expansion at SCI Laurel Highlands, providing 350 additional beds for a growing aged and specialty care population, and staffing expansions at several institutions. The budget provides $3 million in new spending for a personal alarm reporting system at Graterford, Camp Hill, Frackville, and Smithfield.

The budget adds $1.4 million to expand vocational education programs at several institutions, provides $226,000 to open four additional 50-bed therapeutic communities offering intense treatment services to inmates during the final stages of their incarceration, and $2.5 million to increase the availability of behavioral health services for criminal offenders with a dual diagnosis of mental illness and substance abuse.

State funds for the Board of Probation and Parole will top $100 million in the new budget. The budget provides $78.6 million for General Government Operations, $29.2 million in grants for local Adult Probation Services, including $9.3 million in County Supervision Fees, and $2.8 million for the Sexual Offenders Assessment Board.

The new budget provides sufficient funds to continue to increase staff at the parole board. A projected increase of $1.6 million in the new budget would add staff to decrease projected caseloads to an average of 62 offenders per agent. Staffing increases during the past several years have enabled the parole board to reduce supervision caseloads in half from nearly 120 offenders per parole agent in 1995.

After ignoring longer term prevention strategies during the first few years of the administration, the Governor’s budget continues to reverse course and provide new funding for programs to help families and troubled youth before they enter prison, or become repeat offenders. Prevention initiatives receive a combined $8.1 million increase in the new budget.

The prevention funding includes $5.17 million for the Governor’s Partnership for Safe Children, $2.32 million for the Weed and Seed Program, $5.3 for Intermediate Punishment and $13 million for Intermediate Punishment Drug and Alcohol funding, $5.2 million for Drug Education and Law Enforcement, $10 million for Research Based Crime Prevention grants, and $15.6 million for Specialized Probation Services. Together these initiatives provide nearly $57 million in state funds for prevention programs.

The Department of Education has received a $1.714 million or a 6.57% increase in its General Government appropriation. Of this amount, $1.4 million will be used to support three new initiatives. The first would provide administrative resources for the Education Support Services program aimed at improving academic performance. The second initiative is for an Education Leadership Academy with the goal of providing school leaders with the skills, expertise and motivation needed to create and sustain high quality successful schools. The final initiative would provide for a Limited English Proficiency Program which will provide technical assistance and professional development to school districts and charter schools in the instruction of individuals learning the English language.

The Information Technology Improvement appropriation has received a $2.438 million or a 50.10% increase. Of this amount, $3.0 million is enhancing technological capabilities and $100,000 is for replacing and upgrading 250 personal computers.

The School Subsidy appropriation (Basic Education Funding) has received a $168.072 million or a 4.43% increase. This is an increase of $16.4 million over that proposed by the Governor. Of this amount, $114 million is distributed to all school districts based upon their aid ratio and enrollment. An additional $35 million is provided to 35 school districts that have experienced a significant increase in their aid ratio over the past seven years and have an aid ratio, currently, over the median. The proposal also provides funds to guarantee that each school district receive a minimum two percent funding increase and a one percent increase in funding per average daily membership over the previous year. In addition to these formula elements which were part of the Governor’s budget proposal, the legislatively passed budget included $10.188 million for Small District Assistance and $7.9 million for Growth Districts.

As part of Act 4 (HB 996 - Printers Number 1878) of the school code legislation which passed in May, 2001 , the Special Education appropriation has received a $78.309 million or a 10% increase. The proposal distributes approximately $65 million based upon the relative wealth of each school district. All school districts will receive a portion of the $65 million. An additional $6.8 million will be distributed to 62 school districts whose special education incidence rate is at least 25 percent greater than the Statewide average incidence rate. Districts which qualify will receive a payment of $1,650 for each student. At a minimum, all school districts will receive at least a five percent increase over last years funding level. In addition, to address the special conditions within school districts that affect their ability to provide special education services, this proposal continues the contingency fund set-aside of two percent of the appropriation.

The Early Intervention appropriation has received a $5.300 million or a 5.67% increase.

The Performance Incentives appropriation has received a $3.354 million or a 10.0% increase. This appropriation which, as recommended, totals $36.892 million and provides incentive awards to schools which make notable improvements in student achievement and effort as measured by the statewide Pennsylvania System of School Assessment (PSSA). Schools may also qualify for awards by maintaining a high level of achievement or effort for the baseline period as well as for the succeeding three years.

The Pa Assessment appropriation has received a $5.656 million or a 37.7% increase. The increase will be used to strengthen and expand the current academic testing system to provide science assessments for students in grades 4, 7, and 10 and for third grade reading assessment.

As part of Act 4 (HB 996 - Printers Number 1878) of the school code legislation which passed in May, 2001 , there is new $23.6 million appropriation for Educational Support Services. This grant program is targeted to those students in grades three through five who score at or below the basic proficiency level on the Pennsylvania System of School Assessment (PSSA) or have comparable scores on other nationally recognized standardized tests. Approximately, 47,200 children will receive services through this program. The appropriation includes $1.4 million for the administration of this new program.

As part of Act 4 (HB 996 - Printers Number 1878) of the school code legislation which passed in May, 2001, there is a new $30 million initiative for tuition tax credits through the Neighborhood Assistance Program. It is expected that these funds will leverage up to $60 million in funding and will attract business support for innovative education programs and educational reform in our schools.

The budget also includes a new $1.5 million School Readiness appropriation for the purposes of implementing, on a trial basis, school readiness and literary programs for students in kindergarten through third grade that are at risk or in need of additional support.

The Technology Initiative appropriation has received a $5.150 million or a 24.01% increase. Of the amount $5.0 million will be used to establish two new digital school districts which serve as models of school districts which consolidate all the best technology practices and serve as a working illustration of the impact of technology on the educational system. The appropriation also includes $1.290 million to establish the Pa Technology Leadership Academy to train superintendents, principals, and school board members on the importance of technology in the classroom.

The Teacher Professional Development appropriation has received a $1.447 million or a 18.87% increase. Included in the $9.117 million recommended appropriation is $4.0 million (This $4.0 million was appropriated under Act 4 of the school code legislation which passed in May) to develop and administer an assessment tool that measures the subject content knowledge of practicing teachers. The results are to be used by school entities to guide professional development at both the state and local level.

The School Employees Retirement appropriation has decreased by $44.434 million or 44.67%. The appropriation currently stands at $55.033 million. As a result of this decrease in the employer contribution rate for school employees’ retirement, local education agencies have at least $44.0 million available to allocate for other purposes. Over the past six years, it is estimated that the reduction in the employer contribution rate has freed up approximately $1.34 billion for local education agencies to reinvest in other programs.

As a result of on going practices, The Nonpublic Schools appropriations have received a 4% increase. The exception is that the Technology for the Nonpublic Schools appropriation has received a $2.0 million or a 33.33% increase. This appropriation currently totals $8.0 million as recommended in this budget.

The Improvement of Library Services appropriation has received a $13.0 million or a 20.87% increase. The increase will provide resources to enable local and county libraries to streamline their operations and coordinate programs in an effort to reach new patrons and address growing needs. The increase also provides increased assistance to the four major resource libraries in the Commonwealth. As a point of reference, total Commonwealth support for public libraries has increased by $60.3 million since 1994-95, an increase of 205%.

State support of public libraries is based upon a formula that distributes funding in seven different categories. During the past two fiscal years, four of the seven categories were redesigned, provided increased funding, and established and strengthening new library standards. The increase in the budget for this appropriation will provide $6.0 million to maintain the match ( Excellence Aid) on local expenditures per capita between $5.00 and $7.50; provide $3.1 million to increase the per capita rate for those libraries eligible for Quality Library Aid fro $1.57 to $1.82; provide $1.4 million in incentive match funds for the County Coordination Aid Category. The intent of this category is to encourage libraries to restructure at the county level and to support county wide library coordination efforts; provide an additional $2.0 million to the four major resource libraries for the purpose of expanding their collections; and provide $500,000 to defray a portion of the costs of the 28 libraries designated as District Library Centers.

Library Access has been increased by $215,000 or 3.0%. It is recommended that $1.6 million of this appropriation be used to enable the state library to add 493 elementary school libraries, plus other school , public and college libraries, to the statewide library catalog data base. Funds will also be used to strengthen the inter library loan system, maintain the web database and continually update the catalog data.

The Authority and Sinking Fund appropriation has received a $8.610 million or a 3.22% increase.

Teen Pregnancy and Parenting has received a $225,000 or a 15% increase.

The Governor’s Schools for Excellence appropriation has received a $228,000 or a 10.07% increase. Of this amount, $160,000 is to provide for the Governor’s School for Entrepreneurship along with its operational expenses.

Charter School Planning Grants are funded at the current years level of $1.8 million and a new $2.0 million appropriation for Charter Schools - Public School Transfers has been included in the budget.

As part of Act 4 (HB 996 - Printers Number 1878) of the school code legislation which passed in May, 2001, a new $2.0 million appropriation has been recommended for Independent Schools. The new program provides planning grants for certain school districts, as designated under the Educational Empowerment Act, with the authority to designate any of its school buildings as an Independent School.

The budget provides $5.0 million for Vocational Education - Equipment. The governor had recommended that this appropriation be eliminated.

New Choices / New Options has received $3.7 million. This appropriation was not funded in the Governor’s budget.

Job Training Programs will receive $5.1 million. The Governor’s budget eliminated funding for this program.

The budget includes a 5.4% increase for operating/capital funding of Community Colleges, a $9.6 million increase over the current year. This would allow the reimbursement for full-time equivalent students at community colleges to increase $100 from $1,400 to $1,500. In addition, the variable state share ceiling which restricted increases in state funding to certain community colleges, was eliminated. Based upon enrollments, the appropriation would be tentatively distributed to the community colleges as follows:

2000-01 Allocation 2001-02 Allocation % Increase

Allegheny $ 30,057,402 $ 30,732,361 2.2%

Beaver $ 5,047,746 $ 5,146,416 2.0%

Bucks $ 14,044,117 $ 14,742,131 5.0%

Butler $ 6,207,040 $ 6,656,213 7.2%

Cambria $ 2,537,824 $ 3,107,901 22.5%

Delaware $ 13,482,688 $ 14,432,626 7.0%

Harrisburg $ 20,117,551 $ 21,705,313 7.9%

Lehigh Carbon $ 6,958,185 $ 7,458,158 7.2%

Luzerne $ 10,551,081 $ 11,113,445 5.3%

Montgomery $ 13,062,748 $ 13,791,474 5.6%

Northampton $ 10,095,742 $ 10,888,919 7.9%

Northwest (Erie)* $ 5,643,020 $ 0 NA

Philadelphia $ 29,826,941 $ 31,011,981 4.0%

Reading $ 6,098,063 $ 6,567,500 7.7%

Westmoreland $ 10,252,792 $ 10,614,225 3.5%

TOTAL $183,982,940 $187,968,662 2.2%

*Transferred to Department of Labor and Industry

In addition, $2.0 million is included for Workforce Development Challenge Grants, as in the current year. These grants are provided to encourage the formation of partnerships with industry to improve the state’s supply of skilled employees and meet employment needs.

Language is included in the school code bill to allow community colleges in which the majority of programs offered are non-academic in nature to dissolve, and transfer operations to a corporate successor.

The budget includes $3.0 million to provide assistance in securing dormitory sprinklers. This appropriation is part of a $44.0 million, 5-year commitment to subsidize any interest rate costs exceeding 3% on bonds used to pay for sprinklers. The funds will enable schools to borrow $350.0 million at 3% interest through the Pennsylvania Higher Education Facilities Authority.

The budget includes $8.0 million for the higher education graduation incentive program, designed to encourage public and private higher education institutions to offer the opportunity for undergraduate students to complete degrees within four years. In the current year, $6.0 million is available for this program. The department is in the process of surveying institutions to determine if they qualify. Colleges and universities that graduate at least 40% of its students within 4 years would qualify.

The budget includes $5.5 million for Higher Education Technology Grants, to provide for competitive grants focused on innovative approaches to community-based networking and for curriculum development for information sciences and technology programs. Funding is targeted toward workforce development, research and professional development programs as well as infrastructure to interconnect community networks. Funding may also be targeted toward the development of curriculum for information sciences and technology programs. Through these networks, students and teachers will have access to a wide range of educational resources beyond the traditional institutions and geographic boundaries and will progress toward a future classroom which has no boundaries.

The budget includes $6.0 million for Higher Education Equipment

Grants, as in the current year’s budget. The funds would be distributed to institutions of higher education for the purchase, lease or acquisition of Pennsylvania-based equipment in support of undergraduate instruction. Distribution of funds is based on full-time equivalent undergraduate students from all eligible institutions applying for grants. Those institutions eligible include: community colleges, state-owned and state-related institutions and independent colleges and universities.

Also included is $1.0 million for Engineering Equipment Grants. Funds are provided for grants to engineering degree-granting schools to assist in the acquisition of new engineering equipment or the upgrading of existing engineering equipment that is necessary to provide students with the courses required to obtain a degree in engineering.

The State System of Higher Education will receive less than a 1% increase over the current year in its education and general appropriation. Overall, the SSHE will receive no increase over the current year. The State System will receive $9.3 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance, and is eligible for a portion of the technology grants, the higher education equipment grants as well as money for sprinklers.

STATE-RELATED UNIVERSITIES*

The State-Related Universities will receive 1% increases over the current year in their education and general appropriation with the exception of Penn State which receives 3%. Overall, the state-related institutions receive less than 1% increases in funding. Additionally, all the state-related universities are eligible for a portion of the technology grants, the higher education equipment grants and perhaps the higher education graduation initiative funds as well as money for sprinklers.

Increases in state support for the State-Aided Colleges and Universities vary. Drexel University has an Economic Co-op program. Students participating in this program get hands-on training at a community job. In addition, as in the current year, the budget recommends directing existing resources to the University of Pennsylvania’s School of Veterinary Medicine in order to better recruit and retain Pennsylvania students through a resident grant program.

The budget includes a 7.0% increase for the Grants to Students Program. This

is the state’s scholarship program which helps students pay tuition at an accredited college or university. Students who attend private schools, which charge higher tuition, generally qualify for more aid.

The PHEAA Board annually determines the distribution of funds to applicants on criteria including family income, family size and the cost of the institution the student will be attending. This increase will allow for an increase in the maximum award from $3,200 to $3,300, an increase in the number of grant recipients for a total of 151,000, and an increase in the average award from $2,340 to $2,460.

The budget also includes a $1.2 million increase for the Institutional Assistance Grants Program, or a 3.0% increase. These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions. This increase will allow the per capita grant to increase from $1,079 to $1,099 for an estimated 38,737 students.

The Matching Funds Program, which disburses matching funds as a percentage of the federally-required match for the Federal Perkins Loan Program and the Federal Work-Study Program, would receive a 14.6% increase to provide match for increased federal funds.

The budget continues the Agricultural Loan Forgiveness Program. The Child Care Loan Forgiveness Program receives $100,000. Since this level of funding covers only a small number of eligible participants, a random lottery will be used to select the recipients. There is no renewal provision in the law, therefore, applications from award recipients must be placed in the random lottery along with first-time applicants.

The budget includes $8.9 million to continue the SciTech and GI Bill Scholarships. Scholarships are provided to qualified students majoring in science or technology-related fields of study in order to expand and support a knowledge-based workforce. This is a significant decrease from the current year, as the program received fewer applicants than originally anticipated. Changes in the law should increase the number of eligible students in future years. The budget bill contains language that lapses $20.0 million of prior year funds.

Federal funding in the amount of $1.5 million will be available to expand programs that serve low-income students, including grants and scholarships for post-secondary education.

An appropriation of $1.6 million is included for the Cheyney University Keystone Academy, to recruit gifted students to enroll at the University.

A one-time appropriation of Tobacco Settlement Funds in the amount of $5.0 million will be used for a low-interest loan program for medical students. Funds would be used to provide financial assistance to individuals who acquire a degree in medicine, professional nursing, biomedicine or life sciences, and to recruit these individuals to practice their professions in Pennsylvania.

Specifically, a Loan Guarantor Program is established, whereby PHEAA would ensure lenders will offer the lowest fees and interest rates for private loans, by insuring a portion of defaulted loans. Interest rates on loans may be reduced if the loan recipient, upon completion of a degree, agrees to practice medicine or be employed in the commonwealth on a full-time basis for a period of three consecutive years. For licensed physicians, loans may be further reduced if they agree to practice medicine for three consecutive years in a designated area in the commonwealth.

Additionally, a one-time appropriation of Tobacco Settlement Funds in the amount of $3.0 million will be used for an educational loan forgiveness program for nurses. PHEAA may forgive 50% of a loan, not to exceed $50,000, if a loan recipient enters into a contract to practice nursing in the commonwealth for a period of not less than three consecutive years.

The Department’s General Government Operations received a $1.996 million or a 10.03% increase. Included in this amount is funds to renovate the Evangelical Press Building laboratory facility, funds to develop and deploy an electronic commerce strategy, funds to develop a pilot electronic document imaging program and management system, funds to obtain a sight license for geographic information system software, funds to expand e-facts help desk activities, funds for administrative support for the sound land use program, and funds to provide additional administrative support for environmental education activities.

Environmental Program Management has received $4.872 million or a 11.67% increase. Included in that amount is funds for wastewater plant operations training, funds to remove the remnants of the Felix Dam, funds for an electronic document system for land recycling and waste management activities, funds for radiation monitoring plans at municipal waste landfill, resource recovery and waste transfer facilities, funds to provide administrative support for dam and flood safety engineering and compliance activities, funds for integrated water planning, and funds for watershed assessments.

The Office of Pollution Protection and Compliance Assistance has received a $249,000 or a 7.05% increase. Of this increased amount funding is provided for the Governor’s Green Government Council, and to create a partnership of key state agencies, universities, and associations to develop economic, environmental and health indicators and to study issues related to soil, food and health quality.

Environmental Protection Operations has received $304,000 or a 0.40% increase.

The budget includes a new $7.0 million appropriation to provide resources for a new full-cost surface coal mining bonding program.

Included in the budget is $250,000 to support a new Pennsylvania Sea Grant Program which promotes the stewardship of coastal resources.

The Sewage Treatment Plant Operations Grant Program received a $2.40 million or a 4.935% increase to continue current program levels. With this increase the program totals $51.10 million. The other sewage facility appropriation have been maintained at the current level of funding.

The Safe Water appropriation was included in the budget at $9.0 million. The Governor’s budget eliminated funding for this program.

Conservation Districts received a 28.30% or a $75,000 increase.

The Department’s General Government Operations received a $2.808 million or a 4.45% increase. Included in this increase is funds to replace reduced utility augmentations, funds for the transfer of the Commonwealth Information Center from the Purchasing Fund, funds for security system maintenance, and funds to provide digital equipment and technology to enhance the Commonwealth’s Media Service.

The Capitol Police appropriation received a $278,000 or a 3.77% increase to continue its current level of service.

The Capitol Fire Protection appropriation received a $30,000 or a 3.03% grant increase.

The state AIDS programs will receive an increase of $631,000 in the 2001-02 budget over the available year for a total of $7.159 million. According to actual budget language, this increase will be used for a 2% cost of living increase to the seven AIDS Coalitions. Additionally, the Department is planning on developing an identification based system for HIV patients. The Department contends that with a "more accurate" number of HIV patients that services rendered could be more fully funded.

The 2001-02 budget for Drug and Alcohol programs contains an increase of $1.489 million over the available year. This increase of 3.65% over the available year or $41.078 million will be used to provide a nominal increase to the various single county authorities.

This budget contains a number of new initiatives. One such initiative is entitled, Arthritis Outreach and Education. This new program for the 2001-02 is funded at $250,000. The program is directed towards educating the populace about this disease.

The state funding for the line item for "Maternal Child and Health" in the 2001-02 fiscal year is $3.9 million. This level of funding is considered minimal considering that the WIC program was cut by the Federal government by $13.1 million.

The program entitled, New Born Hearing Screening, will be funded at $1 million for the 2001-02 fiscal year. Senate Bill 400 will carry out the implementation of this program and this legislation is expected to be exacted in the near future.

The Commission’s Maintenance Program receives $1.98 million in the budget, a $20,000 decrease from the current year. Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to decrease by over $6.8 million in 2001-02. 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 budget includes no increase in funding for the Museum Assistance Grant Program. $4.5 million will be available for the 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 230 museum assistance competitive grants and 140 general operating support grants will be awarded in the 2001-02 fiscal year.

The budget includes a 3% increase for the individual Non-Preferred Museums that historically receive funding.

The budget also includes first time funding in the amount of $500,000 for a program for Historic Homesite Preservation. The Regional History Centers appropriation increases by $25,000 for a total of $525,000.

A $100.0 million capital investment in Pennsylvania’s state museums is included in the Governor’s capital budget plan, however a capital itemization bill has not yet been considered. The proposed expenditure of these funds is as follows:

State Museum and Archives

Infrastructure renovations – $58.0 million

Renovation and upgrades to exhibits and galleries – $22.0 million

State historic Preservation – $20.3 million

Old Economy Village, Beaver County – $775,000

Anthracite Heritage Museum, Lackawanna County – $1.8 million

Drake Well Museum, Venango County – $1.6 million

Eckley Miners’ Village, Luzerne County – $2.4 million

Fort Pitt Museum, Allegheny County – $2.4 million

PA Military Museum, Centre County – $3.5 million

Railroad Museum, Lancaster County – $4.8 million

Thomas Hughes House, Greene County – $300,000

Washington Crossing, Bucks County – $2.7 million

 

The budget provides $37.8 million in state funds, $105.9 million in federal funds and $30.6 million in existing cigarette tax revenue for the Children’s Health Insurance Program (CHIP). These increases should boost enrollment to a projected 124,672 children in 2001-02. Current enrollment is 110,890. Of this number, 103,449 are enrolled in the free program and only 7,441 are enrolled in the subsidized program where parents pay one-half of the premium cost of approximately $105 per month.

With the passage of Act 68 of 1998, the free program was expanded to children of families under 200% of poverty and the age limit was increased from 16 to 18. For example, the maximum income for a family of four to qualify is $35,300. The subsidized program was expanded to 235% of poverty and the age limit was increased for 5 to age 18. The maximum income for a family of four to qualify is $41,478.

It is estimated that currently there are over 50,000 uninsured children in Pennsylvania eligible for CHIP but not enrolled. Legislation is pending that would require the Departments of Insurance, Education and Public Welfare to coordinate the National School Lunch and School Breakfast Program and CHIP applications, to increase outreach efforts.

The budget includes Tobacco Settlement funds be used for an Adult Health Insurance Program, which would provide coverage for adults whose income is below 200% of poverty. The enrollees would pay a basic monthly premium for the coverage. The program is targeted toward people who do not have insurance through their employer now, but will most likely in the future. It is intended to be "gap" coverage. There is no prescription coverage, however hospitalizations would be covered.

It is estimated that 60,000 adults per year would be served. In the Governor’s original proposal, 40% of the Tobacco Settlement Funds would be used for this program, and 80,000 adults per year would have been served. Under the new proposal, 30% of the funds would be used for the Adult Health Insurance Program.

As a general rule, appropriations relating to the Supreme Court will receive a 2-3% increase. However the Court Administrator will receive a 4.875% increase as requested by the Governor. The Court Administrator had requested an additional $443,000 which was ignored by the Conference Committee.

The budget provides $3 million to fund Senior Judge Operational Support Grants. In Senate Bill 977, the Court Administrator [AOPC] is directed to create a program to defray the costs imposed on counties by rules of judicial administration for facilities and staff relating to senior judges assigned to the courts of common pleas.

Grants are to be based on the level of operational support provided by a county to senior judges from the district or who are regularly assigned to the county, based on support provided in the previous calendar year. Reimbursement will be based as follows:

1. Judicial chambers – $60 per day

2. Law clerks – $20 per hour

3. Secretary – $12 per hour

Rates may be adjusted by the AOPC beginning July 1, 2004. If appropriations are not sufficient to pay all costs, the grants will be proportionately reduced. No county may receive more than 20% of the funds.

Other major changes in the Judiciary budget include:

$1.055 million to implement a web-based interface between the Common Pleas Courts and the JNET program.

$400,000 to continue the Equity Commission and $100,000 for a permanent committee on Racial & Gender bias.

$887,000 for additional Superior Court Senior Judges and $754,000 for additional Commonwealth Court Senior Judges.

$1.055 million for 15 new Common Pleas Judges, effective January 1, 2002.

$955,000 to reimburse counties and Philadelphia for the expenses of the additional judges.

$1.2 million for the Pittsburgh Magistrate Court. Funding had been provided in the 1999-2000 budget but had been deleted in the 2000-01 budget.

The Judicial Computer System appropriation from the special computer augmentation account is projected to receive a substantial increase from $18.7 million to $26.3 million.

While the Governor has indicated support for merit selection of appellate judges and has appointed a committee to work on a plan, the budget does not contain any identifiable money for this proposal.

The $19.6 million General Government request for the Department is significantly below the current year appropriation due to nonrecurring expenditures for unemployment compensation and employment services programs. The request does include $275,000 to renovate the cafeteria in the Labor and Industry Building. The $11.68 million Occupational and Industrial Safety appropriation includes no new initiatives.

The transfer to the Vocational Rehabilitation Fund is increased by slightly more than $1 million to $36.2 million. The Vocational Rehabilitation Services appropriation is increased by $1.9 million to provide vocational rehabilitation services to an additional 1,285 individuals. The requested Supported Employment appropriation of $1.155 million includes a $105,000 increase. Centers for Independent Living would receive $1.6 million, a $382,000 increase to serve an additional 248 individuals.

New employment initiatives in the Department’s budget would include $2.5 million for Self Employment Assistance, to provide entrepreneurial assistance to persons receiving unemployment compensation who wish to be self employed. The budget provides $887,000 to develop a centralized database of employer information for use by all agency program areas. The budget also includes $850,000 to expand access and provide financial assistance for internet based skills training.

The Federal Workforce Investment Act of 1998, which replaced the Job Training Partnership Act, gives the state considerable flexibility to streamline the delivery of federally funded job training services. Numerous programs have been consolidated into three basic grants: adult employment and training, disadvantaged youth employment and training, and adult education and family literacy programs.

Although the new budget would authorize spending a combined $237.5 million in Federal Workforce Investment Act funds, currently the Department is expecting to spend less than $100 million for the three major programs next year. The Pennsylvania Conservation Corps program will receive $6.28 million.

2000-01 Fiscal Year

Through April, ticket sales are running $78 million or 5% ahead of last year’s pace. However, net ticket sales which subtracts out the prize money and retailer commissions are running $38 million or 7% below last years amount. So the Governor’s February projection of a decrease in net ticket revenue is coming true. At the same time, expenditures are increasing by $91 million. This will reduce the amount of surplus available for the budget year.

2001-02 Fiscal Year

Net revenue from ticket sales were estimated, in February, to grow by 1% or $10 million in the 2001-02 fiscal year. It is not known whether this is still the estimate or not. That is a small amount of growth that should be attainable. All expenditures, led by a surge in PACE costs, are budget to grow by 11% or $105 million. This will result in the surplus in the fund to decrease by $118 million. The budgeted growth in PACE expenditures is $70 million.

One other interesting note is that the much ballyhooed increase in the property tax rent rebate program that occurred two years ago has begun to reverse itself. The Governor estimates that $15 million less will be spent on the program in the next fiscal year than will be spent in this fiscal year.

The Governor proposed a direct care worker recruitment and retention PRR funded in precise amounts in the Community Mental Health, Community Mental Retardation, Services to Persons with Disabilities, Attendant Care, and General Government. The budget allocates those funds as follows

Community Mental Retardation $11,900,000

Community Mental Health 5,600,000

Services to Persons with Disabilities 500,000

Attendant Care 800,000

General Government 500,000

Aging – PennCare 2,200,000

A broad coalition of organizations involved in mental health and mental retardation made a major effort to increase the $17 million MH/MR allocation by another $50 million to provide a $67 million support for their low paid workers, with a view to increasing the program to $100 million in 2002-03. The Conference Committee ignored the MH/MR Coalition’s efforts.

As usual, the Governor asked for substantial adjustments to the 2000-01 Medical Assistance appropriations in his February 2001 budget proposal with a net effect of reducing appropriations by $6.4 million. Those substantial adjustments are further modified in the Conference Committee report, with large increases in the Outpatient and Inpatient appropriations and large reductions in the Capitation and Inpatient appropriations. With all those changes the net increase is $4.16 million over the February request.

However, the Republicans have used the 2001-02 Medical Assistance appropriations to balance their budget. While Outpatient and Inpatient appropriations have been increased for a total of $39.8 million, the Capitation appropriation has been reduced by $23 million and the Long Term Care appropriation by $67 million. The net reductions in all medical assistance appropriations is $48.5 million. As the result of the adjustments over the two budget years, the total of state appropriations for 2001-02 will be $18.5 million less than the similar total for 2000-01. Thus, we can expect supplemental requests next year which will have a substantial net increase in expenditures.

Expansion of Health Choices: The most significant feature of the Medical Assistance budget is the expansion of the Health Choices mandatory managed care program in the ten county Lehigh Valley/Capital Region in October of 2001, with full implementation by April 2002. By the end of the fiscal year, capitation programs will account for approximately 68% of the medical assistance caseload. The cost of capitation programs will increase by $244.5 million over the current year.

Fee for Service: The outpatient appropriation will benefit from a transfer of $100 million from the Intergovernmental Transfer funds and the transfer of recipients from fee for service to capitation. Thus, the outpatient appropriation will be $104 million less than that appropriated in the current year. The inpatient appropriation will be $37.6 million less than the current year.

The budget assumes an average drug cost increase of 12%. In addition it proposes to:

Provide tobacco cessation products

Enhance dental benefits, and

Provide electronic implant devices to persons who have not responded to medication or surgery.

Long-Term Care: The budget assumes decreased utilization of nursing homes and an average daily cost increase of 6.9%. It also counts on an increase in Intergovernmental Transfer funds of $118 million. The budget projects the cost of long-term care to be $130 million less than the current year.

Home and Community Based Services: Approximately $30 million in total funds is recommended to provide 2,728 additional older persons with a comprehensive package of medical and support services in their own homes rather than in nursing homes. Of these, approximately 1,600 will meet all medical assistance eligibility requirements and 1,100 are projected to meet medical assistance income eligibility requirements but not asset eligibility requirements.

The budget provides a 2% COLA for the Expanded Medical Services for Women and Medical Assistance-Transportation appropriations. In addition, the budget supports the following transportation enhancements:

Statewide urgent care/same day coverage

Reimbursement for select return trips from the hospital, and

Door to door assistance under certain circumstances.

The Special Pharmaceutical Services appropriation provides for some formulary expansion, a 5% growth in utilization and a 5% growth in drug prices.

Tobacco Settlement Programs: Medical assistance contains three Tobacco Settlement programs which are described in the Tobacco materials, infra:

                                        Medical Care for Workers with Disabilities

Uncompensated Care payments to hospitals for uncompensated costs incurred on behalf of uninsured persons, and

Expansion of Home and Community Based Services to provide services to additional older persons as an alternative to nursing home care.

The budget does not address what Pennsylvania’s response should be to the federal TANF five year lifetime limit that will begin to be effective in March of 2002. Federal law permits an exemption of 20% of the caseload from the limit. In addition, the Commonwealth needs to consider options for alternative programs for some type of support for those persons who may be dropped from the TANF rolls. While federal participation is limited to 60 months of payments over a lifetime beginning March 1997, Pennsylvania law does not contain a five year limitation.

As a background for considering this issue a number of facts must be considered. During the period between March of 1997 and March of 2001, the public assistance caseload has dropped dramatically. The following table illustrates the drop in average caseload since welfare reform has been enacted.

At the same time, state expenditures for Cash Grants have dropped from $523.2 million in the 1996-97 budget to $256 million in the budget.

While the budget refuses to use state funds to supplement the federal Low Income Home Energy Assistance Program [LIHEAP], the Clinton Administration made it possible for the Governor to request a federal supplemental appropriation of $66 million for the current fiscal year. The additional federal money permitted the Department of Public Welfare to extend the deadlines for cash and crisis grants to April 30, 2001. The maximum crisis award was increased from $400 to $700 and maximum income limits have been raised from 135% of the federal poverty level to 150%. Unfortunately, without state supplementation for next winter, the total available for LIHEAP grants will drop from $150 million to $120 million.

The administration continues to absorb additional federal fees for the administration of the SSI-State Supplement. The basic payment will not be increased but the budget adopts the Governor’s request to allocate an additional $8.158 million for a $2 a day increase in the residential component of personal care and domiciliary care residents. SSI recipients in these homes receive $25 a day, an amount which was last adjusted in 1993. The budget will increase that amount to $27 a day when the providers [most of whom are non-profit] state that they need a $35 a day subsidy as the statewide average cost for housing and services in a personal care home is $60 per resident per day.

The budget includes several new initiatives to assist families in the transition from welfare to work. As the total caseload continues to decline, this year’s efforts will shift new resources to target retention and advancement programs, attempts to reach the most difficult to serve, and significant new housing support.

Total state New Directions funding of $73 million increases funding less than $450,000 above the current year, but would be augmented with nearly $60 million in new federal Temporary Assistance for Needy Families (TANF) funded initiatives. The new spending includes $15.6 million to serve 3,000 families with significant barriers to employment, $6 million for additional employment, training, and wraparound services for individuals still unsuccessful at obtaining employment, $5 million for expedited and enhanced job search for individuals who had been employed previously, and a $1.8 million incentive program for non-custodial parents to obtain employment and meet their child support payments.

The new housing support includes $2 million to expand transitional housing, rental assistance, and case management services for homeless and near homeless individuals and families. The budget also funds a $30 million TANF commitment to expand the availability of affordable housing and assist low-income families to become first time homeowners. The funds are part of a two year $60 million commitment for the initiative. Project funding will be coordinated in collaboration with the Pennsylvania Housing Finance Agency and the Department of Community and Economic Development. The budget provides another $2 million from TANF to support Family Savings Account grants to 1200 families to promote future savings for home ownership, education, or business start-ups.

The population at Mental Health institutions is projected to decline from 2,928 in July of 2000 to 2,615 in July of 2001. The Governor expects a further decline of 100 residents during the 2001-02 fiscal year. The Mental Retardation Center population is projected to decline from 1,969 to 1,706 during the current fiscal year with a further reduction of 180 residents during the coming fiscal year.

The Mental Health Community budget provides for a 2% COLA and two program initiatives. $14.5 million in state funds will be allocated to provide community services for persons currently in state hospitals and to direct care worker recruitment and retention. The additional funds will support 230 persons currently in state mental hospitals in the community.

$2.5 million will be provided to increase behavioral health services to criminal offenders with a dual diagnosis of mental illness and substance abuse problems, more fully explained in Department of Corrections materials.

The Mental Retardation Community appropriation provides for a 2% COLA, $24 million in state funds [$43 million total funds] to provide home and community based services to 937 persons on waiting lists, 150 residents of state mental retardation centers and 14 persons in state mental hospitals.

The budget adopts the Governor’s request for $3.794 million for expanded Early Intervention for 2001-02 to provide services to an additional 1,150 pre-school children. It and a comparable program in the Department of Education make up nearly all of the state funds included in the Governor’s so-called $48 million Early Childhood Initiative.

While much has been said about Child Care, the budget is actually a no-growth daycare budget. The total expenditures [state and federal] for child care services will increase from $222.979 million to $229.681 million, approximately $6.7 million. However the federal child care block grant funding in cash grants is actually reduced from $95.073 million to $90.032 million. Thus the real increase is only $2 million on a $300 million base.

On the other hand, the budget contains an $80 million increase in the state share of Child Welfare. Approximately $31.4 million will be used to fund the county needs based budgets as mandated by Act 30 of 1991 and $39.9 million replaces federal funds.

The budget totally ignores the Business Roundtable, other business interests, and various children’s groups requests for a $25 million pre-school program.

The new budget for our YDC/YFC system would actually fall below the current year funding level. Appropriated spending of $65.1 million is $500,000 less than the current year budget. The reduced spending is due to the nonrecurring cost ($5.4 million) of the Bensalem Youth Development Center, closed in August of 1999. The only new spending initiative included in the YDC/YFC budget is $510,000 to fund a new training academy.

A cost of living increase of 2% is provided for all Human Service programs. Attendant Care will receive an additional $800,000 as part of the direct care worker recruitment and retention initiative. The Services to Persons with Disabilities appropriation will receive $500,000 as its share of the direct care worker recruitment and retention program and $1.038 million to provide additional home and community based services.

The further erosion of the PURTA distribution to local governments continues in this budget. In the current year $60 million was available to be distributed, down from $136 million in 1999-2000. For the upcoming year only $48 million is available. This 20% decrease will be felt by municipalities and school districts in October when their payments are even smaller than last year.

The State Police "CLEAN System" is being funded at $16 million for the 2001-02 fiscal year. This system is a propriety system that the department has been using for communications in dealing with the criminal justice telecommunications systems. The funding for the CLEAN system is being used so that the communications that does take place between the State Police is more user friendly. Additionally, the system contains a data base that tracks a person from the judicial process to the sentencing process and finally to probation. In particular, this appropriation will implement a data quality assurance protocol to identify and correct conflicting data.

The 2001-02 General Fund budget reduces the funding for patrol vehicles from $2.880 million to $2.848 million. This line item for patrol vehicles funded from the Motor License Fund was also reduced from $6.120 million to $6.052 million. Despite the fact that these reductions are minor, the fleet of State Patrol vehicles is continuing to age.

The 2001-02 budget provides $1,075,335,000 for "Highway Maintenance". "Highway Maintenance" includes the following line item appropriations: Highway Maintenance, Secondary Roads - Maintenance and Resurfacing (EA), Highway Maintenance Safety Projects, Highway Maintenance - (Excise Tax), Highway Maintenance Enhancement, and Highway Betterment. This level of funding is approximately $26 million below the available year.

The final agreement includes $583.871 million for "Highway and Bridge Construction". This general category contains the following appropriations: Highway and Safety Improvements, Highway Capital Projects (EA), Highway Capital Projects - Excise Tax, Highway Bridge projects (EA), and Bridges - Excise Tax (EA). This level of funding is approximately $32 million below that of the available year.

The line item entitled, "Safety Administration and Licensing" includes a $2.6 million initiative to expand computer on-line motor vehicle transactions. The expansion will provide easier access for Pennsylvanians to complete license and registration transactions at the local level without traveling to Harrisburg or through the normal processing procedures.

Mass Transit Assistance grants were not increased in the final budget. The $270.19 million appropriation will be supplemented by projected Public Transportation Assistance Fund (PTAF) grants of nearly $199 million for urban transportation operators. Rural Transportation systems would receive a $2 million General Fund grant, along with $5.6 million in projected PTAF receipts.

Uncertainty remains, however, over future PTAF revenues due to changes in public utility taxes related to utility deregulation. The Public Utility Realty Tax has provided a major portion of PTAF revenue since its creation in 1991. When utility deregulation was enacted, transit agencies were promised they would not be hurt by these tax changes. Since then attempts to provide supplemental assistance to replace the lost revenue have consistently been resisted by the Governor.

The lack of any increase for transit operators will be exacerbated by a $3.5 million reduction in the Fixed Route Transit appropriation. Pittsburgh’s Port Authority Transit system has already been forced to raise fares this Spring, while Philadelphia’s Southeastern Pennsylvania Transit Authority is expected to implement a fare increase this week due to the lack of state support.

Lottery Funded support is expected to grow to $125 million for transit programs in the proposed budget. Rail Freight assistance would receive an $8.5 million appropriation.

The appropriated amount for general obligation debt service was reduced by $174.9 million from the Governor’s proposed budget. It was estimated that about $94 million could be saved if the 2001-02 bond issuance was delayed until the beginning of calendar year 2002. This will necessitate increased debt service payments in 2002-03. So this appears to be another one time gimmick to help balance the budget. It is not known where the remaining savings can be found.