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8/8/2019 Tallman August 2010 Budget Slide Show
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www.RepWillTallman.com
State BudgetFiscal Year 2010-11Review and Analysis
State RepresentativeWill Tallman193rd Legislative District
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State Budget Summary
Final Spending: $27.84 Billion
State Funds: $24.94 Billion
ARRA Stimulus Funds: $2.70 Billion
General Fund Revenue: $27.65 Billion
Revenue Collections: -$1.18 Billion (Below Estimate)
More than $2 Billion in revenue transfers were needed to support this spending plan.
Reserve funds were exhausted in the 2009-10 budget, specifically the Rainy Day Fund.
Commonwealth Court ruled that up to $716 Million in funds used to finance this budget
(MCare and Health Care Provider Retention Account) must be repaid from the General Fund.
Budget
Notes
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Rendell Budget Proposal
Proposed Spending: $29.03 Billion
State Funds: $26.27 Billion
ARRA Stimulus Funds: $2.76 Billion
Spending Increase: $1.29 Billion or 4.6 Percent.
Budget
Notes
The Rendell Budget proposal assumed a revenue shortfall of $525 Million for FY 2009-10.
The $2.76 Billion in ARRA funds used to support this spending plan includes $850 Million in
yet-to-be-approved federal Medical Assistance (FMAP) dollars.
More than $800 Million in new taxes were included in the governors budget proposal for FY
2010-11. Although they were not originally intended to be spent in this fiscal year, thegovernor added the new taxes to his spending plan when revenues continued to decline.
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Final Enacted Budget
Proposed Spending: $28.04 Billion
State Funds: $25.29 Billion
ARRA Stimulus Funds: $2.75 Billion
Spending Increase: $207.2 Million or 0.74 Percent.
Budget
Notes
As the governor proposed, the final budget assumed the state would receive $850 Million inyet-to-be-approved federal Medical Assistance (FMAP) dollars.
An additional $30 Million was transferred from various special state funds to help balance
the 2010-11 spending plan.
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General Fund Spending: $28.04 Billion
PreK-12 Education,
$10.02 Billion
35.7%
Higher
Education,
$1.96 Billion
7.0%
Public Welfare,
$10.44 Billion
37.2%
Debt Service,$1.05 Billion
3.7%
Corrections,
$1.87 Billion
6.7%
All Other Spending,
$2.70 Billion
9.6%
NOTE: Funding includes $2.75 Billion in federal ARRA dollars.
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General Fund Revenue: $26.71 Billion
NOTE: Revenue only reflects state dollars. Federal ARRA funds are not included in this chart.
Corporate Net
Income Tax,
$1.85 Billion,
6.9%
Capital Stock
And Franchise Tax,
$767 Million, 2.9%
Sales and Use Tax,
$8.34 Billion, 31.2%
Cigarette Tax,
$1.09 Billion, 4.1%
Personal Income Tax,
$10.12 Billion, 37.9%
Inheritance Tax,
$771 Million, 2.9%
Non-Tax Revenue,
$1.02 Billion, 3.8%All Other Taxes,
$2.75 Billion, 10.3%
* Official Estimate
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House RepublicanBudget Analysis
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State Budget Analysis
House Republican Accomplishments
Defeating the Rendell Tax Increases: Despite the governors call to increase
taxes by more than $800 Million as part of his budget proposal for FY 2010-
11, we were successful defeating all tax hikes in this budget.
Controlling State Spending: While Governor Rendell advocated for a $29
Billion budget that increased spending by more than $1.2 Billion, we were
able to cut $1 Billion from his original proposal.
Meeting the Deadline: Throughout the budget process, we called for
cooperative action on the states annual spending plan to ensure it was
approved by June 30. In turn, the legislature was able to meet the
constitutional deadline and prevent the type of fiscal pain felt by human
service providers, educational institutions and non-profit organizations as a
result of last years impasse.
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State Budget Analysis
House Republican Concerns
Federal Revenues: The budget was balanced at the governors demand on the
assumption the state would receive $850 Million in new federal Medical
Assistance funds. Congress recently approved funding, but the state will onlyreceive about $600 Million. Coupled with other federal Medical Assistance
funding adjustments, the budget now yields a $280 Million shortfall.
Spending: Despite continued calls for fiscal restraint and our success in
cutting $1 Billion from the governors proposal, this $28 Billion budget did notgo far enough in controlling state spending.
Structural Deficit: With the looming loss of more than $2 Billion in existing
stimulus funds and the potential $716 Million funding hole that will exist if
the governors appeal of the Commonwealth Court ruling on MCare is lost,
the state is facing at least a $3 Billion structural deficit in FY 2011-12.
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Rendell-ProposedBudget Adjustments
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Rendell Budget Cuts August 2010
Accounting for Less-Than-Anticipated Federal Funds
Original FMAP Funding Assumption: $850 Million
Approved FMAP Funding: $600 Million
Total Budget Shortfall: -$280 Million
Budget
Notes
To offset the $280 Million budget funding hole that now exists, the governor has proposed
the following plan: $212 Million in Budget Cuts
1.9% Across-the-Board Reduction.
$50 Million Reduction in the Basic Education Subsidys Approved Increase.
Assumes the enactment of a severance tax to generate $70 Million.
(Includes -$30 Million in other federal MA funding adjustments)
House GOP: Throughout the budget negotiations, House Republicans advocated for a contingency plan for the assumedfederal funds in the event they were not approved or approved at a lesser amount. The governor rebuffed this plan.
(Approximately)
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Summary of Expenditures
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PreK-12 Education (As Enacted)
Funding: $10.02 Billion
State Funds: $9.36 Billion
ARRA Stimulus Funds: $654.7 Million (All to Basic Education)
BudgetNotes
The states Basic Education Subsidy was approved to provide Pennsylvanias 500 school
districts with $5.78 Billion a $250 Million increase over 2009-10.
Special Education funding will remain at the 2009-10 levels of $1.03 Billion.
Many education programs saw funding reduced in this budget. Accountability Block Grants,
Pre-K Counts, Services to Non-Public Schools and Public Libraries are among those that saw
funding reduced.
STIMULUS IMPACT: The loss of stimulus funds in 2011-12 will result in a minimum $654 Million funding hole in the statesBasic Education Subsidy.
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PreK-12 Education (August 2010 Update)
Rendell Budget Adjustments
Education funding will be reduced by $69 Million.
The Basic Education Subsidy accounts for $50 Million of the
total reduced funding.
Budget
Notes
The new Basic Education Subsidy after the governors recent move will total $5.72 Billion.
This still represents a $200 Million increase over 2009-10.
While there was a reduction in the approved-subsidy increase for 2010-11, the federal
government recently approved another $380 Million to support Pennsylvania schools.
Altogether, Pennsylvania schools are now slated to received $580 Million in new funding from
the state and federal government.
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Higher Education (As Enacted)
Funding: $1.96 Billion
State Funds: $1.87 Billion
ARRA Stimulus Funds: $90.9 Million
BudgetNotes
All Higher Education Funding for the states colleges and universities remained level funded
with the 2009-10 budget.
The Pennsylvania Higher Education Assistance Agency (PHEAA) received $438.7 Million a
$16.4 Million reduction from 2009-10.
STIMULUS IMPACT: All higher education institutions will see a funding hole equal to the amount currently received in thisbudget come 2011-12. PHEAA will not be affected, as the agency receives no ARRA funds in this budget.
PSU: $333.9 Million Temple: $172.7 Million SSHE: $503.4 Million
Pitt: $168 Million Lincoln: $13.8 Million Community Colleges: $282.1 MillionIncludes $46.4 Million in Community College Capital funding
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Higher Education (August 2010 Update)
Budget
Notes
Rendell Budget Adjustments
PHEAA Funding Reduction: -$8.3 Million
Approved Funding: $438.7 Million
Rendell-Adjusted Funding (August 2010): $430.4 Million
Combined with the $16.4 Million in funding that was cut from PHEAA as part of the 2010-11
enacted budget, the new cuts the governor has proposed will total a $24.8 Million reduction in
funding from the prior year.
Nearly $7.4 Million of the newly proposed cuts to PHEAA will come from the Student Grant
appropriation, which is PHEAAs largest budget line item.
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Public Welfare (As Enacted)
Funding: $10.44 Billion
State Funds: $8.61 Billion
ARRA Stimulus Funds (FMAP): $1.83 Billion
BudgetNotes
The $1.83 Billion in ARRA funds included $850 Million in anticipated FMAP money that was
assumed in the governors budget proposal.
Medical Assistance accounts for approximately half of all Public Welfare funding and receivesthe largest portion of ARRA funds coming to the state.
Since the Rendell Administration took office in 2003, more than 600,000 people have been
added to the states welfare population through the Medical Assistance program.
STIMULUS IMPACT: The loss of stimulus funds will leave a budget hole in the Department of Public Welfare for 2011-12.Reevaluation and changes to DPWs budget and administrative operations must be made to help offset the loss in funds.
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Public Welfare (August 2010 Update)
Rendell Budget Adjustments
Rendell-Funding Adjustments in State Dollars: -$57.9 Million
This proposed reduction would be among the funds needed
to offset the receipt of less-than-anticipated FMAP funds.
Budget
Notes
While the Rendell Administration assumed the state would received $850 Million in new
federal FMAP funds in the 2010-11, the state will receive approximately $600 Million.
Altogether, about $1.6 Billion in federal ARRA funds are being used to balance DPW
expenditures in the 2010-11 state budget. None of these funds will be available next year.
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Corrections (As Enacted)
Funding: $1.87 Billion
State Funds: $1.69 Billion
ARRA Stimulus Funds: $180.3 Million
BudgetNotes
Corrections has remained one of the fastest growing expenditures in the state budget over
the last decade.
Inmate population growth has been a driving factor behind the growth in the correctionsbudget. To date, the states 27 prisons house more than 51,000 inmates 17 Percent over
capacity.
Overcrowding has forced the state to send 2,100 inmates to be housed out of state.
STIMULUS IMPACT: The loss of stimulus funds in 2011-12 will cut $180 Million from the Corrections budget, taking thedepartment back to 2007 funding levels.
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Corrections (August 2010 Update)
Rendell Budget Adjustments
Corrections funding will be reduced by $32.2 Million.
Approved Funding: $1.87 Billion
Rendell-Adjusted Funding (August 2010): $1.84 Billion
Budget
Notes
The funding reductions proposed by the governor would cut $26.2 Million from the state
correctional institutions operating expenses, and it would cut another $4.6 Million from the
Inmate Medical Care Appropriation.
Each of these appropriations will still see an increase over what was provided in fiscal year
2009-10.
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Debt Service (As Enacted)
Funding: $1.05 Billion
State Funds: $1.05 Billion
ARRA Stimulus Funds: NONE
BudgetNotes
Debt Service must be paid annually from the General Fund budget before any other
expenditures can be financed. General Fund debt service payments are divided among two
line items: General Obligation Debt Service (Treasury) and a Transfer to the Commonwealth
Financing Authority (DCED).
As a result of drastic increases in borrowing under the Rendell Administration, annual debt
service has increased by nearly $400 Million since 2003.
The states total debt outstanding to be paid from the General Fund currently stands at more
than $11 Billion about a $5.7 Billion increase under Governor Rendell.
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All Other Spending (As Enacted)
Funding: $2.70 Billion
Includes funding for the following:
Budget
Notes
Nearly every agency saw overall funding reduced in this budget. The 2010-11 budget marked
the second consecutive year in which significant cuts were made to agencies and their
respective programs.
Of those noted above, only DCED received an increase over the prior years budget. The
Judicial Branch was level funded.
Agriculture
DEP DCNR
DCED
State Police
Labor and Industry Health
Row Offices
State House and Senate
Governors Office Executive Offices
Judicial Branch
Partial List of Departments classified as All Other Spending
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All Other Spending (August 2010 Update)
Rendell Budget Adjustments
Implemented a 1.9 Percent across-the-board cut to agencies
classified under All Other Spending.
Approved Spending: $2.7 Billion
Rendell-Adjusted Funding (August 2010): $2.6 Billion
Budget
Notes
Since the state began to yield year-end deficits beginning in 2008-09, the departments and
agencies classified under the All Other Spending category represent those that have exhibited
the greatest reductions in funding.
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Budget-Related Issues
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Capital Budget
As part of an agreement between Senate Republicans, House
Democrats and Governor Rendell, two Capital Budget bills were
approved along with the General Fund Budget:
Budget
Notes
House Bill 2289: Authorizes the state to issue up to $1.59 Billion in general
obligation bonds to pay for capital projects during the 2010-11 fiscal year. Italso itemizes $335.9 Million in projects to be funded at the governors
discretion. (Includes projects honoring Senator Arlen Specter and the late-
Congressman John Murtha).
House Bill 2290: Increases the cap on the amount of debt that may beoutstanding at any one time for Redevelopment Assistance Capital Projects
(RCAP) by $600 Million. This creates a new limit of $4.05 Billion for RCAP
projects.
If all $600 Million in debt is issued under House Bill 2290, it will costtaxpayers $963 Million to repay over 20 years.
House GOP: These measures were widely opposed by House Republicans.
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Capital Budget RCAP
Budget
Notes Since taking office in 2003, Governor Rendell has increased the states RCAPdebt cap by $2.6 Billion, adding to the states growing debt service costs.
$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
2003 Act 49 of 2003 Act 67 of 2004 Act 87 of 2005 Act 48 of 2008 Act 48 of 2010Pre-Rendell
179% Increase in RCAP Debt Allowance
Under the Rendell Administration
$4.05 Billion
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Marcellus Shale Natural Gas Extraction
As another budget-related agreement, the majority parties in the
House and Senate agreed to consider legislation in the fall that
would deal with raising additional revenue from the extraction of
natural gas.
Budget
Notes
SB 1042 (Fiscal Code)
It is the intent of the House Majority Leadership and Senate Majority
Leadership to pass legislation that raises revenue from the extraction of
Marcellus Shale natural gas by October 1, 2010, with an effective date for
implementation no later than January 1, 2011.
Regarding the aforementioned agreement, it is important to note that any future revenue
generated from Marcellus Shale legislation would supplement existing revenue, as the funds
are not needed to balance the 2010-11 state budget.
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Independent Fiscal Office
Another non-budget-related provision added to the agreement
dealt with the creation of an Independent Fiscal Office.
Budget
Notes
SB 1042 (Fiscal Code)
It is the intent of the House Majority Leadership and Senate MajorityLeadership to pass legislation establishing a new independent agency to be
known as the Independent Fiscal Office no later than October 1, 2010, with
an effective date for implementation no later than January 1, 2011.
A similar proposal is found in Senate Bill 1, which calls for a fiscal office to fulfill the
following responsibilities relative to the state budget:
Prepare Revenue Estimates
Analyze Executive Budget Proposal
Monitor State Taxes
Develop Performance Measures
Provide a Baseline Budget
Assess the States Fiscal Standing
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PennsylvaniasFinancial Outlook
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Budget
Notes
Loss of Stimulus Funds
The loss of ARRA stimulus funds will cut more than $2.5 Billion from the
revenues available to balance the state budget in 2011-12.
General Fund Revenue
$26.71 Billion
ARRA Stimulus Funds
Basic Education: $655 Million
Higher Education: $91 Million
Corrections: $180 Million
*Public Welfare: $1.6 Billion
Total: $2.5 Billion
* ARRA funds for DPW are based on
estimates and are subject to change.
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Budget
Notes
General Fund Revenue Collections
Even if state tax revenues realize a 3 Percent growth in 2010-11, the state willbegin the 2011-12 Fiscal Year with a tax revenue base less than that of 2006-07.
$14.000
$16.000
$18.000
$20.000
$22.000
$24.000
$26.000
$28.000
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11*
BillionsGF Tax Revenue
GF Non-Tax Revenue
Estimate
2009-10: Included $2.1 Billionin Fund Transfers
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Pension Spike and Future Costs
The states two pension systems (SERS and PSERS) are facing a
multi-billion dollar unfunded liability.
Budget
Notes
The Effect of the RecessionThe recession prompted major losses in the states pension systems
investments. PSERS alone yielded a 26.9 Percent loss in assets during 2008-09as a result of the economic decline. With about 77 Percent of the states
pension funds coming from investments, the recession has been a significant
factor in the states pension funding concerns.
In June, House Republicans were successful in adding key pension reforms to House Bill
2497. The reforms would help the state and school districts better control future pensioncosts. The bill is now before the state Senate.
Employer Contribution Rates for 2010-11PSERS: 5.64 Percent (2009-10 Rate was 4.78 Percent)
SERS: 5 Percent (2009-10 Rate was 4.0 Percent)
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House RepublicanEfforts and Solutions
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House Republican Efforts and Solutions
Revenue Solutions / Cost-Savings Options
Budget
Notes
Privatize the states liquor stores.
Better management of the states vehicle fleet.
Process other states SSI Payments.
Expanding purchasing power P-Cards.
Correct tax refund errors. Merge PennDOT and the PA Turnpike Commission.
Over the last several months, House Republicans have unveiled a list of
proposals that could account for billions of dollars in combined new revenue
and cost-savings all without increasing taxes. These proposals include but
are not limited to the following:
2010-11 Budget
The House GOP plans relating to P-Cards and tax refund errors were used in the 2010-11
budget as an alternative to new taxes. Greater use of these would lead to greater savings.
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House Republican Efforts and Solutions
Eliminating Documented Waste, Fraud and Abuse
Budget
Notes
Auditor General Jack Wagner has issued multiple audits citing rampant
waste, fraud and abuse in the Department of Public Welfare that was first
brought to light by House Republicans.
An audit of DPWs Medical Assistance program cited a 14 Percent error rate
in determining MA eligibility among 12,000 applications in 2009 (53 counties).
The Auditor General has cited a possible savings of approximately $320
Million by reforming DPWs administration of this program.
Given the massive increase in the states Medical Assistance population under Governor
Rendell 660,000-plus have been added for an increase of 44 Percent it is necessary to
question the departments operations given the Auditor Generals findings.
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House Republican Efforts and Solutions
Guidelines for the Future
In order to prepare for the future and help rebuild Pennsylvanias struggling
economy, House Republicans believe we must follow the following plans:
Control Spending: For years, the Rendell Administration has increasedspending at a faster rate than state revenues could grow. We need to ensure
future budgets spend only what we can afford.
Foster Job Growth: Pennsylvania ranks among the most non-business-friendly
states in the nation. In recent years, taxing businesses and job creators has
been the Rendell Administrations solution to revenue concerns. We mustreverse this trend and create a more business friendly and regulatory climate.
Increase Efficiencies: The state needs to reevaluate programs and services to
eliminate those that are no longer needed, consolidate those that are
duplicative and enhance those that have already proven to be successful.