Governor’s 2016-17 Budget Overview

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Executive Summary

Pennsylvania at a Crossroads

In his budget address, Governor Wolf observed that Pennsylvania faces a choice of two paths. Taking one path would require us to deal with the reality of our structural deficit and raise revenues to close it. It would enable government to continue to meet its responsibilities to educate our children, serve those who need our help, protect the environment and encourage economic growth. Taking the other path would require us to accept devastating cuts to education and health and human services.

The structural deficit

The fundamental reality with which any serious budget proposal for both the current and the next fiscal year must contend is that Pennsylvania faces a severe structural deficit. The term “structural deficit” simply means that, without any changes to current law, expenditures will exceed revenues. The government of Pennsylvania cannot continue its current programs without facing a projected deficit for the current year, 2015-16, between $300 and $500 billion, depending on the extent to which appropriations lapse, that is, are not spent. The projected deficit for 2016-17 is $1.8 billion. It is unconstitutional for the state government to run a deficit. Thus either revenues must be increased or expenditures reduced.

Governor Wolf has chosen to close the structural deficit by raising revenues and limiting expenditures to the minimal necessary to meet the needs of Pennsylvania

Revenues

The Governor proposes to increase taxes by $892 million in the current fiscal year and $2.7 billion in 2016-17. General revenues from the Personal Income Tax and Sales Tax account for 69% of the tax increase in 2015-16 and 62% in 2016-17 with the balance of new revenue coming from a combination of business, tobacco, and severance taxes.

Expenditures

The Governor proposes spending $32.7 billion 2016-17, a 7.1% increase over the baseline 2015-16 budget. [1] Most of this new spending is needed simply to cover mandatory spending increases which the state must make by law, including long-delayed contributions to the state pension funds.

The Governor’s budget is far less ambitious than the one he presented last year and builds on the bi-partisan budget that was agreed to by House and Senate leaders, that passed the Senate on a bi-partisan vote of 43-7, and that came within one roll call of passing the House on a bi-partisan vote.

The Governor has thus proposed an austere budget that makes the minimum increase in spending necessary to meet our responsibilities and to invest in our future.

Three quarters of the spending increases, $1.6 billion of $2.2 billion, are mandatory – outlays required to match federal funds, pay our debts, fund pensions and pay for prisons. With the exception of education and human services, the Governor’s budget proposes minimal increases in discretionary spending.

The increase in discretionary spending is just 2%, and most of that goes to education.

For K-12 schools, the Governor proposes classroom funding for 2016-17 that would get back roughly to the 2010-11 funding level in nominal dollars, that is, unadjusted for inflation. But the inequities exacerbated by the education cuts in 2011-12 will remain, and funding levels in most of the state’s lower-income schools would likely remain well below the 2010-11 level.

In higher education, the Governor’s budget would restore only about a quarter of the (nominal dollar) funding cut of 2011-12. This is too little to substantially lift Pennsylvania from its 49th rank for state investment in higher education and too little to stem the continuing rise of tuition and student debt.

In human services, the Governor’s proposal would provide additional funding for County Assistance Offices, Intellectual Disabilities, Long-term Care, Mental and Behavioral Health, Homelessness and Domestic and Rape Crisis Services. But funding for County Assistance Offices would not return to the levels of 2010-11 and waiting lists, sometimes long, will remain for some human services.

In economic and community development programs, the Governor proposes modest funding increases in 2016-17. Funding will remain 50% below that of 2007-08. While some of these reductions make sense, the scale of the retreat echoes the broader theme of recent budgets—Pennsylvania’s state government is failing to invest in the future of our economy.

In environment and natural resources, the Governor proposes minimal increases that leave the state spending far less as a proportion of the budget as a whole than in the past and below what is necessary to meet the new challenges of natural gas drilling and climate change.

The Alternative

The alternative to the path proposed by Governor Wolf is to close the structural deficit not with new revenues but either by more of the budgetary chicanery that hides deficits or by drastically reducing expenditures.

After years of “balancing” the budget with smoke and mirrors, there are few options for doing so again. And they simply put off the difficult choices which we must ultimately make.

Reducing expenditures to close a deficit of $1.8 billion would be devastating. Most of the budget cannot be reduced without violating federal law, losing billions in federal dollars, or undermining public safety. Thus a reduction of $1.8 billion would necessarily fall on education and human services. We would see roughly a $1 billion reduction in pre-K and higher education, undermining opportunity for our kids and our economic future. And we would see a $600 million reduction in human services, with dire consequences for our children and those unlucky enough to suffer from mental illness, a disability, an addiction, or difficulty finding stable, family sustaining employment.

Summary

Governor Wolf has chosen the path that gives us a responsible budget, one that does the minimum that needs to be done and little more. His proposal closes the structural deficit and restores some but not all funding for education and human services. It does not provide new funding for many critical needs, from giving us the schools we really need to protecting the environment to reducing waiting lists for human services to invigorating our economy. It increases spending mainly where there is no choice and where the future of our children and economy, and decency to those who need our help, demands it.

The alternative would be irresponsible and short-sighted—reducing living standards and the quality of life for all Pennsylvanians in the long run.

It’s not a hard choice.

 

Overview of the Governor’s Proposed 2016-17 Budget


Pennsylvania at a Crossroads

In his budget address, Governor Wolf observed that Pennsylvania faces a choice of two paths. Taking one path would require us to deal with the reality of our structural deficit and raise revenues to close it. Taking the other path requires us to accept devastating cuts to the budget especially in the areas of education and health and human services.

Our analysis of the Governor’s proposals and the circumstances in which it was presented confirms his basic premise. Pennsylvania truly faces a stark choice between two different paths. One embraces the common sense approach, supported by both Democrats and Republicans, that has long guided our state. It deals with the structural deficit honestly. It provides enough revenues to improve education for our kids, and their future employers. It accepts the responsibility to take care of the disabled, ill and aged who, through no fault of their own, need our help. And it asks Pennsylvanians to pay a bit more to attain these goals.

The second path would give us devastating budget cuts that abandon Pennsylvania’s historic commitment to providing educational opportunity and protecting the vulnerable. This path would sabotage future economic growth and the lives of our children based on a shriveled and misguided idea of what Pennsylvanians desire and can afford from their state government. Our state government tried the extreme path of radical budget cuts in 2011. And the voters of Pennsylvania rejected it. We cannot go down that path again.

The Challenge of the Structural Deficit

The central goal of the administration’s budget proposal this year is, rightly, to close the structural deficit faced by Pennsylvania without devastating budget cuts.

That there is a structural deficit is widely acknowledged. Figure 1 presents data from the Independent Fiscal Office (IFO) that documents the stark reality of the commonwealth’s fiscal health absent new recurring revenues to support state spending. The projected deficit for the current year, 2015-16 is between $300 and $500 million, depending on how much of that which has been appropriated never is spent.[2] The projected deficit for 2016-17 is $1.8 billion.

As we have documented, the structural deficit does not reflect an expansion in state government relative to the size of the Pennsylvania economy. As a percentage of the state’s Gross Domestic Product (GDP), state government spending has averaged 4.38% since 2012, substantially below the 4.71% average between 1994 and 2011. Governor Wolf’s proposal would increase spending to 4.68% of the state’s GDP, just below the historic average.

Rather than out-of-control state spending, the source of the structural deficit is revenues failing to grow with the state economy. A major cause of declining revenues is corporate tax cuts. If corporate taxes brought in the same percentage of General Fund revenues that they did between 1988-89 and 2002-03, total general revenue would be $2.39 billion higher than projected this year.

Figure 1

The Governor’s budget proposal, if enacted in full, would lead to a small surplus of $31 million in 2015-16 and $17.9 million in 2016-17.

Revenues

General Fund Revenue Sources

We can close a deficit with either new revenue or reduced expenditures. We begin by looking at the new revenue the Governor proposes to raise to fund the work of state government

The Governor proposes to increase taxes by $892 million in the current fiscal year and $2.7 billion in 2016-17. His goal is not only to fund spending in these two fiscal years, but to generate sustainable revenues to support spending at the current level into the future.

If the General Assembly fails to raise adequate recurring revenue, the state will not be able to afford a budget with the minimum increase in spending necessary to meet our responsibilities and to invest in our future.

Figure 2 shows the source of General Fund revenues. As in recent years, the Personal Income Tax and Sales Tax generate over 70% of state revenues. The Corporate Net Income Tax and other business taxes together generate only 15% of General Fund revenues. This is a dramatic departure from businesses contributions to the General Fund in the past. In the 1970s, corporate taxes accounted for 28% of General Fund revenue, a figure that has fallen to 18% today. The Independent Fiscal Office (IFO) projects it will fall to 14.9% by 2020-21. From 1988-1989 to 2002-2003, when business tax cuts first began, taxes on corporations were, on average, 22.25% of all General Fund revenues

Figure 2

General Fund Revenue Increases

As table 1 shows, increases in Personal Income Tax (PIT) and the Sales Tax account for 69% of the tax increase in 2015-16 and 62% in 2016-17, with the balance of new revenue coming from a combination of business, tobacco, and severance taxes.

Table 1

As he proposed in 2015-16, the Governor recommends again raising the income eligibility limit for qualifying for 100% tax forgiveness from $6,500 to $8,700. A two-income family of four with two dependents would owe no tax if its income is $36,400 or below; currently, such a couple pays no PIT up to $32,000 in annual income. The tax forgiveness expansion would reduce PIT collections by $83.4 million.

Overall, a larger share of the Governor’s proposed new revenues than ongoing revenues would come from the income tax (51% versus 40%). With the addition of a severance tax, a similar share of the new revenue would come from corporation taxes (13% versus the 15% noted above). These changes, as well as the expansion of income tax forgiveness, increase the overall progressivity of the Governor’s tax proposals.[3]

The Governor did not propose other tax changes that PBPC has called for that would raise revenues in a more progressive way, from raising the Personal Income Tax rate on income from wealth to expanding the Sales Tax to other services that are more often used by those with high incomes. Nor did he propose reforms in the Corporate Net Income Tax that would close loopholes and bring in substantial new revenues.

Expenditures

The Governor proposed a 7.1% increase in spending for 2016-17. It is an austere budget that builds on the bi-partisan budget that was agreed to by House and Senate leaders, that passed the Senate on a bi-partisan vote of 43-7, and that came within one roll call of passing the House on a bi-partisan vote. Governor Wolf is calling on the members of the General Assembly to enact supplemental appropriations to bring the current, 2015-16 budget up to the level of the bi-partisan agreement. And he is asking them to pass a 2016-17 budget at the $32.7 billion level, $2.2 billion more than he proposes for 2015-16.

A complication in discussing the 2016-17 budget arises when we try to compare it to budgets of previous years. And the same complication explains why some news reports say the Governor is seeking $32.7 billion in spending while others say he proposes a budget of $33.3 billion. The administration proposes to move contributions to the Public School Employees Retirement System (PSERS) the teachers’ pension fund off budget—$280 million in 2015-16 and $561 million in 2016-17. Instead of providing funds for PSERS from the General Fund, funding for PSERS would come from a dedicated portion of the Personal Income Tax. Media reports that say the Governor proposes to spend $33.3 billion are including the pension contributions. We will do the same when comparing the 2015-15 and 2016-17 budget to previous years. But for the purposes of analyzing the current year budget, we will use the $32.7 in order to be consistent with the Governor’s budget presentation and most media reports.

Figure 3 shows the Governor proposes to increase spending in 2016-17 by 7.94% more than spending in 2015-16. His revised budget for 2015-16 increases spending by 5.48% more than 2014-15.

Figure 3

Figure 4 gives an overview of General Fund spending. It shows that PreK-12 and higher education make up the largest part (41%) of government spending in Pennsylvania while human services, including Medical Assistance and long-term care, make up the second largest part (38%). Corrections (8%) and debt service (4%) are next. And all the other services the state of Pennsylvania provides makes up a small portion (9%) of all spending.

Figure 4

Mandatory increases

A budget increase of 7.1% might seem large. However, understood properly, the Governor has actually proposed an austere budget. Roughly $1.6 billion of the $2.2 billion in increases is mandatory. They are described in Table 2.

Mandatory spending increases result from three circumstances. (1) The state is legally required to make payments, for example, to meet pension obligations and to make interest payments on state debt. (2) To receive federal funds for certain federal programs, the state must provide benefits to all who are eligible for the program and pay a share of the costs. Increased costs for Medical Assistance (which is what Pennsylvania calls Medicaid)—which draw down federal matching funds—make up the bulk of the mandatory increase in human service spending. These costs go up in part because health-care costs and long-term care costs increase over time (albeit more slowly recently than at some points in the past) and because Pennsylvania’s population is getting older. (3) Prison costs have to be covered because state government cannot decide on its own to suddenly reduce the prison population. Long-term, there will be opportunities to reduce the prison population and prison costs.

Table 2

Education

New education funding

Education is the one area where Governor Wolf calls for new spending. PBPC analyzes education spending in two ways, which are presented in figures 4 and 5. Figure presents total PreK-12 spending while figure 5 presents what we call “classroom funding,” the amount of state money that actually reaches students. [4]

Figure 5

Figure 6

There are good reasons for Governor Wolf to call for new education spending. As we showed recently, in 2014-15 classroom funding remained $580 million below the level it reached in 2010-11, before the Corbett cuts. Those cuts were distributed in a way that made our already unequal schools even more unfairly unfunded. These cuts were devastating to education in Pennsylvania. They cost the state tens of thousands of teachers, guidance counselors, and school nurses. And the result was declining test scores throughout the state and especially in the relatively poor school districts that lost the most funding.

The bi-partisan budget agreement recognized the critical need for more education funding, increasing basic education funding by $376 million and special education funding $50 million, less than Governor Wolf proposed but far more than Republican budget. That amount would close all but $200 million of remaining cut to classroom funding compared to 2010-2011.

Here, as elsewhere, Governor Wolf’s proposal for 2016-17 builds on the budget compromise and adds another $200 million to basic education funding and $50 million to special education. Moreover, the Governor’s proposal calls for distributing education funding in fiscal year 2016-17 using the new funding formula proposed by the Basic Education Funding Commission.

This additional $200 million would bring us closer to eliminating gap between the Corbett education cuts and the funding levels from 2010-11 (not taking inflation into account). Moreover, it is not clear whether restoration of education cuts have entirely made up for the highly unequal cuts of 2011-2012, which fell the hardest on the school districts with the lowest-income students. We will look at the impact of the Governor’s proposal on school inequity in subsequent work.

In addition, while it is important to restore the cuts to education of 2011-12, we still need more investment in public education to give us high quality schools everywhere in the state. Governor Wolf’s proposals for these two fiscal years would be a big step toward adequate and fair education funding. But they are not all we need.

Charter school reform

Governor Wolf proposed a number of other education initiatives that are worth special notice, in part because they are meant to reduce ineffective spending on charter schools. His plan:

  • implements the 2014 Special Education Funding Commission charter school reforms saving $180 million over three years;
  • implements cyber charter school funding reform that aligns reimbursements with the actual cost of these schools, saving $50 million annually;
  • permanently ends the pension “double dip” that allows charters schools to be paid twice for the same employee pension saving $110 million; and,
  • limits charter school reimbursements for audited costs, reducing the $148 million fund balance.

Higher education

As of 2014-15, Pennsylvania funding for higher education as a share of state personal income ranked 49th out of the 50 states in the country—less than half the national average.[5] In his original 2015-16 budget proposal, Governor Wolf proposed a $140 million increase in funding for two-year and four-year colleges, the community colleges, the 14 PA State System of Higher Education (PASSHE) colleges, and the four state-related universities, Penn State University, University of Pittsburgh, Temple University, and Lincoln University. This proposal was intended as the first of a two-part full restoration of the higher education funding cuts in the 2011-12 budget. In his 2016-17 budget proposal by contrast, Governor Wolf proposes only a $72 million increase in funding for core higher education, a bit less than a 10% increase over 2014-15 spending. This would restore only about a quarter of the nominal dollar cut for publicly supported colleges in 2011-12.

 

Figure 7

As figure 7 shows, Governor Wolf’s budget proposal for 2016-17 accepts a 20% cut in the nominal dollar funding for all of higher education (including the Pennsylvania Higher Education Assistance Agency (PHEAA)) in 2016-17 compared to 2010-11. Even with recent low inflation, this is equivalent to a 30% cut in higher education funding in 2016-17 compared to in 2010-11.

Here are the separate components of higher education funding.

  • Community colleges would receive $22.1 million more in 2016-17 than in 2014-15, bringing nominal dollar funding just above the 2010-11 level.
  • Funding for the 14 “state-owned” PASSHE schools would increase by $42.3 million (10%) compared to 2014-15, to $455.1 million, restoring a bit less than half the 2011-12 cuts.
  • Governor Wolf zeroed out funding for the four state-related institutions in the 2015-16 budget passed by the General Assembly, a cut of $521 million compared to 2014-15. The Governor’s proposed 2016-17 budget would restore this $521 million and increase it by another $55 million for an overall increase compared to 2014-15 of just over 10%. Even this increase, if passed, would restore only one third of the amount cut in 2011-12.
  • Each individual state-related universities would also see about a 10% increase compared to 2014-15. Penn State (including Penn College of Technology) would receive about $25 million (11%) more, the University of Pittsburgh and Temple University would each receive about $14 million (10%) more, and Lincoln University $1.6 million (12%) more.
  • Total funding support for the Pennsylvania Higher Education Assistance Agency in the Governor’s proposed 2016-17 budget is $37.8 million below the 2014-15 level, a cut of nearly 10%.

The failure to raise revenue could lead to deep reductions in funding for higher education, in part because this funding is more discretionary than most parts of the budget. Economic research indicates that reduced higher education funding in Pennsylvania would compromise the state’s future economic growth and undercut economic opportunity for individuals, particularly in rural areas where educational attainment is especially low. [6] Underfunding higher education also saddles Pennsylvania college students with among the highest tuition and debt levels in the nation.

Economic and Community Development

The 2015-16 budget passed by the House and Senate and line-item vetoed by Governor Wolf provided a $4.5 million or 2.5% increase in state dollars for the Department of Community and Economic Development (DCED). The bipartisan budget agreement would have added $61 million. Governor Wolf’s 2016-17 budget proposal would further increase DCED funding. In the rest of this section, we examine the supplemental increases for 2015-16 and the proposed 2016-17 funding as a combined two-year increase that lawmakers will consider over the next few months. We also break down DCED spending increases into three categories: “business subsidies” that provide an incentive for businesses to locate a new factory or site in Pennsylvania; “grow-your-own” programs that foster the growth of existing or startup companies within Pennsylvania; and community development programs. [7]

Since 2007-08, DCED suffered more cuts than any other state agency. By 2014-15 its budget was just a little over one-third of the pre-recession level. Over the two-year 2014-15 to 2016-17 period, the Wolf budget proposes to increase total DCED funding from $204 million to $288 million. This would bring funding to within $5 million of the 2010-11 budget but leave it below half of the 2007-08 level of $592 million. (There have been some increases in tax credit programs over this period, partially offsetting reduced “on budget” funding.) Almost two-thirds of the DCED funding cuts fell on the community development side of the agency, which PBPC estimates shrank from $270 million in 2007-08 to $20 million in 2014-15.

Business Subsidies

Roughly two-fifths of Governor Wolf’s proposed $84 million DCED funding increase for the 2014-15 to 2016-17 period would go to two programs that provide business subsidies.

  • Funding for the PA First program, which provides grants for specific job-creation projects (such as a new plant), would increase from $20 million to $45 million. State funds may cover capital costs, infrastructure, or training.
  • Funding for the Infrastructure and Facilities Improvement (IFI) Grants would jump from $19 million to $30 million, the highest funding for that program in at least a decade. This program dedicates a portion of expected future tax revenue generated by new projects, such manufacturing facilities, industrial or retail projects, or convention center and adjacent hotels and hospitals, to support them.

Two DCED funds that provide low-interest loans to businesses provided significant one-time revenues to the General Fund in 2014-15, undercutting their ability to provide business assistance that complements the PA First and IFI grant programs. The Machinery and Equipment Loan program transferred $85 million to the General Fund, reducing available funds for 2015-16 to less than $12 million; and the Small Business First program transferred $95 billion, reducing its available funds for 2015-16 to $25 billion. The impact on businesses of this reduction in DCED’s ability to provide low-interest loans to job-creation projects and small businesses depends on interest rates in the private capital market, which are currently low, and also on credit availability from non-state sources.[8]

Grow-Your-Own programs

One-seventh of the increase ($12 million) would go for Industrial Resource Centers (IRCs), Pennsylvania’s “manufacturing extension partnerships” that provide low-cost consulting to grow Pennsylvania’s own small and medium-sized businesses. Historically, the IRCs focused on improving the efficiency of client businesses, encouraging the adoption of lean production and quality improvement programs. In the past decade, some IRCs have also sought to help Pennsylvania businesses reposition themselves within more specialized markets with bigger profit margins and more potential for growth. The 2016-17 Governor’s Executive Budget in Brief (p. 14) says that that this $12 million will continue an “IRC Manufacturing initiative” that will “mobilize the talents of Pennsylvania’s research universities to advance manufacturing technology and commercialization.” [9] The same document on p. 11 also indicates that, in exchange for the proposed 2016-17 increase in funding for state-related universities these institutions would collaborate in the effort to encourage innovation and translate their research into job creation.

Community development

The largest funding restoration for the regional and community development part of the agency would result from the reallocation of $125 million in existing Commonwealth Finance Authority (CFA) resources to recapitalize a “brownfield redevelopment” program—called “Business in Our Sites”—that fosters new investment development on already developed land in older communities. An additional $9 million of the DCED funding increase would support another community development program, Keystone Communities. Keystone Communities incorporated the previously separate Main Street and Elm Street programs after 2010-11.

Roughly one-fifth of the total DCED funding increase—from $78 million to $96 million—would be transferred to the CFA. These transfers cover debt repayment for bonds that financed a wide range of projects approved by the CFA Board.

The last $20 million of the DCED funding increase would support:

  • $6.4 million for “Economic Growth and Development Assistance”;
  • $4 million for “Public Television Technology,” up from zero on 2014-15; and,
  • $10 million for “Regional Events Security and Support”.

These increases are offset by reductions in funding from 2014-15 of $5 million for Discovered in PA and zeroing out Developed in PA; $4.3 million for the Center for Local Government Services; $3 million for marketing to attract tourists (balanced by $1 million more for marketing to attract business); and $2 million for the Partnerships for Regional Economic Performance Program.

Human Services

Much of the human services budget consists of mandated Medical Assistance spending. As we did in our analysis of the three budget proposals for 2015-16, Table 3 focuses on a number of critical areas of human service spending where the Governor and General Assembly can more easily change spending levels.

The Governor’s budget proposes substantial increases in human services spending, especially where the previous administration had reduced spending. County-based services, Mental and Behavior Health Services, and Intellectual Disability Services and Homelessness all receive substantial increases. Long Term Care, parts of which are mandated under the Medical Assistance program and Program for Children receive increases as well.

Table 3

A few specific areas of new spending stand out.

 

  • The administration proposes $34 million in new spending for individuals with substance abuse disorders. This effort is a response to growing concerns about heroin and prescription opioid abuse.
  • Some new spending aims at reducing waiting lists for child care for low-income working families and for home and community-based facilities for those with intellectual disabilities and autism. However, waiting lists, especially in the area of intellectual disabilities, remain long and the new spending will not eliminate them. For example, while the Governor proposes an increase in the Intellectual Disabilities-Community Waiver line item to reduce the emergency waiting list, only 500 of the 4000 people on the list will be served by it.
  • The new spending for county offices aims to partially restore the 10% cuts of 2012-2013.
  • The Governor proposes to increase spending by $10 million to expand comprehensive home visiting services aimed at preventing child abuse and enhancing early identification of children with special needs. Programs of this kind are particularly valuable because early intervention can not only help children when they most need it, but can save the state substantial money in later years.

Environmental Protection, Conservation and Natural Resources

Funding for the Department of Environmental Protection (DEP) and Conservation and Natural Resources (DCNR) receive small increase in the Governor’s budget, reflecting the limited funds available for increases that are not mandatory.

Environmental Protection

The DEP receives a 7.8% two-year increase over 2014-15 in General Fund revenues. But funding from other sources is down, and its overall funding level declines by $6 million or .86%. At time when natural gas drilling threatens the quality of our water and adds a dangerous greenhouse gas, methane, to our air and when it is difficult to find the resources to inspect and decommission abandoned oil and gas wells, DEP has 157 fewer employees than it did in 2010. The 2106-17 budget authorizes an increase only two positions.

Conservation and Natural Resources

The DCNR receives a large increase in General Funds of $106,934 million, but much of this offsets the loss of $86,484 in revenue from the Oil and Gas Lease Fund and other special funds compared to 2014-15. The shift from the Oil and Gas Lease Fund, which we welcome, is partly driven by the marked decrease in drilling revenue this year. Taking all funds into account, DCNR spending will increase by $24 million.

Other Funds

The Growing Greener program, funded by a $4.25 per ton tipping fee charged to garbage haulers at landfills and the Marcellus Legacy Fund, which gets revenue from the gas drilling impact fee, will also have less money to spend. Revenue from the Marcellus Legacy Fund will decline almost 30% from $165 million to $117 million over two years. Spending from Growing Greener, which supports watershed protection and restoration, farmland preservation, community conservation grants, parks and forest facility maintenance and sewer and water projects, will decline 34% from $29 million to $19 million between 2014-15 and 2016-17.

The Keystone Recreation, Park and Conservation Fund, which funds land conservation projects, environmental education and historic preservation projects, will spend $95 million, up from $56 million in 2014-15.

Workforce Training and Career/Technical Education

Governor Wolf’s 2016-17 budget proposes small, high return-on-investment funding increases over 2014-15 levels for workforce training and for career and technical education. These investments aim to leverage private and federal funds and also to better connect career education and workforce training to the needs of employers with good jobs. Strengthening this connection boosts the payoff to state investment for individuals, businesses and the commonwealth.

Career and technical education investments include:

  • $28 million to modernize career and technical education, which will help 650,000 more commonwealth residents in the next decade obtain college degrees and/or high-value industry-recognized credentials;

o  $15 million to establish career and technical education public-private partnerships to train students for high-demand occupations that pay a living wage and offer a career ladder;

o  $5 million for Career and Technical Education Equipment grants, with priority for funds going to applicants that provide matching contributions from employers or other partners; and,

o  $8 million for career counselors to guide people to pathways to high-skill careers and higher education.

Workforce training funding increases include:

  • A $9.8 million partial restoration of funding for Industry (training) Partnerships, which bring together multiple employers in industries with good jobs to identify and address common skill gaps and workforce needs, which still leaves funding 40% below its 2005-06 to 2008-09 level;
  • Summer youth employment;

o  A new pilot summer jobs program at commonwealth agencies for low-income high school students;

o  $2.5 million to revive the Pennsylvania Conservation Corps within DCNR which from 1984 to 2011 offered over 500 youth and young adults annually, on average, a year of training through hands-on construction and other work related to conservation and outdoor recreation; and,

  • $2 million for vocational rehabilitation programs that help people with disabilities prepare for, secure, and maintain the highest-wage employment possible, leveraging $8 million in federal funds.



[1] Press reports about the budget sometimes say it totals $33.3 billion, sometimes $32.7 billion, and the increases in spending is sometimes said to be 7.9% and sometimes 7.2%. The discrepancy arises because the Governor's budget proposal moves $280 million in the proposed supplemental appropriation for 2015-16 and $561 million in 2016-17 of the required contributions to the school pension fund off budget into a restricted account. When you include these amounts the General Fund for 2015-16 is 30.8 billion and 33.3 billion in 2016-17 yielding an spending increase of 2.4 billion or 7.9%. To make it easy to compare our number to those in the Governor’s budget documents, we use the $32.7 billion total, except in figures that show government spending over a longer time period, where we used the higher number in order to make overall trends more transparent.

[2] The difference between the Governor’s projection of a $500 million deficit for 2015-16 and the IFO’s projection of a $318 million deficit is that the IFO assumes roughly $200 million in lapses, that is appropriations that are never spent.

[3] Source for the share of revenues from each type of tax: PBPC calculations based on Governor's Executive Budget 2016-17, pp. C1-6, C1-14, and D81.

[4] Our figures for total PreK-12 spending are slightly different (and higher) than those presented in the Governor’s summary of his budget proposal. We use our figures to make it possible for readers to compare our various analyses of education spending. At any rate, we believe that the most important measure is “classroom funding” because it excludes spending that does not directly affect what goes on in the classroom as well as spending on pensions which do not affect the quality of education in solely one year. For our methodology and data sources see Waslala Miranda, Undermining Educational Opportunity: Pennsylvania’s Unequal Restoration of School Funding, Pennsylvania Budget and Policy Center, October 21, 2015, especially Box 1 and "Methodology and Data Sources" (at the end of the brief); online at https://pennbpc.org/sites/pennbpc.org/files/finaledcutsbrief.pdf.

[5] Illinois State University College of Education, Grapevine Survey 2014-15, Table 4, http://education.illinoisstate.edu/grapevine/tables/Table4_GPV15.xlsx.

[6] Stephen Herzenberg et al., A Must Have for Pennsylvania, Part II: Investment in Higher Education for Growth and Opportunity, Keystone Research Center and Pennsylvania Budget and Policy Center, October 2014; online at https://pennbpc.org/must-have-pennsylvania-part-2-investment-higher-education-growth-and-opportunity.

[7] For more on these three categories, see Marina Cristina Herrera et al., Good Jobs, Strong Industries, a Better Pennsylvania: Towards a 21st Century Economic Development Strategy, Keystone Research Center, March 2010, online at http://keystoneresearch.org/sites/keystoneresearch.org/files/KRC2010report_0.pdf. In this source, the third category is labelled “regional, community, and industry” programs but since our discussion of the proposed 2016-17 budget focuses on community development only we use that simpler label here.

[8] As of the second quarter of 2014, outstanding small loans (less than $1 million) from banks to small businesses remained 17% below the 2008 peak, a drop in borrowing from $711 billion to $590 billion, potentially indicate of a lack of available credit. Using the rule-of-thumb that Pennsylvania is 4% of the United States, this implies a reduction in borrowing of nearly $5 billion. See Stephen Herzenberg and John McAuliff, All Pennsylvanians Prospering (APP) Together, Keystone Research Center, February 2015, Figure 1, p. 30; online at http://keystoneresearch.org/sites/default/files/App%20Together_20150302.pdf.