2008-09 General Fund Budget
• Enacted Budget: $28.27 Billion
• Due to the state’s economic decline, state revenues fell short of projections and created a $3.25 Billion deficit.
• Federal stimulus funds – ARRA money – were used to help offset the deficit and protect state programs.
• Estimated 2008-09 Spending: $28.32 Billion
• Total State Dollars: $27.08 Billion • ARRA Dollars: $1.24 Billion
2008-09 General Fund Budget
• Assessment of State Spending
Enacted Budget: $28.27 Billion. $470.4 Million in Spending was Cut to Offset $3.25 Billion Deficit. $1.2 Billion in Federal Stimulus Funds were used to Supplant State Dollars.
About $285 Million in 2009-10 Medical Assistance Expenses were paid back to be included in the 2008-09 budget.
Final Spending Totaled $28.32 Billion.
CRAFTING A NEW BUDGET FY 2009-10
The Budget Impasse
• 101 Days Past the Deadline
• This year’s budget impasse was both unacceptable and preventable. It was a created crisis by the governor and House Democrats in an effort to increase spending and raise taxes. • House Republicans began calling for a budget vote in May knowing the effect a late budget would have on taxpayers. • House Democrats ignored the calls-to-action and did not bring a budget bill up for a vote until July 15. • The governor could have ended the impasse on August 5 when he signed Senate Bill 850, but he opted to veto $13 Billion in vital funds to “pressure” lawmakers.
The Rendell Veto
• Withholding Funding for Leverage
In an August 5 interview with the Harrisburg Patriot-News, Governor Rendell made the following comments on the state budget:
Question: Now that the workers will get paid, do you think there will be less pressure on all sides to get this budget done? Rendell: No. The reason I line-item vetoed everything is to make sure there is still pressure. For example the county governments are screaming bloody murder because all of their lines are out. The universities, the PHEAA grants ... none of the PHEAA grants can go out. Students are going back to school and won't know what their full aid package is. The providers, like the pre-K accounts and the Head Starts, they're going to run out of money by the end of August, so there's still plenty of pressure to get this done.
House Republican Proposal
• GOP Compromise Budget
• House Republicans supported a budget that reflected the state’s economic conditions and better prepared for the future. • $27.5 Billion in Total Spending • Included a $150 Million increase for Pennsylvania schools and maintained – or in some cases increased – funding for the state’s most pressing needs.
• Held the line against tax increases in an effort protect taxpayers, both now and in the future.
• Preserved balances in the state’s reserve funds so they would be available in the event the economy continues to falter.
House Republican Efforts
• Working to End the Impasse
• House Republicans tried on three occasions to end the budget impasse by introducing our budget proposal. At no point was the plan ever considered for a vote.
• August 3: House Republicans work with several House Democrats and introduce a $27.5 Billion budget amendment to SB 850. Democrats withdraw the amendment and block a vote on the plan. • August 19: House Republicans introduce our budget proposal as House Bill 1943. The plan is never brought up for a vote. • September 1: Republican Leader Sam Smith presents the House Republican budget as a conference committee report. The plan was never considered by the Committee.
PENNSYLVANIA’S ENACTED STATE BUDGET FY 2009-10
Signed by Governor Rendell October 9, 2009
2009-10 General Fund Budget
• Enacted Budget: $27.8 Billion
• $2.6 Billion in Stimulus Funds (ARRA) were used to supplant state dollars.
• The budget includes $25.18 Billion in state dollars.
• Balancing the Budget
• The state carried a $2 Billion-plus deficit into FY 2009-10 from last year. • Another $1.3 Billion was needed for the Tax Refund Reserve. • To account for spending and the aforementioned points, the state needed more than $31 Billion to balance this year’s budget.
2009-10 General Fund Budget
• Total Revenues to Balance: $31.2 Billion
General Fund Revenue: $25.53 Billion (Original Estimate) • $486 Million in New General Fund Taxes • $558 Million in Adjustments to Existing Taxes • $2.1 Billion in Revenue Transfers (Rainy Day Fund, HCPRA, etc.) • Revised General Fund Revenues: $28.57 Billion Federal Stimulus Dollars (ARRA Funds): $2.6 Billion
* More than $73 Million in business tax cut adjustments were also included in the revised General Fund revenue total.
2009-10 New Taxes
• General Fund Tax Increases: $486 Million
• Capital Stock and Franchise Tax Rate Hike: $374 Million
• Increased Cigarette Tax (25 Cents Per Pack): $97 Million
• New Tax on Small Cigars (Same as Cigarettes): $15.3 Million
The budget also called for a new gross receipts tax on Medical Assistance Managed Care Organizations (MCOs) and is expected to generate more than $528 Million. This tax will be deposited into a restricted state account and used to augment DPW’s Medical Assistance Capitation appropriation which reimburses MCOs for care to MA recipients. This replaces the expired Medical Assistance MCO assessment and is preferred by those assessed versus the governor’s original proposal of a 2 percent broad-based tax on all MCOs.
All Other Taxes, $1.36 Billion
General Fund Budget $28.57 Billion
Non-Tax Revenue
Corporation Taxes, $5.09 Billion
Non-Tax Revenue, $2.53 Billion
• Reserve Fund Transfers • Interest Earnings • Licenses and Fees • Unclaimed Property • Fines and Penalties
Transfers and New Taxes
Personal Income Tax, $10.28 Billion Sales Tax, $8.39 Billion
$2.1 Billion in Revenue Transfers $586 Million in Tax Adjustments $486 Million in New General Fund Taxes
Cigarette Tax, $920.4 Million
* Revenue projections include new taxes.
General Fund Budget $27.8 Billion
Debt Service, $996 Million All Other Spending, $2.72 Billion
All Other Spending
• DEP • DCNR • State Police • Health • Labor and Industry • Legislature • Governor’s Office • Row Offices * Partial List
Corrections, $1.79 Billion
Education, $9.85 Billion
Federal Stimulus Offset
Public Welfare, $10.47 Bilion
$2.6 Billion in ARRA funds were used to supplant state dollars in this year’s budget.
Higher Education, $1.97 Billion
$25.18 Billion in state General Fund dollars were used in this budget.
Overview of Spending
• Education (Pre-K – 12)
• Pennsylvania’s 500 school districts will receive a $300 Million increase this year as part of the state’s Basic Education Subsidy. Combining state and federal ARRA money, funding will exceed $5.5 Billion • Another $715 Million in new funds will be issued directly to schools from the federal government via Title I, Title IID and IDEA. • Special Education funding will total more than $1 Billion – equal to last year.
• Most other education-related programs were either reduced or eliminated in the budget.
• A total of $654.7 Million in federal ARRA funds were afforded to Pre-K – 12 Education, all of which were used to support the Basic Education Subsidy.
Overview of Spending
• Higher Education
• Community Colleges are slated to receive $235.7 Million this year, which is equal to last year’s funding. • State Dollars: $214.2 Million • ARRA Dollars: $21.5 Million • The State System of Higher Education, which oversees the state’s 14 universities, will receive $503.4 Million, which is about $20 Million less than last year. • State Dollars: $465.2 Million • ARRA Dollars: $38.2 Million • PHEAA will receive $455.2 Million, the bulk of which will go to the agency’s state grant program. This reflects a $17.7 Million reduction.
Overview of Spending
• Higher Education: Non-Preferred Appropriations
• Penn State: $333.9 Million • ARRA Dollars: $15.8 Million
Table Games Effect
Funding for these schools was held hostage until mid-December as House Democrats and Governor Rendell upheld legislation as leverage for approval of table games. After criticism and pressure from House Republicans to approve the bills, the schools’ funding was eventually released.
• Pitt: $168 Million • ARRA Dollars: $7.5 Million
• Temple: $172.7 Million • ARRA Dollars: $7.8 Million • Lincoln: $13.8 Million • ARRA Dollars: $159,000
Overview of Spending
• Public Welfare
• Public Welfare accounts for the largest portion of the budget. • State Dollars: $8.73 Billion • ARRA Dollars: $1.68 Billion • Total State and ARRA Stimulus for DPW: $10.4 Billion • Medical Assistance accounts for the largest program in the DPW budget at approximately $5 Billion.
• When combining state and federal ARRA funds, most Public Welfare programs received an increase in funding in this budget.
• Of the $2.6 Billion in ARRA funds used to supplant state dollars in this budget, more than half went to DPW.
Overview of Spending
• Corrections
• More than $1.78 Billion will support the state’s 27 correctional institutions. Combining state and ARRA dollars, this represents nearly a $180 Million increase over last year. • State Dollars: $1.61 Billion • ARRA Dollars: $172.9 Million
• Corrections has continued to remain one of the budget’s largest expenditures. It also serves as one of the fastest growing areas, as well. • Currently, the state’s prisons house 51,000-plus inmates . • Since 2005-06, the prison population has increased by more than 8,500 inmates.
Overview of Spending
• Debt Service
• Debt service payments included in the General Fund budget total $996 Million in this year’s budget. • General Obligation Debt Service: $930.9 Million • Commonwealth Financing Authority Debt Service: $65 Million • Debt Service has also become a rapidly increasing portion of the General Fund Budget.
• Since Fiscal Year 2003, annual debt service payments to be paid from the General Fund have increased by approximately $300 Million.
• Debt service must be paid each year regardless of economic conditions.
Overview of Spending
• All Other Spending
• Most state agencies received significant budget cuts this year as a result of the state’s economic downturn. Most programs and budget lines were reduced, while many others were cut completely or suspended.
• DEP: $159.1 Million – A $58.5 Million Reduction from 2008-09.
• DCNR: $92.4 Million – A $21 Million Reduction from 2008-09.
• Health: $240 Million – A $33 Million Reduction from 2008-09.
• DCED: $264.8 Million – A $302.7 Million Reduction from 2008-09.
• Agriculture: $67.8 Million – An $8.3 Million Reduction from 2008-09.
* The aforementioned agencies are only a partial list of those included in the All Other Spending Category.
House Republican Budget Analysis
• Spending, Revenues and Tax Increases
• This budget – spending $27.8 Billion – is more than the state can afford during these difficult economic times. • The tax increases enacted as part of this budget will cost taxpayers more than $1 Billion over the next year and a half. • All reserve funds were totally exhausted in this budget, leaving nothing for future years in the event the economy continues to decline. • If the economy does not improve and revenues continue to decline, the state will be faced with a significant budget hole by June – one that will become a multi-billion problem by 2011-12 when stimulus funds are gone.
House Republican Efforts
• Fighting Tax Increases and New Spending
• Although the final state budget was deemed by House Republicans to be too costly for its spending, tax increases and depletion of budget reserves, two key victories were achieved throughout the 2009-10 budget process. • Proposals to increase income taxes, expand the sales tax, implement a tax on the arts and a new tax on civic groups and fire companies were defeated. • Actual spending – $27.8 Billion – was dramatically less than the governor’s original proposal of $28.9 Billion and the House Democrats’ budget of $29.1 Billion.
PENNSYLVANIA’S BUDGET OUTLOOK FY 2010-11 & FY 2011-12
Future Budget Concerns
Pennsylvania’s Budget Funding Gap
One-Time Revenues: $2.2 Billion PA’s Looming Budget Gap The 2009-10 budget was balanced by using $2.2 Billion in one-time revenues and $2.6 Billion in ARRA stimulus funds. The majority of these funds will not be available next year, and all will disappear by Fiscal Year 2011-12. This will create a multi-billion dollar budget gap that must be addressed.
Federal ARRA Funds: $2.6 Billion
PA General Fund Budget FY 2009-10
* Federal ARRA funds used to supplant state dollars in the budget are expected to drop to $1.8 Billion in 2010-11. None will be available thereafter.
Future Budget Concerns
Managing the Looming Funding Hole
• Pennsylvania is facing an array of serious budget-related challenges in the years ahead. This year’s budget, which drained all reserve funds, only compounds those challenges. • Billions in federal ARRA funds will be totally exhausted by 2011-12, leaving a funding hole in the state budget. • The state’s pension obligations will see a multi-billion spike in 2011-12 – one that is expected to increase for years thereafter. • Costs will continue to increase for the budget’s most expensive programs: education, welfare, corrections and debt service.
Current-Year Financial Standing
Year-to-Date Revenues: -$254 Million
$4,500,000,000 $4,000,000,000 $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $July August September October November December January February March April May June
Estimated Collections Actual Collections
* State General Fund revenues noted above are based on the most recent end-of-month collections.