Analysis: Governor's 2014-15 Budget Funds New Initiatives with Uncertain Savings and One-Time Revenues

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Overview

Governor Tom Corbett proposed a 2014-15 budget of $29.4 billion — $927 million, or 3.3%, more than the current fiscal year. 

The proposal provides additional funding for Pre-K-12 education, but restricts funds in a way that will make it hard to restore cuts made to the classroom in recent years.

For the third year, the budget level funds higher education, while adding $25 million for a new scholarship fund for middle-class families. 

The budget foregoes the opportunity to expand Medicaid under the federal health care law, proposing instead a new “Healthy PA” program that will reduce health benefits for low-income working families and people with high health needs. 

Despite starting out with a revenue deficit of more than $1 billion, the plan maintains another rate cut for the capital stock and franchise tax in 2015 and its full elimination in 2016. 

The budget is balanced by relying on optimistic revenue growth, more than $1 billion in one-time funding sources, and far-from-certain changes to the state’s public pension systems. It also finds savings by cutting benefits for Medicaid enrollees under Healthy PA, and ends a moratorium in force since 2010 on drilling in state parks and forests.

Overall, this budget is very different than Governor Corbett’s first in 2011. A call for cutting spending has been replaced by new initiatives popular with the public. But without a sustainable approach to how it is funded and an end to unaffordable tax cuts, the initiatives proposed in this budget may be short-lived. 

Table 1. 2014-15 General Fund Summary

General Fund Revenue

General Fund Spending, 2014-15 Governor's Proposed Budget: $29.4 BillionUnlike previous years, the Governor’s 2014-15 budget proposes few tax changes. General Fund tax collections are projected to increase by 3.9% and total General Fund revenues by 4.9%. These growth figures are markedly higher than what the Corbett administration expects for 2013-14 – 2% for taxes and 1.6% for total revenue.

The first proposed revenue change would shorten the unclaimed property holding period from five to three years, providing an estimated $150 million in additional one-time revenue in 2014-15. The second change is more controversial – selling non-surface oil and gas lease rights on state-owned land. Normally, this revenue would go into the Oil & Gas Lease Fund, but it is being redirected in this proposal, as was done the last time the state signed such leases in 2008, into the General Fund. This is expected to raise $75 million next year. This action appears to lift the moratorium on additional gas leasing on state lands that has been in place since 2010. 

The General Assembly recently approved a tax on small games of chance in taverns that is expected to generate $102 million for the General Fund in 2014-15.

Table 2. General Fund Revenue Growth in 2014-15

Corporate Taxes

For the first time, corporate tax collections are projected to decline, by $3.5 million, or 0.5%, in 2014-15 and continue to decline through 2017-18 as increases in net operating loss carryforward and tax credits take effect. Normally, corporate tax collections would be expected to increase with an expanding economy. This change does not bode well for Pennsylvania’s longer-term financial health. 

The budget does not propose any major new reductions in corporate taxes; however, many of the business tax cuts enacted in recent budgets will increase in cost in 2014-15 and future years.

The budget does include a further cut of the capital stock and franchise tax (CSFT) rate in 2015 from 0.67 mills to 0.45 mills. Revenue from the CSFT is projected to decrease by $62 million from this fiscal year to next and by more than $500 million from 2011-12.

Bank taxes were reformed in last year’s budget and are projected to increase in 2014-15, but this is uncertain, as revenues in the current fiscal year are expected to decline.  

Personal Income Tax

2014-15 General Fund Revenue: $30.5 BillionCollections of the General Fund’s largest revenue source, the personal income tax, are projected to increase by 5.5% in 2014-15, after increasing 3% in 2013-14. This tax tends to track with the economy and employment, and the increase in 2014-15 suggests a much stronger Pennsylvania economy next fiscal year. Job growth in Pennsylvania ranked 48th highest in 2013 and is projected to rank 41st in 2014.[1]

Sales Tax

Collections of the General Fund’s second largest revenue source, the sales tax, are projected to increase by $310 million, or 3.4%, in 2014-15. This equals the growth expected in the current fiscal year.

Other Taxes

Collections of all other General Fund taxes are projected to increase by $168 million, or 6.3%, in 2014-15. This is largely due to the recent enactment of the tax on small games of chance, which will be collected for a full fiscal year for the first time in 2014-15, as well as 7.1% growth in inheritance and realty transfer taxes. 

Detracting from this growth is the growing cost of third-class city improvement zones, including the Neighborhood Improvement Zone, or NIZ, in Allentown, and the newly awarded City Revitalization and Improvement Zones, or CRIZ, in Lancaster and Bethlehem. The NIZ is expected to reduce collections in the General Fund by $46 million, while the CRIZ will cost $17 million in its first year. These costs are expected to increase in future years, particularly for the CRIZ, as more cities are awarded zones. Under these programs, developers are permitted to keep many state taxes collected from activity within the zones to pay for the cost of privately owned redevelopment. While cities are clamoring for the development projects the zones bring, the zones have an immediate impact on the General Fund budget, and the long-term state tax benefits are uncertain. 

Non-tax Revenue

Licenses, fees, liquor store profits, and other non-tax revenue are projected to increase by $301 million, or 62%, in 2014-15, largely reflecting $150 million in new revenue generated from changing the holding period for unclaimed property and $75 million in gas leases on public land for a total of $225 million.

Education

Table 3. 2014-15 Education Summary

Pre-K-12 Education

Governor Corbett’s first budget in 2011-12 reduced public classroom funding by $841 million, or 10%. Half of the cuts were in state-funded programs — including the Accountability Block Grant, Reimbursement for Charter School costs, and Education Assistance Program (EAP) tutoring — and half in the basic education subsidy.

The proposed budget for 2014-15 provides no increase in the basic education subsidy line, leaving that allocation at $5.5 billion. Instead, it adds $251 million in other new classroom funding, which is still $430 million below 2010-11.

Education Funding (Less Pensions) Still Below 2008-09 LevelOverall, the Pre-K-12 budget will grow by $363 million, or 3.7%.

The major new initiative is a block grant program called Ready to Learn, which replaces the Accountability Block Grant (ABG). The budget adds $241 million in new funds along with the $100 million ABG allocation for a total of $341 million. School districts would receive an amount equal to the 2013-14 Accountability Block Grant and could use those funds for all ABG-eligible programs.

School districts and charter schools would also be eligible for the new Ready to Learn funds, which would be distributed through a “student-focused” funding formula based on market value/aid ratio, student poverty (measured by the number of students designated as economically disadvantaged in the School Performance Profile), and English language proficiency.

There are many details yet to be fleshed out, but some program parameters are clear:

  • School districts would be assigned to one of four tiers, based on an aggregation of the School Performance Profile (SPP) of the schools in their district. Those assignments have not yet been released.
  • Use of funds would be restricted based on which Tier a school district falls into, with the lowest-performing districts (Tier 1) being the most restricted in the use of funds, and the highest-performing districts (Tier 4) having the greatest latitude.
  • Districts could use ABG funds for Ready to Learn priorities (Pre-K to 12 literacy, Science, Technology, Engineering and Math (STEM), curriculum development, and training to align with state standards), but most would not be able to use Ready to Learn funds for ABG programs. Only Tier 4 districts would be able to freely move money between ABG and Ready to Learn programs.
  • $1 million would be set aside in a competitive grant program for the state’s highest-performing schools; 428 schools with SPP scores of 90 or above in 2012-13. Funds would be available for districts to share strategies and techniques. (An analysis by Research for Action found that no school with a poverty rate of 65% is in the top tier or eligible for funding.)
  • A new $10 million hybrid learning program, which blends online learning with traditional classrooms, is restricted to Tier 3 and Tier 4 programs.

Page 26 of the administration’s budget presentation provides the most detail about the program requirements, including the information about proposed allocations.

Special Education

The proposed budget provides a 2% increase in special education funding, the first increase in six years, bringing the allocation to $1.047 billion. A Special Education Funding Commission established by the Legislature recommended in a December 2013 report that new funding be allocated based on categories of student disability, which the administration has agreed to do, although an exact formula has not been established. 

Libraries and Literacy

Adult literacy programs receive a 3.3% reduction, funded at $11.7 million, which is down from $23.4 million prior to the recession. 

The State Library has another 1% reduction. The commonwealth’s subsidy for public libraries is increased by $500,000 to $54 million, still well below its 2008-09 funding of $75 million.

Other Education Programs

Career and Technical Education is level funded, and a $3 million equipment grant established last year is eliminated.

Pupil transportation for public and private school students is essentially level funded at $546.7 million and $78.6 million, respectively. Other services and supplies for non-public students are level funded as well.

In 2012, the Department of Education imposed a moratorium on new applications for partial reimbursement of school construction and renovation projects (PlanCon), which will expire on June 30, 2014. This program has been level funded at $296.2 million, despite already having a backlog of projects seeking funding. 

Early Childhood 

The Early Intervention (EI) program for children ages 3 to 5 has received regular funding increases, and this year is no exception. EI programs received a supplemental appropriation of $14.7 million in the current year (as the result of a federal audit) and are scheduled for a small increase in 2014-15, for a total appropriation of $237.5 million, up from $217 million in 2012-13. Approximately 1,500 additional children will receive Early Intervention services with the funding increase. 

The budget adds $10 million to the Pre-K Counts program, bringing the appropriation to $97.3 million.  Pre-K Counts provides early learning services to 15,700 children in school-based and community-based programs. New funding will increase enrollment by 1,670 students.

The Head Start Supplemental program is level funded at $39.2 million. 

The budget also appropriates $2.8 million in federal funds received as part of the Early Learning Challenge grant to develop a kindergarten entry inventory, revise Pre-K early learning standards, and support early childhood educators. 

Higher Education

Higher Education Spending 21% Lower than in 2008-09Higher education programs — including the 14 campuses of the State System of Higher Education, Thaddeus Stevens, Penn State, the three other state-related universities, and the Pennsylvania Higher Education Assistance Agency (PHEAA) — continue to fare poorly under the Corbett administration. Funding for these programs was reduced by 18% in 2011-12, and all programs have been level funded for the third straight year. (A proposed cut to funding for state-related universities in 2012-13 was restored by the Legislature).

Total funding for all higher education programs is $1.6 billion, down from $1.9 billion in 2010-11.

The State System of Higher Education is slated to receive $412.8 million, Penn State University is budgeted at $229.7 million, Temple University at $139.9 million, University of Pittsburgh at $136.3 million, Lincoln University at $13.2 million, and Thaddeus Stevens College of Technology at $10.3 million.

Community colleges are level funded at $212 million for the fourth year, and the Community College Capital Fund has a 2% reduction for a total appropriation of $47.9 million.

PHEAA

The Governor has proposed a new merit-based scholarship program aimed at middle-class families called Ready to Succeed. $25 million in General Fund dollars would be made available to students with annual family income up to $110,000 attending 2- and 4-year institutions in Pennsylvania. The program requires new legislation, and program elements have not yet been determined. 

$345 million will be allocated in grants to students as in prior years. $6 million in additional funding  from PHEAA reserves is allocated to the Targeted Industry Cluster Scholarship program, up $1 million for 2013-14. Grants to independent Pennsylvania colleges are flat funded at $24 million.

Public School Employee Retirement

In 2013-14, the Governor proposed reducing required pension payments by $175 million and using those funds to support other spending priorities.

Under Act 120 of 2010, total employer contributions (for school and state workers) were due to increase by $600 million in 2014-15 as the commonwealth makes its required employer contributions and begins to pay down debt incurred over 10 years of an employer contribution holiday.

The proposed spending plan for 2014-15 once again proposes to reduce state and employer contributions, by $170 million for the commonwealth and $131 million for school districts. 

The budget would reduce Annual Retired Contributions from 4.5% to 2.25% next year (the so-called pension collars). Annual contributions would then be raised by 0.5% each year after that until likely 2019-20. Although providing temporary relief to state and school district budgets, this plan could increase the unfunded pension liability by as much as $9.5 billion over 24 years in the teacher’s retirement system alone.

Several proposed changes would reduce the state’s employer contribution for 2014-15:

The School Employees Retirement line would increase by $105 million from $1 billion to $1.1 billion in General Fund expenditures. The budget proposes eliminating the state share of the charter school pension double dip, which requires separate General Assembly approval. The state appropriation of $168 million is offset by $62.7 million in savings from the double dip for a net increase of $105 million. The pension double dip recapture is a recurring savings.

$225 million is transferred from the Tobacco Settlement Fund (TSF) and Health Venture Investment Account to reduce General Fund contributions for school employee retirement. For many years, Tobacco Settlement Funds have been diverted from the original intent — to provide adult health, fund smoking cessation, and support health education — to plug budget holes. In 2010, under Governor Ed Rendell, a similar amount was transferred out of the TSF for pensions.

The School Employee Social Security line is reduced from $486 million in 2013-14 to $483 million in 2014-15, down from $544 million in 2012-13. This reduction reflects the loss of 20,000 teachers and other education staff between 2010 and 2012, driven by state cuts to education, the low Act 1 cap (a result of historically low inflation rates), and other cost pressures. 

Health and Human Services

Table 4. 2014-15 Public Welfare General Fund Budget

The budget for the Department of Public Welfare (DPW) is proposed to grow from $11 billion to $11.4 billion for 2014-15, a 3.9% increase in General Fund dollars. Hidden behind the curtain are a number of reductions and changes that artificially reduce the DPW budget, including cuts to Medicaid associated with the Governor’s “Healthy PA” proposal, use of Tobacco Settlement Funds for long-term care, and a timing payment for Medicaid Managed Care organizations. 

The proposed budget includes some welcome program increases, for disabilities services, sexual violence programs, and others. Still, the improvements are predicated on funding sources that may not be available come June.

Medical Assistance

Medical Assistance (MA) provides health care services for 2.2 million Pennsylvanians, primarily seniors, children, and adults with disabilities. The MA budget is expected to grow by $249 million, or 4.9%, from $5.1 billion to $5.3 billion.

The MA budget includes outpatient, inpatient, and managed care services, as well as uncompensated care payments to hospitals, Medical Assistance for Workers with Disabilities (MAWD), and savings on “clawback” payments to the federal government for the Medicare drug benefit for seniors who also receive Medicaid.

Some of the increase reflects a shift from federal to state dollars. Pennsylvania, along with a few other states, saw a big reduction in the federal-state funding split, called the FMAP rate, which dropped from 53.52% to 51.82%, a decline of $212 million in the MA program alone.

Medicaid Expansion, Affordable Care Act, and Healthy PA

The proposed budget includes the appropriations necessary to fully implement the Governor’s proposed Healthy PA plan, including administrative costs, federal funds, and proposed cost savings. It includes $2 billion in new federal funds for 605,000 newly eligible individuals for 2014-15, which would grow to 623,000 in 2015-16. The new enrollees are not counted in MA enrollment projections for next fiscal year, presumably because the U.S. Centers for Medicare & Medicaid Services (CMS) has not yet completed its review of Pennsylvania’s waiver application.

It also includes $125 million in funding reductions in the health services lines (inpatient, outpatient, capitation, and workers with disabilities) reflecting revisions to the Medicaid benefit package proposed as part of Healthy PA

Total enrollment is revised upward to 2,258,540, a 3.9% increase. The budget presumes 85,490 currently eligible but previously unenrolled individuals will apply for Medicaid by 2014-15, twice the number projected for the current fiscal year. A large share of these new enrollees will likely be very low-income individuals who are receiving General Assistance (GA) - related Medical Assistance. The budget also includes funding for 26,060 children moving from the Children’s Health Insurance Program (CHIP) to Medicaid and health coverage for children aging out of foster care. 

On the income side, the proposal counts on $90 million in additional funding from the Gross Receipts Tax on Medicaid Managed Care enrollment.

Funding is added for more than 700 additional staff for County Assistance Offices and Statewide Administrative Offices for implementation of the Affordable Care Act and Healthy PA, including managing new enrollment. The staffing increases are partially offset by reductions in other DPW divisions. The expansion is considerable and a reversal of years of funding reductions in the County Assistance Offices during both the Rendell and Corbett administrations; however, even with the additions, total DPW staffing is still 20% below 2002-03.

The budget once again appropriates a large sum of federal funds, including $194 million for information system improvements related to the Affordable Care Act. This is down from $206 million in the current year.

Box 1. Eliminating the MAWD Program Will Harm Pennsylvanians Who Work Despite Disabilities

Medical Assistance for Workers with Disabilities (MAWD) provides health care coverage to individuals with disabilities who are working, with incomes up to 200% of poverty. Individuals who receive MAWD pay a monthly premium of 5% of their countable income.

The Governor’s budget proposes, as part of the Healthy PA program, to eliminate MAWD, saving the commonwealth $7 million. While ending the MAWD program would reduce a fraction of the state’s Medicaid budget, it would harm MAWD recipients statewide.

Eliminating MAWD would harm working Pennsylvanians with severe health problems. MAWD allows people with long-term disabilities to work without fear of losing Medicaid benefits that meet their health care needs. DPW’s proposal would dismantle MAWD and move lower-income recipients into commercial insurance plans. While these commercial plans may meet the needs of some MAWD recipients, many recipients are severely disabled and require Medicaid benefits packages designed for individuals with disabilities. Other MAWD participants would lose Medicaid coverage altogether, and would be faced with financially ruinous medical costs and expenses with no way to pay for them.

Eliminating MAWD would create arbitrary eligibility “cliffs” that would compel workers with disabilities to stop working or significantly reduce their hours, and would discourage people with disabilities from working to their full potential. The elimination of MAWD would create work disincentives for people with disabilities. Individuals with disabilities who currently receive MAWD would lose their affordable Medicaid and face financially ruinous increases in medical costs. Many will have little choice but to significantly reduce their working hours to keep their Medicaid. Congress created the MAWD program, and Pennsylvania adopted it, to address this very problem and to eliminate these work disincentives through higher income eligibility limits and gradually increased premiums. MAWD is an effective program and should not be dismantled.

-- Community Legal Services of Philadelphia

Other MA Programs

Medical Assistance for Workers with Disabilities (MAWD) provides health care coverage to individuals with disabilities who are working, with incomes up to 200% of poverty. (See Box 1.) The program had been funded with a combination of Tobacco Settlement dollars and federal funds.

In response to a lawsuit challenging the state’s decision to end the adultBasic program, the General Assembly in 2013 passed Act 71, the Fiscal Code for 2013-14, which allocated 30% of Tobacco Settlement Funds to MAWD. The proposed budget would reduce that amount to 15.12% of the annual payment, $46.5 million, and the total General Fund appropriation declines by $11.5 million. 

Enrollees in MAWD are being transferred to the capitation program on January 1, 2015, and that program’s funding is increased by $75 million to reflect that change. 

The Medical Assistance Transportation Program will receive a $6.2 million increase due to increased utilization and to offset the FMAP reduction.

Funding for hospital supplement programs is reduced, offset with funds from the Statewide Hospital Assessment that was reauthorized in 2012. 

Long-Term Care

Long-term living programs will see a $149 million increase this year in state funding, but the budget increases reliance on Lottery and Tobacco Settlement Funds to the tune of $203 million.

The Long-Term Care program will grow by $18 million in General Fund dollars, with an addition of $62.8 million in Tobacco Settlement Funds offsetting cost increases and declining federal FMAP funds.

The Home and Community-Based Services program will see a $121 million General Fund reduction, offset by a $142 million increase in Lottery Funds.

The budget includes increases in several waiver programs for older adults and people with disabilities.

The Living Independence for the Elderly (LIFE) program will increase by $9.4 million to serve an additional 800 older adults, and 1,764 will be added to the Medicaid Aging Waiver program with $11.6 million in Lottery funding. The Attendant Care program will see an increase of $2.7 million to serve 396 additional individuals with disabilities.

The budget relies on increased FMAP allocations for investments in home and community-based services as part of the Federal Rebalancing initiative, which provides $31 million in new federal funding, reducing the need for additional state General Fund dollars. 

Child Care and Development

The overall appropriation for child care programs (including state and federal funds) is $745 million.

State funding for Child Care Services for low-income working families is level funded at $156 million; however, $15 million of a $21 million increase in the federal Child Care Development Block Grant (CCDBG) is allocated to remove 2,895 children from the waiting list for a child care subsidy. 

State and federal funding for child care assistance for TANF and former TANF families will decline by $15 million from $346 million to $330 million, resulting from a drop in federal TANF and Child Care Development Block Grants and an $8.9 million reduction in federal food stamp-related child care assistance. 

State funding for Nurse-Family Partnerships and Community-Based Family Centers is level funded at $12 million and $3.3 million, respectively.

Early intervention for children ages 0 to 3, serving 37,800 children, will see a funding increase of $4 million for a total appropriation of $132.2 million in state funds and $211 in combined state and federal dollars.

Income Supports

For the first time in several years, there are no significant reductions in income maintenance cash grant or training programs. 

Cash grants, which two years ago topped $225 million, are budgeted at $60 million, reflecting the 2012 end to the General Assistance Program. TANF enrollment, which declined by 5.7% to 193,572 between November 2012 and November 2013, is expected to average 166,450 in 2014-15.

TANF funding will increase by $4 million and Supplemental Security grants for the aged, blind, and disabled will increase by $1.1 million to reflect caseloads changes.

The New Directions employment and training program is budgeted at $22.3 million, an increase of $4.9 million in state dollars, which offsets a reduction in federal funds.

Mental Health Services

Mental Health Services will increase by $41.7 million from $690.5 million to $732.1 million. New state dollars reflect current costs and offset $18 million in reduced federal funding. The appropriation also includes $4.7 million for an additional 90 individuals moving out of state institutions. The Behavioral Health Services program is level funded at $43.1 million.

Other Human Services

In one of the Governor’s signature initiatives, rape crisis and domestic violence programs are slated for a 10% increase. Both programs are up 25% in funding since Governor Corbett took office.

Legal services are level funded again at $2.5 million. The Human Services Development Fund, after sustaining a 39% cut in 2011-12, is level funded at $13.5 million. This program provides flexible funding for counties to deliver social services that best meet local needs. Homeless assistance is level funded once again at $18.5 million. In 2012-13, the state began a program to allow counties to combine funds from six human services line items. Twenty counties participated in the program in 2012-13, with 10 additional participants in 2013-14.

County child welfare, which funds county needs-based budgets to offer child protection, adoption and other services, receives an increase of $28.4 million.

Intellectual Disabilities

Funding for state centers for individuals with intellectual disabilities will increase in 2014-15 from $120 million to $131 million. The $11 million increase is roughly 60% related to increased costs at five state facilities and 40% to make up for the FMAP revision. The budget also includes $26,000 in savings from transferring 50 individuals to home and community-based services.

ID-intermediate care facilities are budgeted at $152 million. This is a $2.7 million increase in state funds, which partially offsets $8 million in reduced federal funds.

The Community Waiver program will increase by $60 million in 2014-15, a 6% increase, from $1.03 billion to $1.09 billion, while the base program will decline by 1% to $150 million. The Community Waiver has grown by $261 million, or 32%, since the beginning of the Corbett administration; the base program has declined by $8.2 million, or 5%, over that same period.

In the Community Waiver program, $28.7 million of the increase reflects utilization and program costs, and $32.2 million is allocated to offset the FMAP reduction. The budget also incorporates $42 million in savings from the federal Long-term Care rebalancing Initiative. $722,000 is allocated to provide home and community-based services for 50 individuals currently in state centers.

$22.4 million is appropriated for the Governor’s Waiting list initiative, which will provide home and community-based services for 400 adults and services for 700 young adults graduating from Special Education programs.

In autism programs, $1.1 million is allocated to provide services to an additional 100 adults with autism spectrum disorders.

Conservation and Environmental Protection

The Departments of Environmental Protection (DEP) and Conservation and Natural Resources (DCNR) are primarily responsible for administering environmental programs using General Fund dollars. Both departments have seen funding reductions and a shift in the source of funding from General Fund to the Oil and Gas Lease Fund. In 2007-08, DCNR received $90 million more in General Fund dollars than is proposed for 2014-15, and DEP received about $80 million more than proposed for next year.

In 2014-15, the Governor’s budget proposes to cut an additional $3 million, or 9.9%, of DCNR’s General Fund allocation, replacing the funds with Oil & Gas Lease Fund dollars. If enacted at the proposed levels, the Oil & Gas Lease Fund would finance $4 for every $1 of General Fund spending on state parks and forest operations.

The Oil & Gas Lease Fund was established to fund conservation projects, but funds have been increasingly redirected to support the general operating costs of environmental agencies. The budget also proposes redirecting $75 million from new gas leases (where the wells would have no additional surface impact on state lands) from the Oil & Gas Lease Fund to the General Fund. 

Proposed General Fund appropriations for DEP increase by $10 million, or 7.8%, from 2013-14, designed to offset a reduction in federal funding. The Delaware River Basin Commission sees its support cut from $939,000 to $439,000, while other river basin commission funding is unchanged.

Table 5. General Fund: 2014-15 Environmental Funding

The Oil & Gas Lease Fund is not the only special fund providing more operational support to environmental programs. This type of fund shifting can be a double-edged sword. While it allows environmental programs to avoid the yearly competition for General Fund dollars, it also removes them from public view. For instance, when General Fund dollars are replaced with oil and gas lease revenue, it makes environmental programs more dependent on increased drilling for funding.

Total state spending on environmental-related programs, including DEP, DCNR, the Fish and Boat Commission, and the Game Commission, is increased in 2014-15 above funding levels in both 2010-11 and 2013-14 (however, a comparison to 2007-08 shows modest declines). (See Table 6.)

Table 6. All State Funds: 2014-15 Environmental Programs

Increased facility rehabilitation and grants to local parks and other organizations are proposed out of the Environmental Stewardship and Keystone Recreation, Park and Conservation funds in DNCR. DEP sees an increase in watershed protection from the Environmental Stewardship Fund, as well as a $24 million increase in funding for gravel roads from the Motor License Fund in connection with the recently enacted transportation funding law. While not included in the operating budget, the Governor’s plan includes an additional $45 million in bond-financed Growing Greener II spending on parks and forest infrastructure.

Increases in the number of fishing licenses and boat registrations have provided more revenue for Fish and Boat Commission operations. The number of citations issued for violation of game laws has increased since 2010-11, but the number of hunting licenses sold has remained steady. Both commissions are largely dependent on user fees for their operations. 

Public Safety and Corrections

The cost of running state prisons will increase by $78 million, or 4%, to more than $2 billion in 2014-15. The prison population is expected to drop by approximately 1,000 inmates to 49,700 in 2014-15. Since 2011-12, Corrections spending has risen by 10%. The bulk of this increase is due to the rising cost of incarceration, which is projected to climb to $41,100 per inmate in 2014-15. 

A law enacted in 2012 known as the Justice Reinvestment Initiative was expected to reduce the prison population by 620 inmates and save the commonwealth approximately $28 million over five years. More than $7 million of these savings are to be reinvested to generate further savings over the long term. To date, the initiative has not demonstrated any notable savings.

The State Police are funded jointly through the Motor License Fund and the General Fund. The budget will increase the allocation in both: by 6.8% in the Motor License Fund to $666 million, and by 3.4% in the General Fund to $217 million. The State Police budget includes $13.7 million to fund the training of 350 new state troopers.

The Board of Probation and Parole will receive an increase of $12.9 million, or 9.1%, to a total of $154 million. This increase reflects higher costs and allows for the hiring of 36 new employees to handle rising parolee caseloads. Since 2011¬‐12, Probation funding has increased 24%. The board interviews approximately 1,800 inmates for parole each month and is projecting to supervise 40,190 parolees and probationers by the end of 2014-15.

The Pennsylvania Emergency Management Agency is funded at $11 million in the budget, a decrease of nearly 50%. The decline in funding is the result of non-recurring state matching funds for federal aid to address summer 2011 and 2013 storm damage and to support the Hazard Mitigation program, intended to reduce the likelihood of damage from future flooding events.

Agriculture

The Department of Agriculture funds promotional activities for the state’s agricultural industry, research into diseases and pests, and inspections of food establishments, among other things. Overall General Fund dollars in the Governor’s budget remains flat at nearly $124 million.

The budget increases Department of Agriculture general government operations by $2 million to $24.7 million. It also proposes a $1.5 million increase in the transfer to the Agricultural College Land Scrip Fund (Penn State) for a total of $47.7 million. These General Fund increases are offset by a zeroing out of funding for a number of smaller agricultural programs, including agricultural research, promotion, education and exports, hardwoods research and promotion, and food marketing and research. This type of program elimination has been proposed in prior years with the General Assembly restoring funding.

Funding for the state food purchase program, which pays for federal surplus food for pantries, child care programs, and other free food distribution programs, is essentially flat¬‐funded at $17 million. The Farmers Market Nutrition Program, providing eligible mothers and seniors with vouchers to purchase fresh grown produce at farmers markets, saw no change in its $2 million appropriation.

The budget redirects $17.7 million from the Pennsylvania Race Horse Development Fund to the Veterinary Lab, the Animal Health Commission, the State Farm Products Show Fund, and payments to Pennsylvania Fairs.

Transportation

Spending on roads and bridges will increase in 2014-15 by $1.2 billion thanks to Act 89 of 2013, the transportation funding law enacted in November. The plan generates new revenue for transportation projects from an increase in gasoline taxes and other fees over a five-year period, with $2.3 billion in additional spending on roads and bridges by the fifth year. 

In 2014-15, most of the $1.2 billion will go toward three areas: State Highways and Bridges ($553 million), Mass Transit ($355 million), and Municipal Payments ($106 million). Funding from the General Fund for the Rail Freight Assistance Program is eliminated with new funding coming from the Multimodal Fund created by Act 89.

Table 7. Transportation Infrastructure and Transit Investments

Increases in Motor License Fund revenue spending (shaded in blue in the table above) are raised largely by an increase in the Oil Company Franchise Tax (OCFT) cap from $1.87 to $2.49 per gallon. This cap will be raised in several yearly steps until the OCFT is calculated at market prices. The second primary source of these increased funds is an increase in licenses and fees. These funds will be used to maintain and repair the state’s system of roads and bridges.

Transit funding increases are paid for with a redirection of the $200 million from the Turnpike Commission and increases in motor vehicle fines. Much of the increase in public transit funding is to be invested into infrastructure improvements, rather than operating assistance for local public transit agencies. 

Multimodal funds are used for grants to other forms of transportation: airports, Amtrak service, rail freight projects, ports, bicycle and pedestrian facilities, and funding for the Commonwealth Finance Authority to help finance local projects. 

Community and Economic Development

General Fund dollars for Community and Economic Development programs would see an increase of $4.6 million, or 1.9%, to $241 million. Business development programs such as World Trade PA, Marketing to Attract Business, Pennsylvania First, and the Commonwealth Finance Authority receive funding increases, while the Marketing to Attract Tourists appropriation is cut in half. Infrastructure and Facilities Improvement grants and state support of the Ben Franklin Technology Development Authority are funded at 2013-14 levels. Funding for the Office of the Receiver for the City of Harrisburg is eliminated as the city is expected to emerge from receivership, while funding for Early Intervention for Distressed Municipalities remains flat.

Department of State

$5.3 million is sought in the Department of State budget to advertise and publish three proposed Constitutional Amendments (there was no description of what these amendments entail). $2 million is cut for Voter Registration and Education.

Labor and Industry

Overall General Fund support for Labor and Industry remains at $72 million. The budget provides a $1 million increase for the Office of Vocational Rehabilitation that will be combined with federal matching funds to provide on-the-job training for young people age 18 to 25 with disabilities. Funding for Industry Partnerships is cut by $200,000, or 11%.

Legislature and Judiciary

Funding for the Judiciary remains flat at $317 million, while funding for the Legislature remains flat at nearly $278 million. The General Assembly typically adjusts its own funding and that of the Judiciary in subsequent budget proposals.

Row Offices

Funding for the Executive Offices increases by $5.6 million, or 3.2%, to more than $178 million. Funding for the Governor’s Office is essentially flat funded at just over $6 million. 

Also level funded are the Attorney General’s Office ($87 million) and the Auditor General’s Office ($45 million). 

Funding for the Treasury Department increases by $41.4 million, 3.7%, to $1.2 billion. Most of the increase, $37 million, goes toward General Obligation Debt Service, which totals $1.1 billion in 2014-15.

Footnotes

[1] 2013 figures compiled by the Keystone Research Center and Moody’s projected the 2014 job figures (http://www.pewstates.org/research/data-visualizations/top-states-for-job-creation-in-2014-85899531089).