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Fiscal Year 2005-06 State Budget Impact on Philadelphia July 6, 2005 MEMORANDUM TO: Members of the Philadelphia Delegation
FROM:
Senator Vincent J. Fumo SUBJECT: Impact Analysis of the Enacted FY 2005-06 General Fund Budget on the City of Philadelphia. Overview The FY 2005-06 budget calls for $24.150 billion in General Fund expenditures, a 4.4 percent annual increase. Due to revenue constraints and ballooning Medicaid expenses, funding levels for many programs are near, or in some cases, below last year’s levels. These problems were somewhat offset by the administration’s management and productivity initiatives, which have saved Pennsylvania’s taxpayers more than $475 million to date. To address sizable increases in Medicaid costs – set against a backdrop of diminishing federal support – the budget also includes cost-cutting measures in the Department of Public Welfare. The restorations made to the Governor’s proposed cuts, however, will serve to seriously lessen the impact of these cuts on the City of Philadelphia. The School District of Philadelphia will receive more than $35 million in additional funds in FY 2005-06. In FY 2005-06 the Governor’s Growing Greener II program will begin with the first of six scheduled debt issuances. In the first year $100 million in bonds will be issued to finance environmental initiatives across the state. A portion of this money (14%) will be allocated to the counties to use at their discretion for environmental projects that meet the Growing Greener II guidelines. Details regarding specific changes in funding levels and their effects on the City of Philadelphia follow. Human Services
While the FY 2005-06 budget does make some cuts to the MA program, these cuts were mitigated by significant restorations made during budget negotiations. These restorations will be especially important for the City of Philadelphia. The proposed Prescription Drug Limit was jettisoned as well as part of the limit on hospital visits. Most if not all of the restrictions on psychiatric services will not apply to Philadelphia because they are not applicable to the Philadelphia area Medicaid managed care provider. Furthermore, the restorations made will significantly lessen the impact of the Medicaid cuts on area hospitals –specifically, the proposed limitation on Hospital Pass Throughs has been eliminated. The anticipated problem facing the city regarding the transition away from TANF funds, and its impact on children’s welfare programs has been significantly ameliorated by the city’s decision to utilize funds from Community Behavioral Health. In FY 2004-05, the state appropriation for the Human Services Development Fund (HSDF) was essentially level-funded once the 2 percent COLA was backed out. The $33.8 million in state funds was supplemented by $7.5 million in federal Intergovernmental Transfers (IGTs). The FY 2005-06 budget will carry the state HSDF appropriation forward at the FY 2004-05 level, but eliminate the federal IGTs. The result will be a $1.9 million reduction for the City of Philadelphia. The appropriation for Psychiatric Services in Eastern PA (EPPI), which was completely eliminated in the original FY 2003-04 budget proposal, is continued at the fully restored level of $3.5 million for FY 2005-06. The statewide Homeless Assistance line item was increased by approximately 4.4% bringing the total amount to $25.5 Million. This will result in a $2 million increase for the city. Aging Services
In the City of Philadelphia, state funds for aging services are allocated to the Philadelphia Corporation on Aging. Services include nutrition, employment, transportation, domestic care, personal protection, long-term care assessment and both basic and intensive in-home services. In the FY 2005-06 budget, the Philadelphia Corporation on Aging will receive approximately $48.7 million. The PennCare appropriation now includes programs to expand adult day care services, which previously fell under a separate line item. Philadelphia will also be eligible for additional funding for in-home services as an alternative to nursing home care under the Tobacco Settlement. It should be noted that when combined with available federal and state general funds, the Philadelphia Corporation on Aging should receive roughly $73.8 million in the current fiscal year. Public Library Services
In FY 2003-04, the Governor proposed a dramatic reduction in this appropriation, a portion of which was ultimately restored in that year’s final budget agreement. Additional funds were restored in last year’s budget. The Free Library of Philadelphia will receive roughly $7.64 million in public library subsidies in FY 2005-06. This represents an increase of approximately 6%. School District of Philadelphia
The FY 2005-06 budget provides for an approximate 3 percent increase in the basic education subsidy, which translates into a $17.5 million increase for the School District of Philadelphia. State appropriations for special education will increase approximately 2.5 % yielding an increase of $3.1 million for the city. This spending plan will carry forward the $25 million appropriation for the Philadelphia School District, which first appeared in the budget in FY 2002-03. The FY 2005-2006 budget also level-funds Pennsylvania Accountability Grants and School Improvement Grants, from which Philadelphia will receive a combined total of $56.4 million. Furthermore, the funds for the Education Assistance Program, increased by $28 million dollars statewide, will yield another $9.4 million for the district’s tutoring program. The additional funds slated for the Reimbursement of Charter Schools will direct about $4.2 million more to Philadelphia, as well. Combined, these major funding sources will provide an additional $35 million for city schools. Higher Education
The budget provides for modest increases in the appropriations for most state-aided colleges and universities, which includes most of those listed above. Some of the funding for Temple University has been shifted from the state to federal level. The Governor’s “Job Ready Pennsylvania” initiative provides a 10.1 percent increase in Community College funding in FY 2005-06. Based on the new Community College funding allocation formula, Community College of Philadelphia will receive approximately $33.1 million. Health Care Services
* Rounds to less than $0.1 Million Although the Governor’s budget proposal called for many of these programs to have their funding significantly reduced, in the end, state support for the most of these programs will be level-funded from the FY 2004-05 budget. The city will, however, receive an additional $700,000 in funding for AIDS programs. Transportation Services
The FY 2005-06 budget funds a 2.0 percent increase in the appropriation for Mass Transportation Assistance. For SEPTA, this represents an increase of approximately $4.0 million over the FY 2004-05 level. After factoring in the local match, SEPTA will receive roughly $271.4 million due to this appropriation. Due to the General Assembly’s refusal to enact any long term funding solution to address significant operating deficits for SEPTA and other major transit agencies, the Governor took action earlier this spring to reallocate Federal highway funding to provide short-term assistance to SEPTA through calendar year 2006 until a more permanent solution can be developed. Homeowners Emergency Mortgage Assistance Program (HEMAP)
The enacted FY 2004-05 budget was the first since 1998 to include any funding for HEMAP, a revolving loan fund which offers loans to homeowners who have fallen behind in monthly payments due to unemployment or family medical emergencies. Since its inception in 1983, over $45 million in HEMAP assistance has been distributed to Philadelphia homeowners. Despite the program’s diminishing resources, the recent recession caused applications for this program to increase dramatically. The unfortunate result was that the HEMAP program’s administrators were forced to decrease not only the number of loans they granted, but also the size of those loans. The additional $5.0 million appropriated in FY 2005-06 should result in approximately $1.0 million in additional HEMAP funding for Philadelphians, although this will ultimately depend on the quantity and magnitude of the applications that are filed for HEMAP assistance. Housing and Redevelopment Assistance
In the FY 05-06 budget, DCED’s appropriation for Housing and Redevelopment Assistance will remain at the FY 2004-05 level of $30 million. One-fifth of these funds will continue to be allocated to the City of Philadelphia. Probation and Parole Services
The budget includes a 9.25 percent reduction in the state’s appropriation for the Improvement of Adult Probation Services. The Board estimates that this will result in about a $620,000 reduction for Philadelphia. Growing Greener II
The Growing Greener II initiative is new for this year’s budget. The state will issue $625 Million in bonds - $100 million in each of the first five years and $125 million in the sixth year. From this $100 million, a county environmental program block grant of $14 million dollars exists for all counties. Philadelphia will receive $450,000 for discretionary county environmental programs. Programs must conform with accepted Growing Greener II project guidelines. Port Development
The enacted FY 2004-05 budget provided $9.9 million for debt service and operating subsidies in Philadelphia, plus an additional $3.0 million for earmarked capital and special projects, such as a new navigational system. The overall state appropriation for PennPorts increased by approximately 16% this year. Furthermore the city’s share of the funds increased, resulting in $2.1 million in additional funds for the city in FY 2005-06. PURTA Distribution to Local Governments
Each October, the Department of Revenue distributes checks to municipalities and school districts from PURTA tax revenue collected in the previous fiscal year. In 1999, the PURTA tax was “fixed” to provide a reliable tax collection stream. Historically, PURTA has been a wildly volatile and unpredictable revenue source for the commonwealth. Under present estimates, however, the City of Philadelphia should receive roughly $4.1 million through this appropriation in the upcoming year. Judiciary
* Rounds to less than $0.1 Million ** Continuing appropriation of $525,000 plus $125,000 in newly allocated funds for FY05-06 In general, appropriations for the Judiciary are level-funded in the FY 2005-06 budget, although there are increases for both the Municipal Court and the Traffic Court in Philadelphia. The $525,000 provided for Gun Court Reimbursements in FY 2004-05, which is a continuing appropriation that lapses at the end of the upcoming fiscal year, has been augmented with an additional $125,000. The modest increase in the County Court Reimbursements appropriation will also benefit the city.
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