Roae_2010-11 State Budget Slide Show

8/14/2019 Roae_2010-11 State Budget Slide Show

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State Representative

Brad Roae

State Budget Review and Analysis

March 2010


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PENNSYLVANIA STATE BUDGET

2009-10 State Budget: Review of Enacted Budget

The state carried a $2 Billion-plus deficit into FY 2009-10 from the prior year.

Another $1.3 Billion was needed for the Tax Refund Reserve.

To account for spending and the aforementioned points, the state needed

more than $31 Billion to balance this years budget.

Balancing the Budget

Enacted Budget: $27.8 Billion

$2.7 Billion in Stimulus Funds (ARRA) were used to supplant state dollars.

The budget included $25.18 Billion in state dollars.


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General Fund Revenue: $25.53 Billion (Original Estimate)

$486 Million in New General Fund Taxes

$558 Million in Adjustments to Existing Taxes

$2.1 Billion in Revenue Transfers (Rainy Day Fund, HCPRA, etc.)

Revised General Fund Revenues: $28.57 Billion

Federal Stimulus Dollars (ARRA Funds): $2.7 Billion

2009-10 State Budget: Review of Enacted Budget

Total Revenues to Balance: $31.2 Billion


BUDGET NOTES: All state reserve funds were exhausted as a means to balance this 2009-10 budget. In doing so,there was nothing left to help offset any revenue shortfall experienced through the course of the year.


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2009-10 State Budget: Mid-Year Review

Pennsylvanias Growing Budget Deficit

General Fund Revenues continue to lag, as collections have fallen short of

estimate every month this fiscal year.

Through February 2010, General Fund Revenue collections were already $476

Million below estimate.

Governor Rendell projected a $450 Million shortfall in December. Thatprojection has since been increased to $525 Million.

BUDGET NOTES: There have been two noteworthy measures taken to help bring the states budget into balance:

1) The governor signed legislation to expand the states gaming industry to include table games. This is projected

to generate $256 Million in FY 2009-10.

2) The governor cut/froze $135 Million in expenditures from the current years budget to offset revenue losses.


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2009-10 State Budget: Revenue Collections

Collections

Estimates

$-

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

$3,500,000,000

$4,000,000,000

$4,500,000,000

July August September October November December January February March April May June

Year-to-Date Collections-$476.7 Million


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PENNSYLVANIA STATE BUDGET: FY 2010-11

Rendell Budget Proposal

Total Revenues Needed to Balance: $30.3 Billion

- $27.5 Billion in Projected General Fund Revenue

- $2.76 Billion in ARRA Stimulus Funds

Revenue Analysis: The governor is depending on about $850 Million in currently non-

existent new federal FMAP funds to balance his budget. If Congress fails to approve these

funds, the Rendell Budget could not be balanced.

Total Spending: $29 Billion

- $26.27 Billion in state dollars

- $2.76 Billion in federal stimulus dollars (ARRA funds)

Spending Increase: $1.29 Billion or 4.6 Percent growth over the current years budget.

Overview of Expenditures

Revenue Analysis


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Projected Revenue: General Fund and ARRA Funds

Corporation Taxes,

$4.95 Billion, 16.3%

Sales and Use Tax,

$8.62 Billion, 28.5%

Cigarette Tax,

$1.09 Billion, 3.6%

Personal Income Tax,

$10.38 Billion, 34.3%

Non-Tax Revenue,

$961.2 Million, 3.2%

All Other Tax Revenue,

$1.51 Billion, 5%ARRA Stimulus

Funds,

$2.76 Billion,

9.1%

* Revenue based on Rendell Budget Proposal

$30.27 Billion

All Other Tax Revenue

Realty Transfer Tax

Table Games Revenue

Liquor Tax

Inheritance Tax

Etc.

Non-Tax Revenue

Interest Earnings Fines and Penalties

Liquor Store Transfers

Unclaimed Property

Licenses and Fees


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Proposed Expenditures: General Fund

* The governor has again proposed to combine the Department of Aging with the Office of Long-Term Living to create the new Department of Aging and Long-Term Living.

$29.03 Billion

Education (PreK-12),

$10.30 Billion

35.5%

Higher

Education,

$1.98 Billion

6.8%

Public Welfare,

$9.67 Billion

33.3%

Aging & Long-Term Living,

$1.32 Billion

4.5%

Corrections,

$1.92 Billion

6.6%

Debt Service,

$1.10 Billion

3.8%All Other Spending,

$2.75 Billion

9.5%

All Other Spending

Agriculture

DEP

DCNR

State Police

DCED

Legislature Etc.


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Pre-K 12 Education: $10.30 Billion

Basic Education: This budget would provide $5.23 Billion in state dollars and $654.7

Million in federal ARRA dollars for a total of $5.88 Billion to the states 500 school districts.

This represents a $354 Million increase over last year an increase of 7.28 Percent.

Special Education: School districts would be provided $1.03 Billion to support students

with special needs. This proposal is equal to the 2009-10 budget.

Accountability Block Grants: More than $271.4 Million would be provided to school

districts through these block grants, which offer flexibility to address areas of need withineach district. This proposal is equal to the 2009-10 budget.

BUDGET NOTES: Increases for Basic Education supported by ARRA Federal Stimulus dollars will inflate the base

funding levels for PA schools moving into FY 2011-12. As a result, when these funds are exhausted after FY 2010-11, a sizeable funding hole will exist in the state budget for Basic Education in FY 2011-12.


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Higher Education: $1.98 Billion

Community Colleges: Pennsylvanias community colleges would receive a total of $235.7

Million in this budget, combining both state and ARRA dollars.

State System of Higher Education: Pennsylvanias 14 state universities would be provided$503.4 Million in total funds, which includes both state and ARRA dollars.

PHEAA: Funding for the Pennsylvania Higher Education Assistance Agency would total

$455.2 Million to support students higher education needs.

State-Related Universities: Pennsylvanias four state-related universities would beprovided the following funding in this budget proposal through state and ARRA funds:

Penn State: $333.9 Million

Pitt: $168 Million

Temple: $172.7 Million

Lincoln: $13.8 Million

BUDGET NOTES: All proposed funding levels would remain at the approved FY 2009-10 appropriations.


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Public Welfare: $9.67 Billion

Medical Assistance: Public Welfares three primary MA programs (Inpatient, Outpatient

and Capitation) would be provided nearly $4.3 Billion in this budget through both state and

ARRA dollars. Together, these funds would provide a $333 Million increase to the program.

County Child Welfare: As DPWs second largest expenditure, the budget would provide

more than $1 Billion in funding for at-risk and neglected children. This would account for a

$23.7 Million increase over the current fiscal year.

BUDGET NOTES: The Rendell Budget is proposing to move the Medical Assistance Long-Term Care, Services to

Persons with Disabilities and Attendant Care Services expenditures from DPW to the proposed new Departmentof Aging and Long-Term Living.

If the federal government does not approve the $850 Million in new FMAP funds as

proposed by President Obama, the budget would fall out of balance and the

aforementioned increases in the Medical Assistance program would be unaffordable.

Funding Concerns


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Aging and Long-Term Living: $1.32 Billion

Medical Assistance Long-Term Care: The budget would provide more than $1 Billion in

combined state and ARRA funds to reimburse nursing homes and fund home and

community-based services. This represents a $43.8 Million increase over the current budget.

Services to Persons with Disabilities: More than $137 Million in combined state and

ARRA funds would be provided to support individuals transitioning to home and

community-based services. This represents a $15.5 Million increase over the current year.

Attendant Care: Persons with disabilities would also receive $134.7 Million in combined

state and ARRA funding through this budget line. This represents an $8.5 Million increase

over the current year.

BUDGET NOTES: This is the second budget that the governor has proposed to merge the Office of Long-TermLiving with the Department of Aging. The merger was rejected in the FY 2009-10 final budget negotiations.


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Corrections: $1.92 Billion

PA Prison System: Combining state and federal ARRA funds, corrections would be

afforded a $136.8 Million increase in this budget to support the states 27 correctional

institutions. Notable funding within the system includes the following:

Inmate Medical Care: $246.3 Million (a $16.8 Million increase). Inmate Education and Training: $43.9 Million (a $1.3 Million increase).

State Correctional Institutions: $1.43 Billion (a $118.5 Million increase).

Of the $1.92 Billion in funding set aside for Corrections, $172.9 Million is ARRA funds.

BUDGET NOTES: Corrections is one of the fastest growing expenditures in the state budget. Rising costs andincreasing prison populations have factored into the departments recent surge in expenditures.

Pennsylvanias prison population is currently marked at 51,390. Over the last 10 years, this

population has increased by more than 14,000 inmates, representing a 40 Percent growth in

population.

Prison Growth Facts


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General Fund Debt Service: $1.1 Billion

General Obligation Debt: $1.01 Billion ($76.7 Million increase).

CFA Debt Service: $83.3 Million ($18.3 Million increase).

Interest on Tax Anticipation Notes: $10 Million ($8.8 Million increase).

BUDGET NOTES: Pennsylvania is obligated to pay debt service annually, which continues to account for agreater portion of the state budget each year.

Since FY 2002-03, Pennsylvanias General Fund-backed outstanding debt has increased by

more than $4.2 Billion, which represents an estimated 62 Percent increase. The state now

owes more than $900 for every man, woman and child in the Commonwealth.

Pennsylvanias Growing Debt

Total FY 2010-11 Increased GF Debt Service: $103.8 Million


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All Other Spending: $2.75 Billion

BUDGET NOTES: The governors annual practice of eliminating programs historically supported by thelegislature was again continued in this budget.

While the Rendell Budget includes cuts to many programs and government operational

expenses, the proposal moves all funding made available through these cuts to other areas

in the budget that are favored by the governor.

Reviewing the Governors Proposed Budget Cuts

All Other Spending includes, but is not limited to, funding for the following departments:

Agriculture: $62.4 Million ($5.4 Million cut).

DCED: $286.4 Million ($21.6 Million increase). DCNR: $91.4 Million ($994,000 cut).

DGS: $123.2 Million ($3.1 Million increase).

Health: $232.2 Million ($7 Million cut).

Probation and Parole: $125.8 Million ($8.2 Million increase).


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Stimulus Transition Reserve Fund

Governor Rendells Lock Box Fund: The governors budget proposes to create a new

fund to help the state address its future financial problems primarily the loss in stimulus

funds and looming pension costs. This new fund would be supported through a billion-

dollar-plus increase in taxes.

Proposed New and Increased Taxes

Sales and Use Tax: Lower the rate to 4 Percent but remove 74 current exemptions.

Tobacco Products: Impose a new tax on smokeless tobacco and cigars.

Severance Tax: Impose a tax on the extraction of natural gas from Marcellus Shale.

Combined Reporting: Close the Delaware Loophole.

Vendor Sales Tax: Eliminate discount on businesses that remit sales taxes in a timely manner.


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New and Increased Taxes

Although the proposed tax increases are not slated to support spending in the governors

FY 2010-11 budget, taxpayers would begin paying more starting July 2010.

New / Increased Tax Start Date 2010-11 2011-12

Sales and Use Tax

Tobacco Products

Severance Tax

Combined Reporting

Vendor Sales Tax

TOTAL

9/1/10 $531.5 Million $863.3 Million

7/1/10 $41.6 Million $46.8 Million

7/1/10 $160.7 Million $260 Million

2011 $66.6 Million $167.3 Million

9/1/10 $73.6 Million $76.0 Million

$874 Million $1.41 Billion


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Sales and Use Tax Increase

Removing Existing Tax Exemptions: By proposing to remove 74 existing sales tax

exemptions and lowering the rate to 4 Percent, taxpayers would pay less per transaction but

would be taxed on more items and services.

Current Exemptions to be Taxed

Legal Services

Residential Fuel and Gas

Residential Electric

Funeral Parlors (Death Care Services) Accounting and Auditing Services

Personal Hygiene Products

Residential Telephones

Water and Sewage Services

Non-Prescription Drugs

Recreational Parks and Campgrounds

Textbooks

Coal Stair Lift Devices

Candy and Gum

Veterinary Fees

Flags

BUDGET NOTES: The aforementioned list represents only a few of the exemptions that would be removedunder the governors Sales Tax plan.


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Economic and Financial Outlook

Fundamental Budget Concerns

Loss of Stimulus Funds: The Rendell Administration has used ARRA stimulus dollars to

expand the state budget and increase spending, rather than use the funds to supplant state

dollars and maintain critical programs and services. Once the funds are gone, the budget

will be left with a multi-billion dollar funding hole.

Growth in Spending: Pennsylvania cannot continue to increase spending during this

national recession. The state budget is growing at a time when revenues continue to

decline, which is exacerbating the looming funding cliff the state will face beginning in FY

2011-12.

Economic Recovery: The states economy remains stagnant at best. Revenues continue

to fall short of estimate and the labor market remains volatile, as unemployment looms in

the 9 Percent range and improvement is expected to be slow over the next two years.

BUDGET NOTES: The state is facing several unavoidable fiscal challenges in FY 2011-12. The FY 2010-11 budgetwill play a key role in determining the severity of these challenges and their impact on taxpayers.


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House Republican Concerns

Unaffordable Spending: Governor Rendell is proposing to increase spending by $1.2

Billion despite the fact the state is facing a projected $525 Million revenue shortfall in the

current year. Spending more when the state has less defies common fiscal principles.

The more the budget increases in FY 2010-11, the greater the funding cliff the state

will face in FY 2011-12, after the governor leaves office.

Unreliable Revenues: The governors budget is dependent on the federal governmentapproving about $850 Million in new ARRA stimulus funds to support the states Medical

Assistance program.

Building a budget on assumed, non-existent revenues is a recipe for fiscal disaster. If

this budget were adopted as is and the funds were not approved by Congress, the

budget would be left with a gaping funding hole.


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$15,000,000,000

$17,000,000,000

$19,000,000,000

$21,000,000,000

$23,000,000,000

$25,000,000,000

$27,000,000,000

$29,000,000,000

$31,000,000,000

1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

PA STATE BUDGET: FY 2010-11

General Fund Budget Growth

Ridge-Schweiker: $4.73 Billion

Rendell: $8.63 Billion

Rendell Proposal

30% Growth

42% Growth


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Spending vs. Inflation 1994-2011

0%

10%

20%

30%

40%

50%

60%

1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Inflation

State Spending

Spending

48.1%

Inflation

33.8%

Ridge-Schweiker

Spending Growth: 30%

Inflation: 21%

Rendell

Spending Growth: 42%

Inflation: 24%

* Spending and inflation data for 2010-11 is based on projected CPI and the governors proposed spending levels.


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ARRA Stimulus Dollars

* Total revenue needed to balance the budget is marked at $30.3 Billion for FY 2010-11.

General Fund Revenue

$27.52 Billion

Anticipated ARRA Funds (FMAP)

$850 Million

Existing ARRA Funds

$1.91 Billion

Stimulus Funds

The Rendell Budget proposal

depends on $2.76 Billion in

stimulus funds to balance

spending.

Of the funds depended upon in

this budget, $1.9 Billion will not

be available next year, thus

leaving an equal hole in the FY

2011-12 budget.

The $850 Million in anticipatedARRA funds must be approved by

Congress for the budget to be

balanced. If approved, another

$498 Million would be available

for the FY 2011-12 state budget.


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House Republican Budget Goals

Control State Spending: Rein in spending growth to reflect the states economy. The

budget should only spend what the state can afford and must take into account the looming

funding cliff and loss of stimulus funds in FY 2011-12 as well as growing future expenditures.

Reevaluate Budget Programs: The economic decline and need for a fiscally responsible

budget provides the state an opportunity to reexamine the budget. Duplicative programs

and those deemed ineffective should be eliminated or consolidated.

Address Fraud and Abuse: Examples of fraud and abuse have been cited in the

Department of Public Welfare by Auditor General Jack Wagner. Efforts to reform DPWfunding and eliminate wasteful spending must be implemented.

Responsibly Support Priorities: If or when additional funds are needed to support the

states priorities (education, public safety, etc.), increases must reflect what the state can

afford without relying on new taxes. Boosting funding beyond the states fiscal means is

counterproductive and will lead to future financial problems.

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Roae_2010-11 State Budget Slide Show

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