THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS

FISCAL YEAR 2008-09 BUDGET PROPOSAL ANALYSIS  

PROTECTING OUR PROGRESS

Tax Rebate Program - $130 million 

The Governor proposes, as apart of the economic stimulus program, a one –time, $130 million personal income tax rebate for low income working families.  A qualifying taxpayer would be eligible for $200 or $400 for a couple filing jointly.  To qualify, a taxpayer would have to be eligible for the poverty exemption provisions under the income tax and have at least one dependent.  For a family of 4 the maximum amount of taxable income they could earn would be $32,000 annually.  The proposal estimates that 475,000 working class families would be eligible for the rebate. 

The Governor wants the rebate to be given to taxpayers before the beginning of the new fiscal year.  To pay for this stimulus program the Governor proposes to borrow $130 million from the rainy day fund and then repay the fund with an equal transfer back to the rainy day fund through the automatic transfer of 25% of the 2007-08 budget surplus.  Therefore, the budget projects an estimated Rainy Day Fund balance of nearly $750 million, even with this recommended transfer at the close of this fiscal year. 

Job Creation Tax Credit Enhancement 

The Governor proposes increasing the amount of the job creation tax credit awarded to businesses from $1,000 per new worker hired to $3,000 in the first year.  It is expected that the business would receive the current amount of $1,000 per new employee for the second and third year that the existing credit covers.  The current program allocates $22.5 million annually for these tax credits. 

Unfinished Business 

The Governor’s stimulus plan recommends immediate action by the General Assembly on several action items unfinished from last year’s session.  These items would include his Energy Independence Strategy, the Jonas Salk Legacy Proposal, an increase in the current limit on Redevelopment Assistance Capital Program debt, and enactment of his Cover All Pennsylvanians health care plan.

Energy Independence - $850 million 

The Energy Independence Strategy would provide an $850 million bond issuance to be used to stimulate Pennsylvania’s alternative energy producers and create a fund to invest in new alternative energy technology.  The proposal would stimulate the economy in two ways: increase industries that are in the renewable energy sector and decrease energy usage by all Pennsylvanians thereby lowering their energy costs, which will provide more disposable income to be used within the economy.

Jonas Salk Legacy Fund - $500 million 

In 2006 the Governor first proposed the creation of the Jonas Salk Legacy Fund which was to build on the world quality medical research that was taking place in Pennsylvania.  This fund was to provide the funding for expanding bioscience laboratories for universities and academic medical centers that foster entrepreneurship in the life sciences. 

The Governor’s 2008-09 budget continues this mission by providing $500 million for the Jonas Salk Legacy Fund.  Like its precursor, the 2008-09 Jonas Salk Legacy Fund creates financial resources for biotechnology commercialization and investment capital.  The source of the $500 million will come from Pennsylvania’s Tobacco Settlement Fund revenues.  Without raising taxes Pennsylvania can jump into the lead as a center for international research in biosciences, while employing 12,000 people. 

The 2008-09 budget proposes that four percent of the tobacco revenue currently used to support the PACE program be re-allocated to provide additional resources for Life Science Greenhouses (two percent).  The Life Science Greenhouses are regional biotechnical centers that address the critical lifeline between university research and company formation.  These Greenhouses also attract private investors that are able to leverage the Commonwealth’s investment.  The remaining two percent that will be re-allocated from the PACE program will be used to provide addition venture investments through the Health Venture Account, to support start-up and emerging life sciences companies in Pennsylvania.   

Raising the RCAP Debt Ceiling - $750 million  

The Governor recommends increasing the Redevelopment Capital Assistance (RCAP) authorization an additional $750 million, from $2.65 billion to $3.4 billion.  An increase of $750 million in authorization will enable more than $1.5 billion in development projects to proceed, as there is a 1 for 1 matching rule with non-state funds.    According to the Governor, there are $500 million in projects that are ready to break ground this year.

Rebuilding Pennsylvania - $250 million 

          Bridge Repair - The Governor proposes an additional $200 million for each of the next 10 years to repair commonwealth bridges.  Over the past 5 years the commonwealth has repaired 1,381 commonwealth bridges.  In spite of this effort an estimated 5,900 state owned bridges remain structurally deficient.  This additional funding will raise total bridge funding to $15.5 billion over the next 10 years, and enable 1,000 additional bridges to be under construction by 2010. 

          Dam Repair Program - The Governor proposes to make $12 million available to fix 24 state owned dams.  These dams are classified as high hazard dams.  This necessary safety work will protect not only those in proximity to dangerous dams but will also create construction jobs.  The Governor wants to commit $37 million in capital funds to repair these dams over two fiscal years. 

          Another 21 unsafe high hazard dams are owned by local governments.  The budget will include $6.6 million matching grant program through PENNVEST where state funds can provide up to 30 percent of the cost of financing.  

          Flood Prevention Program – The budget proposes more than $100 million over the next three years to make flood prone communities safer.  The Department of Environmental Protection will provide capital funding of $13 million this year, growing to $58 million in 2010-11 to fund this assistance. 

          Rail Freight Program – Capital funding for rail freight assistance would be increased from $20 million to $30 million during the next three fiscal years. 

          Aviation Grants – Capital Assistance for Aviation projects for medium/small city/regional airports would be increased by $5 million per year for each of the next three years. 

          PA Infrastructure Bank – The Pennsylvania Infrastructure Bank provides low cost financing for highway, bridge, aviation, rail freight, and public transportation projects.  Since it was created, $72.3 million in projects have been financed.  The proposed budget would provide $30 million per year, a $13 million increase, for each of the next two years from the program. 

Business in Our Sites - $100 million  

            The Business in Our Sites (BIOS) program, through the Commonwealth Financing Authority has already provided $300 million to create shovel ready sites for development throughout the commonwealth.  The Governor recommends providing a new $100 million capitalization to the program. 

Keystone Opportunity Fund Expansion 

            The Governor recommends an extension and renewal of unused portions of existing undeveloped portions of Keystone Opportunity Zones, Keystone Opportunity Expansion Zones and Keystone Opportunity Improvement Zones.  The Governor has proposed a seven year extension of undeveloped areas with existing zones and discretion to designate new zones with local approval. 

Property Tax Relief - $853 million 

            On April 15^th the Budget Secretary is expected to certify the first distribution of Gaming Funds for homestead tax relief and wage tax reductions in Philadelphia.  This initial distribution is anticipated to provide $672 million for state wide tax relief, $134 million for expanded Property Tax Rent Rebate (PTRR) assistance, begun last summer for senior citizens and the disabled, $48 million for expanded PTRR assistance to individuals with high property tax burdens or living in cities with high tax burdens, and $19 million for Sterling act tax credits. 

            Tax relief will vary by school district, but will average an estimated $185 per eligible homeowner.  Wage tax reductions in Philadelphia will lower rates to 3.91 percent for residents and 3.48 percent for non-residents effective in 2009. 

GENERAL FUND 

2008-09 Budget 

            The Governor’s proposed 2008-09 budget has total expenditure growth of 4.19% to $28.3 billion.  The budget is based upon revenue growth of $806 million or 2.86% and a delay in the scheduled decrease in the capital stock tax that puts an additional $40 million in the general fund.  The additional money from the capital stock tax is equal to the amount of general fund transfer required to the hazardous sites clean-up fund.  The proposed budget has a small expected surplus of $2 million.   

2007-08 Budget (Current Year) 

            The Governor anticipates that there will be a revenue surplus this year of $427 million.  That surplus along with expected lapses of $80 million should provide a general fund surplus of $400 million that will be utilized to balance the proposed 2008-09 budget.  The Governor also intends to borrow $130 million from the rainy day fund to provide an income tax rebate for low income working families.  The money would be replaced in the rainy day fund at the end of the year when the surplus is transferred.  This report will detail both tax changes.  

            The expected revenue surplus of $427 million will come primarily from the personal income tax which is expected to bring in $346 million more than was officially estimated in July and the capital stock tax which is expected to bring in $94 million more.  The estimate for corporate net income tax is adjusted downwards by $56.7 million.  Also miscellaneous non-tax revenue is expected to bring in $24 million less than was officially estimated.   

TAX CHANGES 

The Governor proposes three tax changes in his presentation.  The first two are a one –time rebate for low income working families and an increase in the amount of job creation tax credit that a business can receive for each job created.  Both of these changes are discussed in the Protecting Our Progress Section at the front of this report.   

The last proposed change is a slow down of the phase-out of the capital stock tax for 2008-09.  Current law would decrease the tax by 1 mill on January 1, 2009.  The Governor’s proposal would allow for only a .4 mill reduction to 2.49 mills.  The savings is about $40 million according to the Governor and that is equal to the amount of the revenue from the capital stock tax that is to be transferred to the Hazardous Sites Clean-up Fund under Act 77 of 2007.  With this change the General Fund is not reduced by the change under Act 77. 

DEPARTMENT OF AGING 

The Governor proposes spending $100,000 in lottery funds on a new initiative entitled “Improving End of Life Services”, as part of his Prescription for Pennsylvania plan.  Funding would be used to assess the opportunities for increasing the availability of hospice and pain management care services. 

Family Caregiver Support  

The Family Caregiver Support Program appropriation would remain at the current year’s funding level, under the Governor’s proposed budget.  This program is also supported by $10 million in federal funds.  The program assists families who maintain frail relatives in their home.  Working through AAA’s, the program provides benefits counseling and, depending on income, financial assistance including supplies, services and home adaptations and devices.  It is anticipated that 7,925 families will receive these services in 2008-09. 

Alzheimer’s Outreach Services 

The Governor’s budget includes $250,000 for Alzheimer’s Outreach Services.  It is also anticipated that Pennsylvania will receive $350,000 in federal funds for an Alzheimer’s Demonstration Grant program. 

Pre-Admission Assessment 

Funding for the Pre-Admission Assessment Program is increased by $1.4 million, to provide for additional assessments.  This nursing home pre-admission screening program helps older Pennsylvanians and their families determine the least restrictive environment needed and assists them in securing and managing intensive in-home services tailored to their needs. It is anticipated that assessments and referrals to community services will increase in 2008-09.  Referrals to nursing homes are also expected to increase. 

PENNCARE 

The PENNCARE program provides home and community based services to older Pennsylvanians to enrich their lives and enable them to delay or avoid moving to a nursing home.  This budget proposal includes $247.6 million for the lottery funded PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 260 recipients.  Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports.  As part of this appropriation, the Governor has included $3.0 million to provide additional services to reduce reliance on institutional long-term care and promote growth of high quality home and community based services. 

Home and Community-Based Services – Tobacco Settlement Fund 

A total of $25.8 million in Tobacco Settlement funding is included in the Governor’s budget to provide home and community-based services to older Pennsylvanians.  This includes an increase of almost $3.0 million to continue current home and community-based services, as well as nursing home transition activities, and an increase of $1.5 million to provide waiver services to an additional 2,100 recipients.   

Pharmaceutical Assistance 

The Pharmaceutical Assistance Program provides help to qualified older Pennsylvanians who are 65 years of age and over and whose cost of drugs is a burden to them.  The program is financed by the Lottery and Tobacco Settlement Fund revenue.  

The commonwealth has expanded its PACE and PACENET programs to make them compatible with and complementary to the Medicare prescription drug program.  PACE Plus Medicare enables cardholders to take advantage of the features of both PACE and the Federal Medicare Part D benefit by filling the gaps encountered by cardholders in Medicare Part D including deductibles, the donut hole phase of no Medicare coverage, and co-payment differentials between the Part D plan coverage and the PACE and PACENET co-payments.  PACE Plus pays the Medicare premiums for Part D coverage PACE cardholders, while PACENET cardholders pay the Part D premium. 

With a heavier reliance on lottery funds and a reduced use of tobacco settlement funds,  the Governor’s budget proposes funding for 2008-09 that will allow the average number of seniors covered by PACE, PACENET or PACE Plus Medicare to rise to 407,575, an increase of 49% over the last 5 years.  It is estimated that 24,000 additional seniors will be served in 2009-09 than in the current year. 

Reforming the Long-Term Living System 

The Governor’s budget includes a total of $4.2 billion in total funds among departments for nursing home and community based services, including funding to enable 2,100 additional seniors to remain in their homes as an alternative to nursing home care. 

            Pennsylvania has the third oldest population of any state, and is experiencing demographic changes that many other states will not experience for another 10 to 15 years.  Providing services for the rapidly growing number of seniors, especially those 85 and older, will present a major challenge for the commonwealth in the coming years.   

The problem will come to a head in the near future, as 2006 was the year that the first wave of baby boomers, many struggling to care for elderly parents, joined the ranks of the 60-plus year olds.  By the year 2020, one in every four Pennsylvanians will be age 60 or older.             

The goal of this administration is achieving a balance of 50% institutional care to 50% home and community based care.

DEPARTMENT OF AGRICULTURE

General Government Operations received $32 million in this year’s budget which is a 7% increase from the available year.  Much of this increase will be directed for the administration and support of programs that were cut back such as the Animal Health Commission and Agriculture Research. (See above chart)  Additionally, General Government Operations received $375,000 to strengthen the Food Safety program which has wide ramifications upon the health of millions of Pennsylvanians who buy and eat prepared food at grocery stores and restaurants. 

Crop Insurance is expected to receive $3 million in this year’s budget.  This is a 50% increase from last year.  This program which has existed in the last decade has helped farmers deal with adverse weather conditions that have seriously impacted crops across the state. 

Although the Agricultural Promotion, Education and Exports program may be expected to receive a decrease of $347,000 to $1.19 million in the 2008-09 budget; the Department plans to continue to increase the number of Pennsylvania exports beyond the $1.8 billion that was exported last year. 

The State Food Purchase program, according to the 2008-09 budget, will see $18 million.  Much of these dollars will be used to purchase federal surplus food and to leverage additional money for food programs throughout the state.  

DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT 

            Economic Stimulus program commitments totaling more than $2.6 billion since 2003, $2 billion in additional community and business incentive spending, and other investments in education and training initiatives continue to produce an expanding state economy.  Total state non-farm employment increased nearly 40,000 jobs over the past year, and 200,000 jobs over the past 5 years, while our 4.7% unemployment rate continues to trend below the national average. 

            A troubled housing market and lower projected GDP growth provide a cautionary note for the 2008 state economy, making commonwealth investments for new jobs and expanded commerce even more important this year.  The Governor has proposed a short term stimulus plan to further spur our state economy.  In addition to that plan several other spending initiatives are proposed within the Department of Community and Economic Development budget to help our economy grow. 

            The new stimulus program would include a $10 million increase in Infrastructure Development funding, totaling $32.5 million in the proposed budget.  The budget would include $40 million for Opportunity Fund grants, $20 million for Customized Job Training, $28 million for Infrastructure Facilities Improvement Program grants, and proposes the consolidation of the Machinery and Equipment Loan Fund (MELF) and the Pennsylvania Industrial Development Authority (PIDA) to make more than $100 million available in low interest loans for the purchase of machinery & equipment and lands and buildings.  The Stimulus plan would lower interest rates for both programs to two percent below the prime interest rate and do the same for an estimated $37 million in loans through the Small Business First program. 

            Technology programs would receive $55.7 million through the Ben Franklin Technology Development Authority.  These funds would include $4 million for the creation of 4 to 6 new Keystone Innovation Zones (KIZs).  There are currently 26 KIZs throughout the commonwealth. 

            The budget proposes the consolidation of regional grants for tourism marketing initiatives currently funded through three different appropriations, to provide $9 million, a $4 million increase for Regional Marketing Partnerships.  Funding for Marketing to Attract Business would be reduced by $500,000 and local grants for Tourist Promotion Assistance would be cut by $3 million to fund this consolidation.  Tourism is estimated to contribute $27 billion to our state economy annually, a 17.5% increase since 2002. 

            The Film Grant program would be discontinued in the proposed budget.  The state now provides $75 million in film production tax credits.          

            The Governor has renewed his call to redirect 4 percent of Tobacco Fund revenue currently supporting the PACE program to provide additional resources for biotechnology commercialization for the Life Science Greenhouses ($7.4million), and additional funding for the Health Venture Account ($7.4 million).  The Health Venture Investments were initially capitalized with $60 million in Tobacco Settlement proceeds.  Venture Capital investments could also be boosted by enactment of the proposed Energy Independence strategy, which includes a new $50 million venture investment in alternative energy projects. 

            Commonwealth venture capital investments through the Commonwealth Finance Authority, DCED, and our state retirement boards have stimulated significant new venture capital funding throughout the commonwealth.  Since 2002 these investments have grow by nearly 70%, a $778 million increase.

            The budget provides more than $15 million for international trade development.  Funding for trade activities has been expanded significantly since 2002.  These investments have produced significant growth in commonwealth trade activity adding an estimated $10.5 billion to our state economy, a 70 percent increase. 

            Most community assistance programs are level funded from the current year.  These programs include $34 million for Housing and Redevelopment Assistance, $18 million for New Communities, $2.4 million for Shared Municipal Services grants, and $4.234 million for Land Use Planning Grants. 

DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES 

            In the proposed budget, funding for general government operations has increased by approximatley$2.3 million.  Of this increase, it is proposed that $ 2.2 million is used for the general operation costs of this Department.  The remaining $50,000 will be from the lease and moving costs of the Philadelphia State Office Building.  Another proposed funding increase is $2.4 million for Infrastructure Initiative Mapping. This proposal is to increase the amount of information available for flood mapping.  This is a component of Rebuilding Pennsylvania’s Infrastructure plan.   

            This proposed budget also recommends that the appropriation for state parks be increased by $296,000.  One of the largest recommended increases is for State Forests Operations in the amount of $2 million.  Throughout the Commonwealth there are 2.1 million forest acres.  In fact, our forests comprise one of the largest tracts of forest in North America.  The Department works diligently to protect and conserve these forests.  Through the harvesting of hardwood timber, the Commonwealth boasts a $5 million forest product industry and employs approximately 100,000 people.  The state park system consists of 117 parks and 2 conservation areas within 62 counties in the Commonwealth’s nearly 2.4 million acres. 

            In addition to managing facilities, the Department is also responsible for upgrading facilities where needed.  These services are needed to provide quality visitor services which would allow for increased tourism and enhance revenue opportunities.  Included in the budget for 2007, funding was provided for enhancements to be made to our parks facilities and operations.  The Heritage Parks also received funding; however in the proposed budget for 2008-09 this program appropriation is reduced by $7.6 million because the majority of the upgrades were made.   

            The budget for 2007-08 also includes funds from the Growing Greener II bond initiative.  Growing Greener II was established in May 2005 and will provide the Department with $218 million over the next six years to improve state parks and forests, community park and recreation grants and for open space conservation.  Also included in the proposed budget is an increase in the Keystone Recreation, Parks and Conservation Fund in the amount of $2 million.  

The following chart shows the improvement project totals to date that were accomplished with Growing Greener II monies. 

            In addition, grant programs that are administered through this Department have been recommended in this proposed budget to receive increases as well.  Some of these programs include:  $2.9 million for the Community Conservation grants, $1.7 million for Local Recreation Grants and $689,000 for Land Trusts grants.  

CORRECTIONS 

Background 

During 2006, the prison population increased in 41 States.  The growth rate for 30 of the 41 States experiencing an increase in 2006 exceeded the average annual rate of growth for the preceding 5-year period.  Eight States had absolute increases that exceeded 2,000 prisoners in 2006, one of which was Pennsylvania.  Collectively, these 8 States accounted for 66% of the total increase in the number of prisoners under State jurisdiction. Overall, the increase is expected to cost states more than $27 billion.  

FY 08-09 Budget 

State Correctional Institutions and Community Correction Centers 

In the Governor’s proposed 2008-2009 budget, state spending for the Department of Corrections will reach nearly $1.7 billion, an increase of $73 million or 4.5% over the current year funding level. 

*The 2008/2009 cost per inmate is projected at $37,515 per year, a decrease of $549 over current year funding level.   

Mirroring a national trend that finds the size and cost of America’s prison systems skyrocketing, the Commonwealth is currently operating at 4,336 inmates or 10.4% over capacity.  For FY 08/09, the Governor is requesting an increase of $55 million for the Institutional system house an offender population that reached nearly 46,000 inmates in December 2007.  Of this population, 44, 480 are housed throughout the State’s 27 institutions, while 1,548 inmates are housed in Community Correction Centers.   

Of the $55 million increase, $43.8 million will offset Correctional Institution costs and $11.2 million will be used for Community Corrections Centers (CCC), which will provide for an expansion of 1,000 beds in this setting.  CCC beds offer a less costly alternative to prison incarceration and improve an offender’s chance of transitioning back into the community and staying out of prison for good.  In addition to the $55 million, $3.6 million has been proposed to provide operational resources for a total of 690 beds across three housing units during FY 2008/2009. 

 Proposed Legislation 

The increase in the inmate population is the biggest challenge facing the Department and the Commonwealth.  Inmate population forecasts show the State prison population will grow to more than 56,500 offenders by 2013, an average increase of 2,027 inmates per year.  Some statistics about the current inmate population: 

1)                          Admissions for less serious offenders has increased at twice the rate of admissions for violent offenders over the last seven years

2)                          36% of PA prison beds are filled with less serious offenders

3)                          The recidivism rate in PA is 46%, meaning almost half of all inmates return to prison within 3 years of their release 

In order to begin to deal with prison overcrowding crisis, the Governor is proposing enactment of comprehensive legislation:  HB 4, 5, 6, and 7.  This legislation is directed at lowering the recidivism rate in the following ways: 

1)     Increasing offender access to crime reducing drug treatment programs

2)     Provide incentives to less violent offenders to complete programs that provide them with tools to live crime-free in society

3)     Enhance Probation & Parole’s ability to focus more on offenders during their first year of parole.

4)     Authorizing PA Commission on Sentencing to recommend necessary changes to legislation and develop guidelines for offenders who violate parole, probation, or State Intermediate Punishment program (SIP) 

The chart below shows the impact of the House bills if enacted.  One thing to note, if all the bills are not passed, it could have a negative impact on the Governor’s 2008/2009 proposed budget because DOC’s budget assumes the anticipated savings in the legislative package.   

While the House Bills can help reduce future growth of the offender population, the recent inmate population forecasts necessitate immediate action to create more prison capacity.  The Capital Project Itemization Act pending in the Legislature includes authorization for four new prisons and four new housing units on existing State Correctional institution sites.  Each new prison costs $200 million to build, 5 years to construct, and $50 million to operate.  If four new institutions were to come online, the Department’s budget could increase to well over $2 billion dollars.

Medical

            As the inmate population continues to rise, so do the medical care expenses for the inmates.  The Department has requested a $12 million (5.9%) increase in the medical care appropriation for the continuation of current medical services.

BOARD OF PROBATION AND PAROLE 

Background

            According to the Bureau of Justice Statistics, as of December 31, 2006, there were 798,202 adult men and women on parole across the Nation.  The parole population grew by 17,586 –– an increase of 2.3 percent. This was greater than the average annual increase of 1.5 percent since 1995.  Of those parolees still under supervision at yearend 2006, nearly 2 in 5 had been convicted of a drug offense, while about 1 in 4 had been convicted of a violent or property offense.

The Bureau of Justice Statistics reports that more than 8 in 10 offenders (4,237,073) under community supervision on December 31, 2006, were on probation.  About half of all probationers had been convicted of a felony (49%), about half were convicted of a misdemeanor (49 %), and 2% were convicted of other infractions.  More than 7 in 10 were on probation for a non-violent offense, including more than a quarter for a drug law violation and a sixth for driving while intoxicated.  Five states accounted for more than half (57%) of the growth in the probation population during 2006: California (up 13,447), Minnesota (up 8,411), Alabama (up 7,159), Colorado (up 6,594), and Pennsylvania (up 4,664).

FY 08/09 Budget 

            In the proposed FY 08/09 budget, the Governor has recommended an increase in Probation and Parole’s General Government Operations spending of $7.3 million, or 8.5% over current year.  The $7.3 million increase includes $4.5 million to continue current programs and $2.4 million for a new initiative, Public Safety, proposed by the Governor.  At the end of FY 08/09, the Board anticipates approximately 33,000 supervised parolees and probationers, up almost 1,800 or 5.7% over current year projections. 

The Sexual Offenders Assessment Board received an additional $503,000, while the Drug Offenders Work Program’s funding has been eliminated. 

The estimated State Supervision Fee Collections for FY 2008-2009 are $3.1 million, which is an increase of $96,000 over current year collections.

Proposed Legislation 

The initiative, Public Safety, is a comprehensive legislative package proposed by the Governor.  The legislation, HB 4, 5, 6, and 7, is directed at lowering the recidivism rate.  The Governor has proposed $2.4 million as part of this package to enhance the Board’s case-processing capabilities and maintain a favorable agent-to-parolee ratio.  In anticipation of the enactment of this legislation, the Board is expected to see a savings of more than $13 million to its budget over the next five years. 

EDUCATION 

            The proposed budget would increase basic education spending by $465 million, continuing his support during the past 5 years that has increased basic education spending by more than $2.4 billion.  These increases have included $600 million in targeted investments in early learning programs, tutoring assistance, science and math instruction, classroom technology, and high school restructuring.  The investments have provided results.  Pennsylvania is now one of only nine states continuing to demonstrate significant improvement in assessment results for math and reading instruction, with 90 percent of the commonwealth’s school districts meeting national proficiency standards. 

            Last year Act 114 of 2006, required the State Board of Education to complete a study of the adequacy and equity of school funding and to determine what educational resources and related expenditures are necessary to provide a quality primary and secondary education for each student in the commonwealth’s public schools.  The report determined the need to increase state and local support by an estimated $4.6 billion to insure all school districts within the commonwealth provide an adequate education to their students. 

            The proposed budget recommends a $291 million increase in the basic education subsidy to begin a six year state phase in of the recommended adequacy spending targets.  These targets establish an adequacy goal of $8,355 per student with supplements for low income, English language learners, school district size, and cost of living within the geographic region.  The recommended targets, including adjustments for local wealth and tax effort, would increase total state support by more than $2 billion during the six year period. 

            The Special Education portion of the adequacy funding recommendations was excluded from this calculation, since Special Education programs are funded separately.  The budget would increase Special Education grants to school districts by $30.3 million, a 3 percent increase. 

            Spending for the major education initiatives begun during the Rendell Administration would continue including, $275 million for the Accountability Block Grant Program, $66 million for tutoring assistance, $40 million for state Head Start assistance, $11 million for High School Reform, and $90 million for Classrooms for the Future, completing the third year of a three year $200 million spending initiative to upgrade technology in high school classrooms. 

            In spite of these investments 40 percent of 11^th Grade students are currently unable to read or complete math assignments at grade level.   Recently the State Board of Education has taken action to require new graduation standards for graduating seniors.  The General Assembly, through the regulatory review process, must review and approve these new standards prior to their implementation.  The proposed budget would increase state assessment costs by $15 million to implement this system. 

            Dual Enrollment payments would be increased to $12 million in the proposed budget, an increase of $2 million.  The Education Department estimates that 20,000 college credits will be awarded to dual enrollment students this year.  The budget provides $15 million, a $1.5 million increase, for Science: It’s Elementary instruction.  A new $3 million appropriation is requested for Concentrated Alternative Education Intervention Funding grants.  

            Funding for Approved Private Schools would be increased by more than $3.9 million, while funds for PA Charter Schools for the Deaf and Blind would rise by more than $1.8 million.  The budget includes $7.3 million for final audit resolutions that should be sufficient to close out all outstanding prior audits for these schools. 

            Carter School Reimbursements would increase by $36 million, totaling nearly $197.6 million in the proposed budget.  The increased funds reflect an estimated 22% increase in charter school enrollments and would continue to reimburse school districts for 30% of their costs for charter school students.              

            Services to Nonpublic Schools would be increased by $5.1 million.  Textbooks, Materials and Equipment for Nonpublic Schools would increase by $1.5 million.  The percentage increase for both appropriations, 5.9%, reflects the percentage increase in the Basic Education Subsidy for public schools. 

            Other major increases in the proposed education budget include, $26.7 million, including the $15 million referenced above for assessment programs, $12.55 million, to total $87.55 million for Pre-K Counts, $16.7 million, totaling $47 million for Teacher Professional Development, $25.8 million, including a $15 million supplemental request, to total $334.2 million for school construction reimbursements, $22.4 million, totaling $529.48 million for Pupil Transportation, and $12 million, totaling $185 million for Early Intervention Services. 

            The Public Library Subsidy would be increased to $77.26 million, a 2% increase above the current year.

HIGHER EDUCATION INSTITUTIONS 

Community Colleges 

The Governor’s budget includes a 3.0% increase in operating funds for community colleges, or an additional $6.9 million.  Funds for capital projects are held at the current year level of $44.5 million.  In total, the budget includes $280.7 million for community colleges. 

Funding for the community colleges is shared by sponsoring counties or school districts, the students through tuition payments and the commonwealth.  Commonwealth appropriations are based on a formula that ensures predictable base operating funding, provides a supplement for enrollment growth, provides a stipend for students enrolled in economic development programs that focus on high priority occupations and recognizes the capital costs of the colleges.   

Technical College Programs 

            Funding for Technical College Programs is included in the amount of $2.4 million.  Technical college programs were established in 2007 to increase access to high quality, affordable college-level education in areas of the state that are educationally underserved.  Westmoreland County Community College received the first and only grant to date.  It is estimated that programs will be established in three to four educationally underserved areas off the state and will serve approximately 200 students who previously did not have access to affordable and high quality postsecondary education. 

State System of Higher Education

The State System of Higher Education institutions would receive an additional $14.5 million, or a 3.0% increase over the current year.  Funding is distributed through the Chancellor’s Office to individual universities in accordance with a formula that considers the enrollment and programs of the school and the cost of operating and maintaining the individual campuses.  In total, the State System universities would receive $518.8 million. 

 In addition, the System will receive $16.0 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance projects.  

State-related Universities 

Penn State, University of Pittsburgh, Temple University and Lincoln University each are slated to receive a 1.5% increase over the current year’s appropriation.   Combined, state support for the state-related institutions would increase by $7.6 million for a total of $696.6 million.   

State-Aided Institutions 

Proposed funding for the state-aided institutions varies from some very minor increases to 50% reductions for the medical lines.  In total, these institutions would receive a total of $75.6 million.   

The Governor has included an initiative entitled “Federalizing Physician Practice Plans” which would achieve savings by claiming $8.8 million in new federal Medicaid funds for the university-affiliated physician practice plans affiliated with the Philadelphia Health and Education Corporation, the University of Pennsylvania and Thomas Jefferson University.   

PA HIGHER EDUCATION ASSISTANCE AGENCY 

Grants to Students 

The Governor’s budget includes a 3% increase, or an additional $11.6 million, in the Grants to Students appropriation for a total of $397.8 million.  This is the commonwealth’s scholarship program which helps students pay tuition at an accredited college or university.  Students who attend private schools, which charge higher tuition, generally qualify for more aid.  The Governor estimates this level of funding will provide for grant amounts which will cover 11.9% of a student’s educational cost in 2008-09.  

 In the current year, PHEAA provided $75.0 million in its earnings revenues to supplement state funding for the grant program.  With the downturn in the capital markets, it is not known at this time how much PHEAA will contribute to the grant program from its business earnings. 

The PHEAA Board annually determines the distribution of funds to applicants on criteria including family income, family size and the cost of the institution the student will be attending.  Currently the number of grant recipients is 164,960 students, the average award amount is $3,100 and the maximum award is $4,500 for students attending the highest cost institutions.   It is anticipated that the there will be 171,560 grant recipients in 2008-09.    

Institutional Assistance Grants 

The budget includes no increase in the IAG program.  These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions.  This funding level will provide for a per capita grant of $1,046 for an estimated 40,172 students at 85 institutions. 

Matching Funds Program 

The Matching Funds Program, which disburses matching funds as a percentage of the federally-required match for the Federal Perkins Loan Program and the Federal Work-Study Program, is slated to receive no increase in state funding. 

Agricultural Loan Forgiveness Program 

The budget continues the Agricultural Loan Forgiveness Program.  The Governor has included an appropriation of $85,000.  The program forgives up to $2,000 each year with a maximum forgiveness of $10,000 per recipient. 

Sci-Tech Scholarships 

The Governor is proposing to continue funding the SciTech and Technology Scholarships in the amount of $4.4 million, to provide an incentive for Pennsylvania students to pursue education and training in science and technology and stay in Pennsylvania after graduation, thus expanding Pennsylvania’s skilled workforce.  It is estimated that 4,765 students will receive these scholarships in 2008-09.  

Cheney University Keystone Academy  

An appropriation of $2 million is included for the Cheyney University Keystone Academy to recruit gifted students to enroll at the university.  

Nursing Shortage Initiative 

The Nursing Shortage Initiative is part of the commonwealth’s workforce development efforts and will help increase the number of nurses in the labor force.   Funding is maintained at the current year level of $2.5 million. 

DEPARTMENT OF HEALTH 

          This year’s budget once again highlights the Governor’s health initiative, Prescription for Pennsylvania.  Much of the Department’s budget and subsequent increases in certain line items reflect this concern.  

In 2007, Pennsylvania adopted the most comprehensive plan in the nation for the eradication of health care associated infections. Act 52 of 2007 is Pennsylvania’s first ever law requiring health care facilities report all incidents of infections.  This budget recommends $4.6 million for health care infection-reduction initiatives.  For example, the line item entitled, Prescription for PA – Health Case Associated infections is expected to receive $2.644 million in this budget, an increase of $600,000 over last year. 

The program, Quality Assurance, in this budget was funded at $19.427, an increase of over $1 million from last year.  This program reviews and analysis formal health care plans for new construction and remodeling of health care facilities.  Quality Assurance is the agency that sets up and reviews each health care facility infection control policy and plan. 

The Prescription for Pennsylvania aggressively addresses prevention, addiction and treatment of chronic diseases.  This health budget includes $2.2 million for chronic care management.  Additionally, this, 2008-09 budget provides $5 million to develop and begin implementation of a state-wide information technology system to provide for better coordinated care. 

Pennsylvania Injury Reporting and Intervention System in the 2008-09 budget, is expected to receive $1.3 million for this program which will assist in implementing coordinating care. 

The Governor recommended that $5.573 million be used to purchase and stockpile antiviral medicine.  This effort is part of the Commonwealth influenza pandemic preparedness planning efforts that have been recommended by the federal government. 

The Governor placed $500,000 in the line item for minorities, who tend to receive lower quality health care than others. The Prescription for Pennsylvania – Health Equality Strategies is an initiative that will be developed and implemented to address this pressing need. 

DEPARTMENT OF EMERGENCY MANAGEMENT AND HOMELAND SECURITY 

This budget seeks to create a new department by merging the Pennsylvania Emergency Management Agency with the Office of Homeland Security.  The new department will be entitled, Department of Emergency Management and Homeland Security. 

This new Department will have several goals: oversee preparedness strategies and plans within the Commonwealth, coordinate federal, state and local emergency and preparedness efforts, and provide a strategic plan to identify and preserve critical infrastructures.  The merging of these two agencies into one will facilitate the collection and distribution of intelligence. A seamless response to emergencies will be developed and enhanced to create greater efficiencies. At the core of the new Department will be a multi-agency training program which develops and maintains emergency personnel from federal, state and local governments that can be rapidly deployed.  

DEPARTMENT OF ENVIRONMENTAL PROTECTION 

            DEP is slated to get one of the largest general government increases at 5.3% of any agency in 2008-09.  The two other line items that contain most of the personnel costs of the department are also getting hefty increases.  Environmental Program Management has a proposed $2.7 million or a 7.5% increase.  While Environmental Protection Operations will receive a $5.8 million or a 5.9% increase.   

            These increases are more than offset by two reductions in the proposed budget.  The safe water appropriation which received $12 million in 2007-08 is not funded at all in the proposal.  A savings of $12.8 million is also realized from DEP’s budget because revenue from the capital stock tax will be used to fund the hazardous sites clean-up fund.  With these reductions the total state commitment to DEP actually decreases by $18 million or 4.3%. 

            The appropriation for flood control is increased from $2.7 million to $5.7 million.  The increase is in conjunction with the Governor’s goal of protecting and upgrading the infrastructure within the Commonwealth.  

GAMING CONTROL BOARD 

            The proposed budget recommends an appropriation of $35 million for the operation of the Gaming Control Board.  This funding will be used for the operating and personnel costs of the Board.  The Gaming Board is responsible for the operation of up to 14 operating facilities and up to 61,000 active slot machines.  Currently there are 6 venues open with approximately 13,000 active slot machines.   In addition, the Board now has 243 positions filled and it is anticipated that an additional 77 employees will be hired, which will make the Board’s compliment 320.   

A breakdown of revenues for the operating facilities as of January 28, 2008 is as follows:   

 * This amount includes the $50 million licensing fee from each of the 6 operating facilities, totaling $300 million.   

Status of facilities 

The chart below shows the number of operating venues and their date of opening. It is projected that within 2008-09 six new facilities will open.  This will make the total number of open facilities 13.   

Number of Active Slot Machines through January 27, 2008 

Mohegan Sun:                       1,203
Philadelphia Park:                2,575
Harrah’s Chester Downs:     2,778
Presque Isle:                          1,999
The Meadows:                       1,816
Mount Airy:                             2,523
TOTAL:                                 12,894

Projected Opening Schedule for FY 2008-09 

Local Law Enforcement Grants

     Annually the sum of $5,000,000 is transferred to the Board for the purpose of issuing Local Law Enforcement Grants.  The agencies submit applications to the Board for these grants.   The following grants have thus far been approved:

1. Allegheny County Police:                 $160,568

2. Armstrong County DA:                     $41,278

3. Erie County DA:                                $199,698

4. Lebanon County DA:                        $140,000

5. Montgomery County DA:                  $250,000

6. Pittsburgh Bureau of Police:            $181,129

7. Susquehanna County DA:    $35,000

Gaming Board Support Agencies 

          Several state agencies provide support to the Gaming Control Board.  Their budgets are submitted to the Board who then has the responsibility of approving their budget requests or not. There are three agencies that are closely involved with the day to day operation of operating facilities.   The Department of Revenue is the manager of the central computer system which keeps track of all operating facilities in the Commonwealth.  The Office of Attorney General and the Pennsylvania State Police work with the Board as well assisting with background checks, investigations and legal issues.   Below are their budget requests for fiscal year 2008-09.   

Department of Revenue:                        $10,091,400       Increase of 30%Attorney General:                                 $941,552            Increase of18%Pennsylvania State Police:                    $17,514,967       Increase of 51% 

HISTORICAL AND MUSEUM COMMISSION 

The Historical and Museum Commission provides state and local museum assistance.  

Museum Maintenance Program 

The Commission’s Maintenance Program funding would no longer be a separate appropriation, as the Governor’s budget rolls it into the General Government Operations Appropriation.   

  Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to be $11.5 million.  Funding is available to Pennsylvania non-profit organizations and public agencies that operate a publicly accessible historic property listed in, or eligible for, the National Register of Historic Places, or that operates a contributing historic property in a National Register historic district.  Grants are awarded on a 50-50 matching basis and support projects in the areas of redevelopment, preservation and rehabilitation and restoration.  The Commission also receives federal funding for historic preservation programs. 

Museum Assistance Grants 

The Governor includes $3.8 million in funding for the Museum Assistance Grant Program.  The Museum Assistance and Local History Grant Program is a competitive financial assistance process available to all qualified history related institutions within Pennsylvania.  It is anticipated that 200 museum assistance competitive grants and 155 general operating support grants will be awarded in the 2008-09 fiscal year, although the number of grants awarded may vary depending on the average award amount.  

Non-preferred Museums 

The Governor’s budget includes level funding for the individual Non-Preferred Museums that historically receive funding.  The amounts are identical to the funding levels the museums receive in the current year. 

JUDICIARY 

The recommended appropriation for Judiciary in this proposed budget is $11 million.  The Commonwealth’s Court System includes the Supreme Court, Superior Court, Commonwealth Court, Court of Common Pleas, Philadelphia Municipal Court, Pittsburgh Municipal Court, Traffic Court of Philadelphia and the Magisterial District Judges.   

The Administrative Office of Pennsylvania Courts (AOPC) is the administrative arm of the courts.  APOC provides services for 2100 members of the judiciary and their staff. 

Recently the Supreme Court initiated a variety of programs in order to facilitate the administration of justice in the Commonwealth.  An example of one of these programs is the creation of the Office for Children and Families in Court through APOC.  This program assists courts throughout the State which provides for abused children with safe and permanent homes for as quickly as possible.   

Another goal of this Department is to become completely computerized.  Currently automated systems are in place for the Magisterial District Judges which serve 548 offices throughout the Commonwealth.  The next phase of this project will be to integrate the Civil Courts.  The Judiciary in Pennsylvania is also active with the Integrated Criminal Justice Network, which is a system that involves multiple agencies.   

               LABOR & INDUSTRY 

Through the proposed budget the majority of programs in this Department will remain at the current levels.  There is a small increase for the general government operation in the amount of $759,000, $65,000 for Occupational Safety and $102,000 for PENNSAFE. 

The largest appropriation in this proposed budget is for the Administration of Workers’ Compensation in the amount of $13 million.  The goal is to further economic development in the Commonwealth by assisting in stabilizing the income of those who have become unemployed.  This program allows for income and medical services to those who qualify.  Included is workers’ compensation, unemployment compensation, occupational disease payments and Social Security disability payments.   

Act 147 of 2006 amended the Workers’ Compensation Act to create an Uninsured Employer Guaranty Fund.  This fund will provide benefits to injured workers whose employers do not have workers compensation insurance and were not approved by the Commonwealth to self-insure.   

Also included in this proposed budget are two appropriation reductions for the Self Employment Assistance program in the amount of $500,000 and also for Employment Services in the amount of $10 million.  This is a program that has now been established through the ‘Job Ready” program which was initiated in 2004-05.  Currently throughout the Commonwealth, Local Workforce Investment Boards are those who oversee and assist in planning for the delivery of local job services.  These Boards identify providers of training services, monitor performance of both the employer and employee and assist in youth training and development. The Department of Labor & Industry is the lead agency in the administration of the interagency employment and training programs for the Commonwealth’s adult labor force and youth.  The industry partnerships have assisted in creating opportunities for a variety of the Commonwealth’s citizens.  Included are TANF clients and those who are unemployed.  In addition, programs have been established to provide at risk youth with skill development, career education and job placement.  These industry partnerships have become a valuable resource that assist both the workforce and workplace as these two groups are now able to fulfill the other’s needs.   

Funding recommendations for Vocational Rehabilitation programs are as follows: 

An appropriation in the amount of $5 million to provide additional resources in order to support federal match requirements.   

Once again both the Centers for Independent Living and Assistive Technology have been cut.  For the CIL’s in the amount of $450,000 and $500,000 for Assistive Technology.   

MILITARY AND VETERANS AFFAIRS 

            The Department of Military and Veterans Affairs has two roles in the Commonwealth:  to provide services to PA veterans and their families and to provide combat ready units of the PA Army and Air National Guard to protect the citizens of the Commonwealth.  It is projected that during FY 08/09, the Commonwealth will have 20,650 PA National Guard personnel. 

            For FY 08/09, the Governor proposes utilizing federal funds to increase reimbursement for residents of Veterans Homes.  Specifically, the Department has budgeted $12.5 million in Enhanced Veteran’s Reimbursement Funds to implement this initiative.  Utilizing these federal funds will result in a $4.2 million savings in Veteran’s Homes state appropriation. 

The Governor has proposed $382,000 for Scotland School, a school for Veterans children.  The school can accommodate 360 students.  The 2008/2009 student population is to be 320. 

In FY 07/08, Senate Bill 1043 established the Supplemental Life Insurance Premium program.  For Guardsmen and women deployed in combat zones, the Commonwealth pays the difference between the amount the federal government pays and the cost of maximum coverage.  It also provides the flexibility for the Commonwealth to purchase this coverage under existing state-sponsored life insurance programs rather than reimbursing the soldiers after the fact, as other states have had to do.  The Governor has proposed a $1.3 million reduction to this appropriation in FY 08/09. 

The Veterans Outreach Services appropriation received an additional $1.3 million in FY 08/09 in order to provide the additional resources Veterans’ Services Organizations need to deliver much needed services to our Commonwealth veterans. 

The programs that provide social services to Veterans are level funded for next year.  However, the Civil Air Patrol appropriation has been zeroed out for the 2008/2009 budget year.   

Infrastructure Investment Authority (PENNVEST) 

In this proposed budget is a new initiative to rebuild Pennsylvania’s Infrastructure.  Through PENNVEST this budget proposes an appropriation of $2.2 million to provide for grants for municipalities to repair unsafe dams. Also, an additional $2.2 million is recommended to continue the Environmental Stewardship Fund.  This fund is used for grants awarded to municipalities for their storm water, water and sewer projects.   

PENNVEST maintains other funds as well that combine Federal money with State money and are maintained as either repositories for loan payments and investment incomes or as a revolving fund, such as the Water Pollution Control Revolving Fund, which combines the state’s matching funds with federal funds.  

The following is a breakdown of the total loans and grants awarded by PENNVEST through December 2007:  

• Brownfield Loans                  $38 million

• Stormwater Loans                $84 million

• Water Loans                          $1.4 million

• Sewer Loans                         $2.7 million

• Water Grants                         $69 million

• Stormwater Grants                $1 million

• Sewer Grants                        $321 million

• TOTAL                                   $4.7 Billion

INSURANCE 

            Although much of the Governor’s proposed budget for the Insurance Department is dominated by Cover All PA (see Cover All PA section), there are other items in the Insurance Department proposed budget that deserve attention. 

Cover All Kids 

            The Cover All Kids (CAK) program was approved by the legislature in the fall of 2006.  The main goal of CAK was to ensure that all children in the Commonwealth have access to health care coverage.  Enrollment in CHIP will reach approximately 186,000 children during FY 08/09.  Current enrollment in the CHIP program is 166,969 as of January 2008.  The Governor’s budget includes $87.7 million in state funds, $251.3 million in federal funds, and $30.7 million from the cigarette tax for CHIP. 

adultBasic 

            The adultBasic program provides basic health insurance to uninsured adult Pennsylvanians with a net family income no greater than 200% of the Federal Poverty Income Guidelines (FPIG) ($42,000 for a family of four).  The average statewide rate per enrollee per month is $309.00, $33.50 paid by the enrollee and the remaining $275.00 paid by the Commonwealth.  As of January 2008, enrollment in the adultBasic program is 50,117, with an additional 100,216 individuals on the waiting list.  At the beginning of the calendar year, the Governor announced that an additional 29,000 individuals currently on the waiting list will be offered enrollment.  As of July 1, 2008, the Governor proposes collapsing the adultBasic program into the new Cover All PA program. 

USTIF 

            The Governor also proposes spending $10 million to repay the loan to the General Fund made by the Underground Storage Tank Indemnity Fund.  This is an increase of $4 million over current year funding level. 

Prescription for Pennsylvania 

Background 

            The Governor’s Fiscal Year 2007-08 budget initiated his request for a comprehensive health care reform proposal entitled Prescription for Pennsylvania, or Rx for PA.  

          The Governor’s Rx for PA proposal came at a time when health insurance coverage across America has become less affordable and less available.  Most Americans have health insurance through their employers.  But, employment is no longer a guarantee of health insurance coverage.  The service sector continues to offer less access to health insurance and the country’s increasing reliance on part-time and contract workers who are not eligible for coverage means fewer workers have access to employee-sponsored health insurance.  Due to rising health insurance premiums, many small employers cannot afford to offer health benefits.  Companies that do offer health insurance, often require employees to contribute a larger share toward their coverage.  As a result, an increasing number of Americans have opted not to take advantage of job-based health insurance because they cannot afford it. 

As States across the nation are beginning to enact bolder and bolder reform initiatives to tackle the problems of burgeoning health care costs and growing uninsured populations, Governor Rendell’s plan is in many ways the most ambitious and all-encompassing of any that have been proposed or enacted.  Three states, Massachusetts, Vermont, and Maine, have passed legislation to make health care more affordable to all or nearly all of their residents.  Eleven other states, including PA, have proposed comprehensive health care reform initiatives.  Rx for PA is the Commonwealth’s plan to ensure access to affordable health insurance for all Pennsylvanians, expand the availability of healthcare, improve the quality of healthcare, and help make the costs for healthcare more affordable for employers and workers. 

Enacted Components of Rx for PA 

            The Commonwealth has taken several important steps in health care reform during the current fiscal year.  We have begun to reduce health care costs and improve the quality of health care through the following measures: 

1)     Elimination of Hospital Acquired Infections (HAI) – Rx for PA requires health care facilities to report all incidents of health care-associated infections and adopt plans to reduce them.  Health care facilities that reduce infections by at least 10% and meet other quality benchmarks, receive performance payments from the Commonwealth.  This budget includes $4.6 million for HAI initiatives in FY 08/09.

2)     Licensed Health care providers can practice to the fullest extent of their training – During the current year, the Governor signed several bills into law that expanded the ability of the following medical professionals to more fully utilize their professional training in the healthcare work environment:  Physicians’ Assistants, Certified Nurse Practitioners, Clinical Nurse Specialists, Nurse Midwives, and Dental hygienists.

3)     Improvement of prevention and treatment of chronic diseases – By executive order, a commission was created to improve the delivery of health care to individuals with chronic diseases.  In FY 08/09, the Governor proposes $7.2 million for this initiative, $2.2 million for chronic care management and $5 million to develop and implement a statewide information technology system that will enable health care providers to coordinate care for patients.

4)     Expansion of Access to Health Care Services – The 07/08 budget provided $2.9 million to increase primary health care to under served areas.  This budget recommends an additional $1.9 million to further increase access to primary care and an additional $4.8 million for loan repayment programs for nurses and primary care providers and for the expansion of a community challenge grant program.

5)     Improving Nutrition in Schools – During FY 07/08, approximately 55% of the Commonwealth’s schools agreed to adopt high standards for food service in school cafeterias.  The Governor is proposing $6.2 million to continue this initiative in FY 08/09. 

Unfinished Rx for PA Business 

            There are still critical components of Rx for PA that need enacted: 

1)     Cover All Pennsylvanians (CAP)

2)     Smoking Ban

3)     Effective regulation of the individual and small group insurance markets

4)     More sites for treatment of non-ER health care needs  

Cover All Pennsylvanians 

            The Governor’s Cover All Pennsylvanians (CAP) initiative will offer an affordable basic health insurance plan for small businesses and the uninsured. 

            A 2004 survey conducted by the Pennsylvania Insurance Department found that there are approximately 889,000 Pennsylvanians who do not have health insurance.  The survey also found that a vast majority of these 889,000 people are employed, and that most of them do not have health insurance because of the prohibitively high costs.  Finally, of the 889,000 uninsured people in Pennsylvania, approximately 574,000 adults earn less than 300% of the Federal Poverty Level. 

            Cover All Pennsylvanians will be an insurance program that is supported by the state and offered through private insurance companies.  Employers can participate in the program if they have not offered health insurance to their employees for the past six months, they have 50 or fewer employees, and on average these employees earn less than the state average wage.  Additionally, all uninsured individuals will be eligible to purchase insurance through the program.  Those earning less than 300% of the Federal Poverty Level ($62,000 for a family of four) will receive help from the state in paying part of their premiums.   

FY 08/09 CAP Costs 

The health care premium and administrative costs of the CAP program in fiscal year 2008-2009 are expected to be approximately $480 million, of that amount $191.2 million will be provided by the federal government.  This figure is based upon enrolling 150,000 adults in the Cover All Pennsylvanians program in FY2008-09.   Enrollment is expected to increase to 272,000 by FY2012-13. 

FY 08/09 CAP Funding Sources 

When CAP was first proposed in FY 07/08, the Governor proposed a Fair Share Assessment to help fund the initiative.  The Fair Share Assessment was a 3 percent tax levied on the payrolls of businesses that do not offer health insurance to their employees.  In an effort to reach a compromise on the assessment component, the Governor has proposed alternative funding sources to replace the assessment revenue.  Funding for Cover All Pennsylvanians would come from the following sources: 

1)     Existing State funds used to support the adultBasic program, which would be folded into CAP

2)     A $.10 increase in the cigarette tax.  In FY 08/09, this tax is estimated to generate $66.1 million

3)     A new tax on smokeless tobacco and other tobacco products.  PA is the only state in the nation that does not tax other tobacco products.  The Governor estimates this tax will generate $48 million in FY 08/09

4)     Gradual redirection of State-provided uncompensated care payments to health care institutions.  With enactment of CAP, it is assumed that the number of patients requiring uncompensated care will decline.  The savings from this component are estimated to begin in FY 09/10.

5)     Use of available funds from the state’s Health Care Provider Retention Account (HCRPA).  The Governor proposes to use HCRPA funds once Mcare-related obligations have been met, beginning in FY 11/12.

6)     Existing money from the tobacco settlement agreement totaling $49.5 million in FY 08/09, which is a decrease of $10 million over current year.

7)     Existing money from the Community Health Reinvestment Agreement totaling $122 million, an increase of $18.9 million over current year.  The Community Health Reinvestment money will be available because the adultBasic program will be collapsed into the Cover All Pennsylvanians plan.

The impacts of going uninsured are clear and severe. Many uninsured individuals postpone needed medical care which results in increased mortality and billions of dollars lost in productivity and increased expenses to the health care system.

Every Pennsylvanian should have health care coverage.  Implementation of Cover All Pennsylvanians is the first step towards the goal of covering all residents of PA. 

DEPARTMENT OF REVENUE 

            While the general government has a very small increase (1.6%) there is a new line item for technology that is budgeted for $10 million.  The money would be used to modernize the collection process.  There is a continuing funding of last year’s enforcement imitative, although the cost of that is, at $9 million, a reduction of $1.5 million.  

STATE ROW OFFICES 

The proposed appropriations for the Office’s of Attorney General, Auditor General and State Treasurer see no significant changes with the following exceptions: 

            Reimbursements to counties for full time district attorneys in the amount of $5.4 million for the Attorney General’s Office. 

            An appropriation increase of $1.2 million for the Auditor General’s Office.   

DEPARTMENT OF TRANSPORTATION 

            Act 44 of 2007 provided a significant new infusion of funds for highway, bridge and transit programs throughout the commonwealth.  These funds have eliminated transit agency operating deficits, provided significant new funds for capital investments, and will provide $450 million for highway and bridge spending.  The Governor’s Protecting our Progress proposal would add an additional $200 million for bridge repair investments over the next 10 years. 

            The legislation brought together the Pennsylvania Turnpike Commission (TPC) with the Department of Transportation to provide $750 million this year, growing to $850 million in 2009-10 and $900 million the following year.  The TPC will enter into a fifty year lease agreement which will require it to make payments to Penn Dot.  The financing plan includes seeking federal approval to operate and toll Interstate 80. 

            During the 2007-08 fiscal year, Act 44 provides Penn Dot with $300 million dedicated towards Mass transit and $450 million directed to roads and bridges.  In the 2009-10 fiscal year, Penn Dot is expected to receive $850 million; whereby mass transit will receive $350 million, while roads and bridges will receive $500 million.

          State revenue collected to maintain Pennsylvania’s roads and bridges is deposited in the Motor License Fund and appropriated annually by the General Assembly.

                   Dollar Amounts in Thousands

            During the 2007-08 fiscal year, the department will design 94 bridges and 97 miles of roadway construction to begin in FY2008-09.  Construction wise, 2007-08 will see construction of 57 bridges and 733 miles of roadway.  All of Act 44 funds will be spent for project work with priority on preserving and rehabilitating bridges, resurfacing roadways, improving safety and using highway technology to improve traffic operations.  The Governor expects 1,000 bridges will be under construction and repair by 2010. 

            Additionally, Act 44 of 2007 will provide maintenance and construction of county bridges with funding from the lease agreement with the Turnpike Commission.  This Act will provide $35 million to be distributed to local municipalities for maintenance of their roads and bridges. 

Transit 

            Act 44 now provides dedicated operating assistance to mass transit agencies through a dedicated portion of sales tax revenue.  The budget anticipates these sales tax receipts will provide $704 million for transit operating grants for the 2008-09 fiscal year.  Dedicated capital funding will provide an additional $100 million for capital improvements, and more than $90 million for other capital asset programs. 

MOTOR LICENSE FUND 

The Governor’s 2008-09 budget has estimated the revenue in the Motor License Fund at $2.805 billion.  The Governor had projected revenue receipts from the Motor License Fund in 07-08 to be $2.757 billion. However, in this budget (2008-09) he has adjusted this level of funding downwards by $17.6 million to $2.739 billion. The level of revenue in the Motor License Fund for both 2007-08 and 2008-09 does not reflect the amount of revenue received from the PA Turnpike Commission.  The Commission deposited $450 million in the 2007-08 fiscal year and is expected to allocate $500 million in the 2008-09 fiscal year.  

LOTTERY FUND 

There are concerns regarding the Lottery Fund as ticket sales are expected to decline by $59 million in this fiscal year and $45 million in the next fiscal year while expenditures are anticipated to grow by $111 million or 6.7%.  As of the end of December ticket sales are .3% higher than they were last year.  In the month of November ticket sales were 2% higher than the previous year at that time.   

The two biggest components of the expenditure growth are PACE ($34 million) and the PTRR ($58 million).  The Governor wants to reconfigure the instant games to increase revenues and keep the fund healthy.   

DEPARTMENT OF PUBLIC WELFARE 

The Commonwealth’s General Fund total expenditures are projected to grow by $1.13 billion or 4.2%, while DPW’s General Fund spending will grow by $668 million or 6.9%. 

Of the $31 million in supplemental appropriations requested by the Governor, a net $5 million or 1.6%, are in the Department of Public Welfare.  The largest supplemental request is for the Medicare Part D (“clawback”) payment to the federal government. 

Despite constrained general fund spending, the Department’s budget still contains expansion in program spending and does not include any client or service reductions in the MA service program.

Medical Assistance 

The most significant issues in the department’s budget relate to Medical Assistance.  This is part of a NATIONAL TREND.   Caseloads are increasing.  Pennsylvania has the 3^rd highest elderly population and the fastest growing number of persons over 85.  While the elderly and disabled are only 34% of the total Medical Assistance population, they account for 67% of the Medical Assistance expenditures. 

The current demographics for the Medical Assistance system are as follows: 

                                                % of Caseload                    % of Dollars

            Disabled                                20%                                        34%            Elderly                                    14%                                        33%            Children & Families              60%                                        26%            Adults without children            5%                                          7% 

“Big 5” Medical Assistance Appropriations

                                    FY 07/08                    FY 08/09                    Difference 

Outpatient                  $   593,992                $   783,002               $189,010
Inpatient                      $   468,589                $   454,406              ($14,183)
Capitation                  $2,700,022                $2,818,986                $118,964
LTC                             $   762,585                $   935,037             $172,452
Medicare Part D       $   384,872                $   374,056                  $(10,816)
Total                         $4,910,060                $5,365,48                 $455,427

Medical Assistance Cost Containment Initiatives 

The Administration is proposing to support the 2008/09 Medical Assistance program through a number of Cost Containment initiatives totaling $167.5 million: 

1)     Health Choices Plus:  There are two components to this initiative.  A new managed care model will be introduced in the Lehigh/Capital and Southeast zones which will challenge bidders to incorporate Rx for PA goals.  Under this model, the Department will assume responsibility for managing the pharmacy benefit. 

The second initiative will implement a new delivery model where Managed Care programs will have the opportunity to expand into 16 counties in the Western part of the State and will operate side by side with the Dept's Access Plus program. 

Total estimated savings in FY 08/09 is $117.3 million 

2)     Enhancing Program Oversight:  This initiative is designed to improve oversight in the MA program and enhance incentives for appropriate service options, including increased fee for selected providers. 

Total estimated savings in FY 08/09 is $33.6 million 

3)     Improve Autism Insurance Coverage:  The Governor is proposing to improve the insurance coverage and services that are provided to children with Autism. 

                  Total estimated savings in FY 08/09 is $16.5 million (Please see Autism Services write-up for discussion of new initiatives) 

Expanding Pharmacy Benefits 

This initiative will provide prescription drug coverage to 43,000 medically needed individuals who currently don’t have this benefit.  If implemented, all individuals on Medical Assistance will have prescription drug coverage. 

Dual Eligible Drug Costs 

The Medicare Part D Prescription Drug Program took effect in January 2006.  The new program moved persons who are dually eligible for Medicaid and Medicare into a new Medicare Part D prescription program.  In order to fund the prescription drug costs of these dual eligibles, the Federal Government is requiring States to pay a portion of those costs.  This is referred to as the “clawback” provision of the Medicare Part D program.  The Administration separates these costs from the existing MA Outpatient appropriation.  For FY 2008/2009, the Commonwealth’s clawback costs are $374 million, a savings of $11 million over current year payments.  

Medical Assistance Rates 

The Governor proposes the following rate increases for Medical Assistance providers: 

Managed Care Organizations:  2% with the opportunity to earn an additional 2.5% increase based on performance 

During FY 08/09, the Governor has proposed no rate increase for Nursing homes or Hospitals. 

Reforming the Long Term Care System 

            Pennsylvania has the third oldest population of any state.  One out of every five Pennsylvania residents is over the age of 60 and this group of individuals will continue to grow until at least 2030.  In order to meet the challenge of the Commonwealth’s growing elderly population, the Governor is proposing to use $29.2 million in state funds to expand long-term living options and the overall long-term living system.   

Beginning with home and community based service, the Governor is proposing to use $10.2 million to serve an additional 2,100 individuals over the age of 60.  Furthermore, $12.2 million will fund programs for an additional 1,169 individuals with disabilities under the age of 60 in the Medicaid waiver program.   

            The availability of adult day care in the Commonwealth is limited.  At least 15 counties in PA have no adult daycare services.  Adult daycare allows caregivers to continue to provide support for their loved ones in their homes, delaying or sometimes preventing the need for institutional care.  The Governor has proposed $3.1 million to increase adult daycare services across the Commonwealth. 

During the current fiscal year, assisted living facilities and the Department have faced increasing pressure from residents regarding inadequate facility monitoring and review.  The Governor has proposed $1.3 million to begin licensing, certifying, and inspecting assisted living facilities, a new residential long term living option created during FY 07/08. 

Income Maintenance 

            The FY 08/09 state appropriation for County Assistance Office represents a $15.8 million increase over current year funding level.  The $15.8 million increase is needed to maintain current operations and to replace federal funds not available in future years. 

Due to Federal changes to TANF, the Commonwealth was required by October 1, 2006 to have 50% of its TANF clientele in some type of federal approved work activity.  In a recent DPW press release, Secretary Richman announced that Pennsylvania was just shy of the 50% goal.  States will not face a penalty for non compliance until State FY 2009/10. 

            The appropriation for Supplemental Grants for the Aged, Blind and Disabled will increase by $8.9 million, including $4.6 million to offset additional caseload costs. 

            There is no provision for a state supplement for LIHEAP for 2008/09. 

Mental Health and Mental Retardation 

            The Mental Health program will receive an increase of $11 million over current year funding.  Part of the $11 million is for providing community mental health services for 75 individuals who currently reside at Mayview hospital.  Mayview State hospital is set to close at the end of 2008.  

The Governor is not recommending a cola for Mental Health Services. 

            The Mental Retardation program will receive substantial increases under the Governor’s budget: $45.5 million or a 5.2% increase for Community Mental Retardation Services and nearly $14.5 million or a 13.7% increase for Early Intervention. 

The Mental Retardation appropriation includes a $28.3 million initiative, Expanding Community Mental Retardation services to provide home and community based mental retardation services for 1,818 additional individuals on the waiting list. 

The Early Intervention appropriation includes $7.9 million to provide early intervention services to an additional 1,453 children ages birth to 3 years of age. 

$7.6 million has been proposed to serve an additional 400 persons with Autism in a home and community based care system. 

Community MH/MR Programs and the Early Intervention program do not contain funding for a cost - of - living adjustment.  

Services for Children 

Child Welfare funding will increase from $967 million in 2007-08 to $1.1 billion in 2008-09.  This includes $95 million to support county needs-based budgets. 

In 2008-09, the TANF Child Welfare Transition appropriation will be eliminated.  This appropriation received $20 million in state funding for 2007-2008. 

In addition, the Governor has proposed to strengthen the Early Education and Care Initiative by providing a $28.5 million increase to Child Care Services.  These funds will provide additional subsidized child care services to 2,600 low – income children and improve accountability of early learning experiences through the Keystone Stars programs ($4.6 million).   

The Nurse Family Partnership program will receive an additional $1 million to provide services to 240 additional families. 

In FY 07/08, the Governor proposed a new line item, Childcare Assistance.  This program provided a mechanism to monitor the quality and availability of childcare for TANF and former TANF families.  In FY 08/09, Childcare assistance will receive an increase of $19.9 million, including funding for a $11.3 million initiative to increase provider rates to ensure access to child care.

Other Social Programs 

            The Governor’s budget provides substantial increases in General Fund appropriations for Services to Persons with Disabilities and Attendant Care, as well as Home and Community Based Services in the Tobacco Fund.   

·        $7.1 million has been provided in the Persons with Disabilities appropriation to provide services to an additional 576 persons. 

·        $5.1 million is recommended to provide Attendant Care to an additional 593 individuals. 

The Governor has eliminated a COLA for the social programs during FY 08/09.