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Radio PA Roundtable – July 25, 2014

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On this week’s Radio PA Roundtable, Pennsylvania received some bad news as its credit rating was downgraded. Drivers on the PA Turnpike received some good news regarding the speed limit on a 100-mile stretch of the toll highway. And are we finally able to see what the cars of the future will be like?

Radio PA Roundtable is a 30-minute program featuring in-depth reporting, commentary and analysis on the top news stories of the week.

Click the audio player below to hear the full broadcast:

Budget Hearings Kickoff with Medicaid Debate

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The Governor’s Office and Senate Democrats aren’t on the same page when it comes to expanding Medicaid under the federal Affordable Care Act.  Based on the exchanges that played out on the opening day of state budget hearings, they may not even be reading from the same book. 

When pressed for answers as to why the administration isn’t planning to expand the Medicaid program, Budget Secretary Charles Zogby told the Senate Appropriations Committee that it would cost the state an extra $200-million dollars next year and more than $4-billion dollars within the next decade. 

“I don’t know where that money comes from,” Zogby said while noting that not enough attention is being paid to the cost side of the Medicaid equation. 

Senate Minority Appropriations Chair Vincent Hughes (D-Philadelphia) noted a “huge gulf” between the analysis of the administration and the analysis of legislative Democrats. “Our analysis indicates that the implementation of Obamacare saves $200-million because the feds are now paying for state dollars on the General Assistance population, saves about $140-million in state payments for county health services, and saves about $100-million in uncompensated care costs.” 

Hughes pressed Budget Secretary Zogby for a public vetting of the numbers the administration has been crunching.

State Senator Larry Farnese (D-Philadelphia) later found irony in Zogby’s complaints about how unresponsive the Obama administration has been to the governor’s Medicaid questions, while the Corbett administration has not responded to Senate Democrats’ request to see their fiscal analysis.

The House and Senate Appropriations committees will continue to hold budget hearings through March 7th.

Pension Reform Could Drive Budget Debate

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Perhaps the most controversial piece of Governor Tom Corbett’s $28.4-billion dollar state budget is the call for public pension reform.  The administration has penciled in $175-million dollars worth of savings next year, pending legislative action on the issue.  They say reforms would also free up nearly $140-million for the state’s 500 school districts. 

Charles Zogby briefed reporters on the budget just prior to the Governor's speech on Tuesday.

Charles Zogby briefed reporters on the budget just prior to the Governor’s speech on Tuesday.

“The reality is that our pension costs are taking most of our available revenue growth,” says Budget Secretary Charles Zogby.  The state’s pension obligations are expected to triple – to $4.3-billion – within the next four years.  Without reform, Zogby says deep cuts would be unavoidable.     

But legislative Democrats call it a false choice.  “We’ll work with him on [pensions], but everything he proposed today is not right, and we won’t support,” says House Democratic Leader Frank Dermody (D-Allegheny). 

The Corbett plan calls for new hires to be enrolled in a 401(k)-style defined-contribution plan and for adjustments to be made to the yet-to-be earned benefits of current state employees.  No changes would be made to retirees’ benefits or the benefits existing workers have already earned. 

The plan’s already raising legal concerns.  “He’s talking about changing future compensation for current employees, which has already been decided in the courts that is something that’s illegal, back in 1983-84,”  says AFSCME Council 13 executive director David Fillman.    

The state’s two biggest public sector unions – AFSCME and the Pennsylvania State Education Association (PSEA) – are vowing a legal fight, and that has lawmakers on both sides of the aisle concerned about balancing a budget on savings that would ultimately be in the hands of the courts. 

“The question is really, I think, what does a set of reforms look like that can secure 26-votes in the Senate and 102-votes in the House,” says Senate Republican Leader Dominic Pileggi (R-Delaware).  Pileggi has been serving in the Senate for more than a decade now, and knows that pension reform can be a profoundly difficult issue.

Prepping for another Tough Budget Season

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The Corbett administration’s third budget season may be its most difficult yet, according to Budget Secretary Charles Zogby.  The 2012-13 Mid-Year Budget Briefing projects the state will end the current fiscal year $85-million dollars in the black, but $1.3-billion in mandatory cost drivers await in the new fiscal year. 

For instance: pension obligations ($511-million), Medical Assistance ($650-million) and debt service ($89-million). 

Charles Zogby gives reporters a mid-year update on the state budget.

“We’re working very hard in a number of areas – education would be one, health & human services – to not have to make the level of deep cuts that we’ve made in the past,” Zogby told reporters huddled in a capitol conference room. 

Zogby’s not divulging many details ahead of Governor Tom Corbett’s February budget address, but says it will not include any new taxes. 

For now, the budget planning revolves around a hypothetical 3% revenue growth in FY2013-2014, but Zogby knows a lot can change in the next two months.  “Not the least of which is the fiscal cliff,” Zogby says, noting that sequestration alone could have a $300-million dollar impact on the Commonwealth. 

Legislative Democrats have been critical of the governor’s first two spending plans, and they don’t see things changing during the coming budget cycle.  “We have suggested that jobs, education, health care and transportation are things to invest in,” says House Democratic Appropriations Chair Joe Markosek (D-Westmoreland).  “The Governor has suggested that corporate welfare is something that we ought to be investing in.” 

Democrats say it’s showing up in the state’s tax receipts, where corporation taxes are running 18% above projection for the fiscal year, while sales and personal income taxes are lagging.

Housing Advocates See Way to Restore HEMAP Funding

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The state will be getting a significant chunk of change from the recently announced mortgage foreclosure settlement with the big banks.  Housing advocates believe some of that expected $69-million dollars should be used to restore the Homeowners Emergency Mortgage Assistance Program.  “It’s appropriate to put this foreclosure money back into a solution that is foreclosure related,” says Liz Hersh, executive director of the Housing Alliance of Pennsylvania. 

She points to a new analysis by the Reinvestment Fund, which shows that that the HEMAP program saved 6,100 homes from foreclosure between 2008 – 2010.  While the state invested $38-million dollars into HEMAP over that time, the study pegs the cost savings at $480-million dollars. 

The issue of the mortgage foreclosure settlement was broached at Monday’s Appropriations Hearing with Budget Secretary Charles Zogby.  “I think certainly something like the HEMAP program is one that many have interest in seeing some of those funds go to, but that is ultimately to be decided,” Zogby told the Senate panel.  He says discussions are taking place between the Governor’s Office and Attorney General’s Office. 

The current state budget reduced HEMAP funding from $10.5-million dollars to $2-million dollars.  That money dried up early on, and the program is not currently slated for funding in the newly proposed state budget.

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Budget Secretary Speaks of the ‘New Normal’

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Virtually no line item will be left unturned as the Senate and House Appropriations Committees convene dozens of budget hearings over the next three weeks.  Leading off the agenda was Budget Secretary Charles Zogby, who told the Senate Appropriations Committee that the $27.14-billion dollar, no tax increase budget plan is reflective of the ‘new normal.’ 

“We have constrained revenue growth,” Zogby explained.  “We’re seeing less revenue growth coming out of this great recession than we’ve seen in any recovery in recent time.” 

The governor’s new budget is built on estimated revenue growth of 3.8% next year.  “While some may regard it as optimistic, it’s certainly trending below what have been historical trends,” says Zogby, who points out that a robust recovery is usually accompanied by 6 or 6.5% revenue growth. 

While the budget secretary was reminding the panel about this ‘new normal,’ Democrats were reminding him that there are real people behind every one of the line items.  “You’re cutting the budget at the state level,” State Senator Jim Ferlo (D-Allegheny) said.  “You’ve fulfilled your ideological, dogmatic role that you’ve been elected to serve.  But what is the impact, what is the analysis of what those cuts mean back at the local level?”

Keeping government costs under control will allow the private sector to create jobs, according to Governor Tom Corbett, who’s been making a series of stops at Pennsylvania companies to tout his budget plan.  “Government doesn’t grow the economy, the private sector grows the economy,” Corbett said during Monday’s stop at a York County manufacturing plant. 

Governor Tom Corbett

Gov. Corbett discussed the state budget, Monday, at Johnson Controls in York.

Governor Tom Corbett Proposes $27.139 Billion Budget

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    Governor Tom Corbett has unveiled his budget proposal for the 2012-13 fiscal year. The $27.1 billion spending plan comes in $10 million under the current year’s actual budget and represents what the governor calls a realistic budget in difficult times.

    Prior to the Governor’s speech to a joint session of the General Assembly, state Budget Secretary Charles Zogby reported that the projected revenue shortfall for the current fiscal year is up to $719 million, putting more pressure on the governor and lawmakers who will have to craft the next budget.

    While basic education would see a slight increase in its General Fund subsidy, it would all but hold the line from last year’s overall number. The governor took the opportunity during his address to chastise political opponents, saying they misrepresented his education budget last year. The governor says he raised basic ed funding, but the evaporation of federal stimulus dollars results in an overall decrease in spending.

    Governor Corbett is proposing more deep cuts to higher education, which last year was slashed by about 20%. This year, the 14 state-owned universities would see their state funding slashed by another 20% under the governor’s plan. Meanwhile, three of the four state-related universities – Penn State, PITT and Temple – would average 30% cuts. Lincoln University would receive the same funding level as last year. Governor Corbett also announced the formation of a special panel to examine the way higher education is funded in Pennsylvania. He has appointed former state Senator Rob Wonderling to head that committee and report back in November.

    Next up in the state budget process: weeks of budget hearings in Harrisburg, then lawmakers will try to iron out a final spending plan that will be brought to the floors of the House and Senate by June 30th.

 

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Corbett Administration Eyes Capital Budget Reforms

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Budget Secretary Charles Zogby

Budget Secretary Charles Zogby addressed capital debt in his mid-year budget briefing.

On the same week that Governor Tom Corbett signed a capital budget bill, his budget secretary was vowing to reduce the commonwealth’s capital debt.  “The level of capital issuance that the commonwealth was doing from the prior administration was unsustainable,” says Budget Secretary Charles Zogby. 

The Corbett administration’s goal is to reduce spending on public improvement projects at commonwealth-owned buildings and facilities by 50%.  While the Rendell administration averaged $415-million dollars in new commitments per year, the Corbett administration’s goal is in the $150 – $200 million dollar range.  “I think as you watch the budget you’ll see debt service continue to climb in the coming years,” Zogby says.  “But with these reforms, we think we’re going to start to bend that cost curve and bring those costs down.” 

Things like leaky roofs, leaky pipes and broken down HVAC systems will be prioritized under the new approach to capital budgeting.  “If you’re a homeowner, and you’re watching all of that fall down or fail around you, those are important things.” 

Also primed for a 50% reduction is the level of new-project releases that the commonwealth provides to the State System of Higher Education.  Zogby’s mid-year-budget briefing indicated that the Rendell administration was averaging $310-million dollars per year in state system capital project commitments; the Corbett administration’s goal is roughly $155-million dollars annually.

Corbett Administration Projects Half-Billion Dollar Budget Shortfall

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The economic forecast took a turn for the worse after the state budget was passed, and it’s showing up in tax collections that are already running $345-million dollars below expectation.  Budget Secretary Charles Zogby estimated a shortfall of $500-million dollars by the end of the fiscal year.  “I tend to think that this is an optimistic scenario,” Zogby said at the mid-year budget briefing.  “I think we’re expecting and planning for a much bigger shortfall.” 

Budget Secretary Charles Zogby addressed the media on Tuesday.

Budget Secretary Charles Zogby addressed the media on Tuesday.

Zogby’s office is currently working on options for a budgetary freeze, which Governor Tom Corbett could act upon by the end of the month.  “That will help alleviate – to an extent – the FY2012-2013 challenges that we’re facing.” 

Taking into account the revised revenue outlook and projected growth in mandatory spending, Zogby estimated that the administration will have a $750-million dollar budget hole to fill in order to balance next year’s budget.   “Right now I’m looking at the expenditure side, no tax increases,” Zogby added. 

State Rep. Joe Markosek

State Rep. Joe Markosek

While Governor Tom Corbett will deliver his budget address in early February, Democrats say it’s premature to be projecting such dire budget circumstances next year.  “The governor is using scare tactics to make his case for cutting another three-quarters of a billion dollars in needlessly painful cuts next year,” House Democratic Appropriations Chair Joe Markosek (D-Allegheny) said at a capitol news conference.  Markosek contends that year-to-date revenue collections are actually up when compared to the same five-month period last year.