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State-Related Universities Plead Their Budget Cases

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State-related universities saw near 20% cuts in state support last year.  The governor imposed a 5% budget “freeze” mid-year, and Penn State, Pitt and Temple face proposed 30% cuts next fiscal year.  “In certain respects, what we’re seeing is the dismantling of a long, long commitment by the Commonwealth of Pennsylvania to public higher education,” University of Pittsburgh Chancellor Mark Nordenberg told the House Appropriations Committee on Wednesday.  Nordenberg went on to say the cumulative cuts appear to be pushing the state-related into private institutions.

When asked what the proposed cuts would mean, if they were entirely addressed through tuition hikes, Penn State President Rodney Erickson told the panel that it would be a 9.37% tuition increase.  “But I can assure you that we will not do that,” he added. 

At Temple, President Ann Weaver Hart says the hypothetical tuition hike would be in the $4,000 dollar range.  At Pitt, Chancellor Nordenberg said in-state students would be paying $3,000 dollars more if the cuts were absorbed entirely through tuition increases.  But the leaders of all three universities stressed that they continue to look to cut costs, and they would keep tuition hikes as low as possible. 

“The unemployment rate among college graduates is less than half the unemployment rate among high school graduates,” Temple President Ann Weaver Hart said as she implored state lawmakers to reconsider another round of deep budget cuts. 

Pennsylvania’s fourth state-related university, Lincoln, receives just a fraction of the state support as the larger universities do.  Lincoln’s “general support” line item would be level-funded at $11.1-million dollars in the governor’s spending plan.

online computer internet

Online Purchases Dominate Revenue Department Budget Hearing

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E-commerce has muddied the waters of an already complex tax code here in the Keystone State, and Revenue Secretary Dan Meuser did his best to clear things up during Appropriations Hearings on Tuesday. 

There’s some overlap between two big Department of Revenue priorities in 2012.  First, the state is compelling online retailers with a physical presence in PA to collect and remit sales taxes.  Pennsylvania consumers are also being encouraged to report the use tax that is due for online purchases when the sales tax is not collected. 

“We’re not interested in new taxes,” Secretary Meuser told the Senate Appropriations Committee.  “We’re about enforcing the laws that exist.”  Combined, the two initiatives are expected to add $49-million dollars to the state’s balance sheet. 

Online retailers have been given until September 1st to comply with state nexus laws, while line 25 on the PA-40 tax form will capture consumers’ attention this year.  It allows you to report your use taxes for all of those taxable items you may have bought online in 2012.  If you don’t have complete records of your purchases, the instructions even provide you with a table through which you can estimate the use tax that is due. 

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

For instance, a tax filer who made between $15,001 and $30,000 dollars in taxable income would pay an estimated $12 dollars in use tax (assuming they don’t live in Philadelphia or Allegheny counties, where the sales & use taxes are higher). 

“90% of people pay their taxes in a voluntary, compliant manner,” Meuser says.  “So our approach is aggressive education if you will, informing in many many ways.” He tells lawmakers that consumers’ self-reporting of use taxes is expected to account for $7-million of the $49-million dollar figure.

PSP Commissioner Addresses Vacancies, Cadet Class

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The governor’s proposed budget includes $8-million dollars to pay for 115 new State Police cadets.  Even with the new troopers, PSP faces a projected 500 vacancies by the end of June 2013.  At Thursday’s Senate Appropriations Committee, Tina Tartaglione (D-Phila.) asked PSP Commissioner Frank Noonan if he is worried they are being spread too thin.  “I am concerned,” Noonan responded.  “But I do believe we will be able to fulfill our mission.  We will fulfill our mission.”

While attrition is eating away at their compliment, Noonan stressed to lawmakers that his top priority is putting troopers on the road, which means PSP’s ever-growing list of auxiliary duties may bear the brunt of staff shortages. 

Frank Noonan

State Police Commissioner Frank Noonan

“These numbers, and as the numbers go down, it’s going to require us to do some things that are going to be individually sometimes unpopular,” Noonan said.  “We may be thinking of station consolidations.”   But Noonan told the panel that a thorough review would be conducted before any decisions are made. 

Per Governor Tom Corbett’s request, Noonan is leading a comprehensive review of all PSP operations to ensure that resources are being used effectively.  Aside from the new cadet class, PSP is slated for a zero-growth budget that must address nearly $29-million dollars in increased pension and health care costs.

Modernization Plans Dominate PLCB Appropriations Hearing

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Talk of liquor store privatization was brushed aside at Thursday’s Senate Appropriations Committee with the Liquor Control Board.  Instead, the focus was on modernization. 

The governor’s proposed budget calls for an $80-million dollar transfer from the Liquor Control Board to the General Fund next year.  LCB CEO Joe Conti tells lawmakers that number is right on target, but they could generate even more revenues if only they were allowed to modernize.  “It’s clear that we think we could add $70-million dollars to our bottom line,” Conti explained during an extended Q&A with the committee. 

One of the high-profile reforms he seeks is flexible pricing.  “We would just like to price the way that all other retailers price their product, with a mix of pricing,” Conti explained.  “And we are not able to do that now.”  He later stressed that prices would still be the same across the commonwealth, but the LCB would have greater discretion in how they are set. 

The retail price we pay on every bottle at state-run liquor stores includes: the wholesale price, the 18% state liquor tax, a 30% markup, a handling fee and federal alcohol taxes.  The flexible pricing allowed in SB 1287 would allow the LCB to vary its 30% across-the-board markup, based on the product, and likely nix the handling fee. 

That legislation currently awaits action in the Senate Law & Justice Committee.  Meanwhile, legislation to privatize PA’s liquor stores is awaiting action in the House.  The Liquor Control Board is scheduled to appear for its House Appropriations Hearing on February 27th.

Pennsylvania Finance Building

Budget Hearings: Straight Talk from the Auditor General

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Continued budget cuts could cost the state’s independent fiscal watchdog its bite.  Under next year’s proposed spending plan, the Auditor General’s Office is slated for a $2.2-million dollar (or 5%) cut.  It would make it an aggregate 25% cut over the past four years, according to Auditor General Jack Wagner. 

“I’m not complaining.  We realize that there had to be substantial cuts in state government across the board.  But, yes, we are at the bone,” Wagner told the Senate Appropriations Committee on Wednesday.

Jack Wagner

Auditor General Jack Wagner

Wagner’s office conducts 4 – 5,000 audits a year, which have pointed out billions of dollars in wasteful state spending.  Now, he’s warning lawmakers that it’s becoming difficult to fulfill the mandates of the office.  “I’m not going to be here for this next budget – for half of it – but in the process you are harming information flowing, or audits flowing, that help you make decisions.” 

Due to term limits, 2012 will be Wagner’s final year as Auditor General.  The Democrat received bipartisan praise from members of the Appropriations Committee throughout the hearing.  “Whether it was a Republican administration or Democratic administration, I think you were on the side of the taxpayers,” said Chairman Jake Corman (R-Centre).

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.

State Capitol Facing North Office Building

Appropriations Hearings to Start on Monday

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Four weeks of budget hearings commence on Monday when the state Senate Appropriations Committee sits down with the Governor’s Budget Office, Independent Fiscal Office and State Treasury for three separate hearings in their North Office Building hearing room. 

The $27.14-billion dollar no-tax increase budget has been generating plenty of buzz around the state capitol complex, and plenty of rhetoric too.  “If you are on the low rung of the economic ladder in Pennsylvania, this governor has his foot on your neck,” exclaimed Senate Democratic Appropriations Chair Vincent Hughes, who’s sure to scrutinize the public welfare spending plan. 

Between mandatory increases in welfare spending and aggressive cost-containment measures, the Department of Public Welfare budget received a net $30-million dollar cut in proposed budget.  “We need to make sure we take care of the neediest of citizens and reform is necessary to do that,” says Commonwealth Foundation President & CEO Matthew Brouillette, a supporter of the Corbett budget. 

The Department of Public Welfare will get its first budget hearing before the Senate on February 28th.  The House DPW Appropriations hearing is scheduled for March 7th. 

Governor Tom Corbett continues to make appearances throughout the state to plug his budget plan.  “This is a very difficult time, I understand that,” Corbett said during Thursday’s stop at a Lancaster County manufacturing facility.  “But we have to start living within our means so that companies and the people can start saving and growing, and getting new jobs.” 

National Federation of Independent Business state director Kevin Shivers tells us the small business community is buoyed by the stability that the Corbett administration brings to the state budget process.  “It’s an important message that government is no longer going to spend at a prolific rate and then hand the tax bill to small employers and other taxpayers in the state.”

Transportation Funding Crisis Not a Budget Item

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The governor’s Transportation Funding Advisory Commission released its final report in August, and House Democratic Appropriations Chair Joe Markosek (D-Westmoreland/Allegheny) says it’s been ignored for too long.  “I’m just flabbergasted that he’s ignored transportation to the extent that he’s ignored it,” Markosek told us after this week’s budget address.  “It’s just almost unbelievable in my opinion.” 

Pennsylvania faces an annual transportation funding gap that tops $3-billion dollars.  While the new spending plan does not address the matter, Governor Tom Corbett did call it a priority in his budget speech on Tuesday:   

“This is not a budget item.  It is too large for that.  Transportation must be confronted as its own distinct and separate topic.  This problem has grown for the past several decades and it will not be solved overnight.  But, whatever solution we enact must be a lasting one.”

“I have spent significant time considering this issue with my transportation team and developed some workable solutions.  However those solutions will only be possible with your input, assistance and support.” 

Jake Corman

Jake Corman discusses state budget issues with the assembled media.

Senate Republican Appropriations Chair Jake Corman (R-Center) recently put the TFAC recommendations in to bill form in hopes of spurring action on the transportation funding crisis.  But he stresses that this type of funding falls outside of the General Fund and can be addressed at any time – not necessarily during budget season.  “We’ll be waiting for the governor to make his proposal… I look forward to that proposal, and once that comes forward I’m sure we’ll negotiate something that works for everybody,” Corman said during a Q&A with the media following Tuesday’s speech.

College Faculty Group Concerned About Higher Education Cuts in Budget

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Governor Corbett’s proposed budget unveiled this week would cut funding to the 14 state-owned universities by 20%.  Faculty at the schools are disappointed the schools are targeted once again.

State System of Higher Education schools had their funding cut by 18% this year, something that’s already led to larger classes and program reviews according to Dr. Steve Hicks, President of the Association of Pennsylvania State Colleges and University Faculties. He fears working class and middle class students and their families will feel the pinch.  Tuition already went up 7.5% this year.

Dr. Hicks is hopeful lawmakers can find a way to reduce the 20% cut proposed for next year.  He’s also disappointed that the Higher Education Advisory Panel named by the Governor does not include a state system faculty member.

Dr. Hicks says many of their students are the first generation in their families to attend college. He says they come from working class, lower middle class families who are trying to step into a different kind of life.  He says the more we reduce the state’s commitment to these institutions, the harder it is for them to make that step that we need for the Commonwealth to grow and develop.

The 14 state system schools are Bloomsburg, California, Clarion, Cheney, East Stroudsburg, Edinboro, Indiana, Kutztown, Lock Haven, Mansfield, Millersville, Shippensburg, Slippery Rock and West Chester Universities.