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Budget Plan Would Consolidate Human Services Funding into Block Grants

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The governor’s proposed budget takes a new approach to human services funding by lumping seven separate line items into a single block grant.  “The innovation will give the counties the flexibility they need to identify their most pressing needs, and apply funds as they know best,” Corbett said during Tuesday’s budget speech. 

Jo Ellen Litz, CCAP, County Commissioners

CCAP President Jo Ellen Litz of Lebanon County

The increased flexibility is welcome news to the County Commissioners Association of Pennsylvania (CCAP), which has identified human services funding as its top legislative priority.  “Counties not only know what programs and services are needed at the local level, but also how they can be most effectively managed while keeping unnecessary costs to a minimum,” says CCAP President Jo Ellen Litz of Lebanon County.

While combining these seven line items the Corbett administration would cut about 20%, or $168-million dollars.  “So they’re going to have perhaps more flexibility, but somewhat less money,” says House Democratic Appropriations Chair Joe Markosek (D-Westmoreland).  “Over time, generally speaking, block grants go down not up.” 

But counties are used to human services funding cuts.  In fact, the next budget is poised to be the 10th consecutive spending plan that cuts state aid for the human services counties deliver.  “Although there is an overall reduction in the monetary amount that counties will be receiving for human services, we also think that the administrative savings that we realize will offset and mitigate that impact this year,” says Somerset County Commissioner Pamela Tokar-Ickes, who chairs CCAP’s Human Services Committee. 

The seven appropriations that are being proposed for block grant consolidation are: Mental Health Services; Intellectual Disabilities; County Child Welfare Special Grants; Behavioral Health Services, Homeless Assistance Program; Human Services Development Fund, and Act 152 Drug and Alcohol Program.

Gov’s Basic Ed. Budget Plans Already Being Debated

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Pennsylvania policymakers still aren’t on the same page when it comes to the current fiscal year’s public schools budget, let alone Governor Tom Corbett’s newly proposed education spending plan.  For instance, Governor Tom Corbett made it a point to stress that basic education funding was not cut in June. 

“When the Obama Administration handed states billions of dollars in stimulus monies, the previous administration reduced the state’s share in the Basic Education funding formula.  In its place, they put the stimulus funds.  Almost a billion dollars worth,” Corbett said during Tuesday’s budget address.  “That money is gone.  It’s not coming back.” 

As for his new spending plan, Corbett says there are no cuts to the basic education funding formula.  “In fact you will find a slight increase, just as we did last year,” Corbett said to a partisan applause from lawmakers gathered in joint session.  

Corbett’s new education budget does have a new look however, as the Basic Education Funding, Pupil Transportation, Nonpublic and Charter Transportation and Social Security line items have all been lumped into a $6.5-billion dollar block grant.  

Bill Adolph

Bill Adolph addresses the media following the governor's annual budget address.

“We’ve heard for years that local school districts needed more flexibility,” says House Republican Appropriations Chair Bill Adolph (R-Delaware).  “I think what the governor has laid out today… will give the school districts this type of flexibility.  Sometimes they may not need all of that money in transportation, and can put it into the classroom.”  

But House Democratic Appropriations Chair Joe Markosek (D-Westmoreland) is wary of the block grant approach, and he’s identified $124-million dollars in cuts to education programs.  “I think most school directors would tell you they will have less money to spend, in spite of what the governor has said,” Markosek tells us.  

He’s referring primarily to the elimination of something called the Accountability Block Grant, which received $100-million dollars in the current fiscal year.  It’s a program that primarily helps to fund full-day kindergarten classes across the commonwealth.  

While Governor Tom Corbett’s new approach to education is being interpreted in different ways, there’s not debating the challenges created by a different education line item.  The state’s contribution to the Public School Employees’ Retirement System is slotted for a $315-million dollar (53%) increase in FY2013.

Missed Opportunities on Marcellus Shale?

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Severance tax advocates say legislative inaction is adding up to millions of dollars in lost revenue.  In fact, the Pennsylvania Budget & Policy Center’s “Drilling Tax Ticker” crossed the $300-million dollar mark late last month.  That’s money that Research Director Mike Wood says could be put to good use.  “We’ve been making lots of cuts to teachers in our schools, domestic violence shelters have had to close their doors to new people.  This is definitely something that could have helped in a time when revenue is pretty hard to come by.” 

The ticker is based on an effective tax rate of roughly 6%, whereas the impact fee proposal being hammered out by GOP negotiators in Harrisburg would more likely be in the one or two percent range.  “Most states that have either oil or gas have a severance tax.  The major producing states all have such a tax,” Wood tells Radio PA.  “Pennsylvania is the only one that doesn’t.”   

Marcellus Shale

A Revenue Department analysis, last year, found that natural gas companies had paid more than a billion dollars in taxes since 2006. However, Mike Wood questions that figure because it includes taxes not directly related to drilling activity.

Governor Tom Corbett isn’t fazed when critics point out that Pennsylvania is the largest gas-producing state without a severance tax.  He uses the Texas analogy.  “They pay a severance tax in Texas, yes they do, but their corporate income tax is considerably lower.  So we have to compare apples to apples, not apples to pears.”

While Pennsylvania may not have a severance tax, the governor says they are paying corporate and related taxes.  “They’ve paid billions of dollars in taxes, so far, in Pennsylvania directly,” Corbett said on a recent edition of Ask the Governor.  “But keep in mind all of their employees, all the companies they purchase goods and services from, they’re all paying taxes also.” 

Both Corbett and Senate President Pro Tem Joe Scarnati (R-Jefferson) have expressed a desire to finalize impact fee discussions before next week’s budget address.

Gov. Taps Task Force to Reduce Prison Costs

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The new Justice Reinvestment Initiative panel will be tasked with helping to reduce the crime rate, decrease recidivism and lower corrections costs.  Corrections Secretary John Wetzel says the goals are all connected.  “We know with better outcomes we have less people coming back.  With less people coming back, that means they’re not screwing up when they’re out.  We’ll continue to focus on improving public safety by delivering better outcomes, and – by the way – we’re going to save money doing that.” 

Secretary Wetzel will lead the new task force alongside Pennsylvania Commission on Crime and Delinquency Chair Mark Zimmer. 

The group convened for the first time at the Governor’s Residence this week.  “Education, corrections and welfare take up about 95% of the budget pie,” Governor Tom Corbett told them.  Governor Corbett will deliver his second budget address on February 7th.

Governor Tom Corbett

Corbett addresses the Justice Reinvestment Initiative in the Governor's Residence.

Between 2000 and 2010, Pennsylvania’s prison population grew by 40% to more than 51,000 inmates.  Over that same time period, Department of Corrections spending increased by 76% to $1.9-billion.

Two Weeks ‘Till Governor’s Budget Address

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Just past the half-way mark of the current fiscal year, Governor Tom Corbett says he’s dealing with the state’s difficult budget reality.  “People elected me to bring fiscal discipline to Harrisburg,” Corbett said on Radio PA’s Ask the Governor program.  “That isn’t always the easiest thing, I can tell you it’s not the most popular thing.  But it’s necessary if we’re going to get through this period of time.”

In two weeks, Governor Corbett will address a joint session of the General Assembly to present is spending play for fiscal year 2012-2013.  Year-to-date revenues, for the current fiscal year, are already running a half-billion dollars below expectations.  Earlier this month, Corbett ordered a budget freeze of nearly $160-million in state spending. 

While the governor isn’t revealing any budget details ahead of time, he doesn’t want to cut basic education subsidies.  “At this point in time, it would be nice if we could increase that some, I certainly don’t want to cut it at all, but it might be that we end up at that same level as last year.” 

Many Democrats call Governor Corbett’s first budget a disaster, however, and are wary of what may be coming in his February 7th proposal.  “Governor Corbett’s first budget defunded welfare and other support programs, to the point of completely undercutting our social safety net at a time when people need it the most,” says Pennsylvania Democratic Party Chairman Jim Burn.

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“Guarded Optimism” in New PA Economic Report

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Pennsylvania appears to be on the road to economic recovery, but experts caution the road is long and full hazards.  Pennsylvania’s new Independent Fiscal Office is out with its first ever Budget & Economic Outlook, which pegs the state’s “real growth” at 1.6% for 2012. 

There are reasons for optimism in the Pennsylvania economy.  “If you look at the balance sheets of the corporations, the profits are pretty healthy, the balance sheets are strong,” says IFO Director Matt Knittel.  “If you look at the banks, they’re beginning to lend once again.  If you look at consumers, they have brought down their debt balances and I think they’re in a stronger position now than they were a year or two ago.”     

Demographic trends pose real economic concern in the years ahead, as Pennsylvania’s senior citizen population is projected to grow by 25% over the next decade.  The working age population, meanwhile, is expected to contract by nearly 2%.  “Extrapolating these trends out five years we find that if current policies are left in place and current tax laws are left in place, then expenditures greatly exceed revenues five years from now,” Knittel tells Radio PA. 

The General Assembly created the Independent Fiscal Office in 2010 as a means to provide nonpartisan financial data.  It was funded for the first time in 2011, and required by statute to release its first report this month.  The IFO will release its state revenue estimates in May. 

Governor Tom Corbett’s Budget Office will need to base a proposed spending plan on revenue estimates much earlier than that.  Corbett’s 2nd budget address is scheduled for February 7th.

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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.