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THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS FISCAL YEAR 2007-08 BUDGET PROPOSAL ANALYSIS Prescription for Pennsylvania The Governor’s Fiscal Year 2007-08 budget proposal for the Insurance Department is dominated by his comprehensive health care reform proposal Prescription for Pennsylvania, or Rx for PA. The Governor’s Rx for PA proposal comes at a time when states across the nation are beginning to enact bolder and bolder reform initiatives to tackle the problems of burgeoning health care costs and growing uninsured populations. Governor Rendell’s plan is in many ways the most ambitious and all-encompassing of any that have been proposed or enacted. The Rx for PA will cost a total of $150.9 million in state funds in FY2007-08 with an addition $104.4 million in leveraged federal matching funds, a portion of these funds will be raised through an increase in the Cigarette Tax, and a new tax on other tobacco products which will raise a combined $77.5 million. Funds for the Rx for PA plan will be disbursed through various state agencies including the Departments of Insurance, Health, Education, Labor and Industry, and Public Welfare, the Health Care Cost Containment Council, and the Office of Health Care Reform. The majority of the funding issues for the Rx for PA, however, revolve around the Governor’s Cover All Pennsylvanians initiative. Cover All Pennsylvanians At the heart of the Governor’s plan is the Cover All Pennsylvanians initiative which will offer an affordable basic health insurance plan for small businesses and the uninsured. A recent study conducted by the Pennsylvania Insurance Department found that there are approximately 767,000 Pennsylvanians who do not have health insurance. The survey also found that most of these 767,000 people are employed, and that most of them do not have health insurance because of the prohibitively high costs for both small businesses and individuals. Finally, of the 767,000 uninsured people in Pennsylvania, almost 581,000 earn less than 300% of the Federal Poverty Level. Cover All Pennsylvanians will be an insurance program that is supported by the state and offered through private insurance companies. Employers can participate in the program if they have not offered health insurance to their employees for the past six months, they have 50 or fewer employees, and on average these employees earn less than the state average wage. Additionally, all uninsured individuals will be eligible to purchase insurance through the program. Those earning less than 300% of the Federal Poverty Level ($62,000 for a family of four) will receive help from the state in paying part of their premiums. The health care premium and administrative costs of the CAP program in fiscal year 2007-08 are expected to be approximately $235 million, of that amount $104 million will be provided by the federal government. This figure is based upon an expectation to enroll 153,600 adults in the Cover All Pennsylvanians program in FY2007-08. Enrollment is expected to increase to 431,300 by FY2011-12 at which time the cost of the program will be significantly larger and dependant upon future health care costs and the mix of people taking part in the program. The Governor plans to fund the program in FY07-08 from a variety of sources: existing money from the tobacco settlement agreement totaling $31.3 million; existing money from the Community Health Reinvestment Agreement totaling $52.2 million; Federal matching funds totaling $104 million; and $60.4 million from a new Fair Share Assessment tax. The Fair Share Assessment will be a 3 percent tax levied on the payrolls of businesses that do not offer health insurance to their employees. The Community Health Reinvestment money will be available because the adultBasic program will be collapsed into the Cover All Pennsylvanians plan. In addition to Cover All Pennsylvanians, the Rx for PA has provisions designed to address the three issues of Affordability, Access, and Quality. Rx for Affordability · $268,000 to expand the Commonwealth’s premium rate review authority to all insures providing coverage in the individual and small employer market. · Require hospitals to immediately screen and redirect patients who go to emergency rooms but do not require emergency room care to more appropriate places within the hospital. · $120,000 to develop recommendations and criteria for the review and approval of health care services and facility planning. · $810,000 to develop standardized policies and reporting and auditing procedures for non-profit hospitals required to meet community benefit obligations. · $510,000 to develop and enforce standardized hospital admission criteria and fair billing and collection procedures for uninsured and underinsured patients. Rx for Access · Eliminate the barriers in existing laws, regulations, and insurance reimbursement policies that limit the ability of health care providers- such as nurses, nurse practitioners, midwives, physician assistants, pharmacists, and dental hygienists- to practice to the fullest extent of their training. · $5.4 million to increase access to primary health care in underserved rural areas. · Provide incentives to increase the number of care centers that offer services in the evening and on weekends. Rx for Quality · $2.3 million to standardize identification and reporting of hospital acquired infections and to provide training in infection-control best practices. · Commonwealth will lead a coalition of other health care purchasers from the private sector to align provider payments with their expectations for quality care and will introduce a pay-for-performance program into state funded health care programs. · $2.5 million to develop a chronic care information system with the ultimate goal being the implementation of a nationally recognized and proven chronic care model. · $719,000 to promote health literacy by enhancing the delivery of health-promotion and risk-reduction messages. · $1 million to reduce health disparities by increasing the number of health professionals equipped to address the needs of racial and ethnic minorities. Overall Wellness Initiatives · Ban smoking in all Pennsylvania workplaces, restaurants, and bars. · $6.5 million to increase the number of school breakfasts served and to provide incentives for schools that adopt best-practice nutritional guidelines.
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$30,000 for elementary school
teachers to integrate healthy living concepts into lesson plans.
ENERGY INDEPENDENCE FUND One of the Governor’s major policy initiatives is the creation of a fund expected to total $850 million for enhancing Pennsylvania’s energy independence. This bold initiative will work on both the supply and demand side of the energy crisis. In order to decrease the demand for energy the plan will provide $244 million as grants to aid consumers in replacing old refrigerators and air conditioners with energy efficient ones. $44 million would be available to replace 440,000 energy wasting units with new units that utilize at least 15% less energy. There will also be rebates of up to 50% of the cost of solar energy units. This money will be available for both business and residential users. Money available to increase the supply of energy will include $106 million for research and development of the next generation of alternative fuels and technology that will conserve energy. The largest portion, $500 million, will be used to aid the clean energy industry. These industries include the renewable sources, wind, solar, geothermal and bio-diesel and ethanol and the more abundant sources such as clean coal. The chart below shows the relative amounts that will be available under the Governor’s proposal.
The funding for this proposal is to come from a .005 cents/kilowatt hour system benefits charge for all consumers of electricity. The administration estimates that the average residential consumer would pay $5 more for electricity annually. They expect that that same residential user will save $73 per year from the proposal in reduced energy usage and cost of electricity. Large commercial electricity users will pay an extra $840 due to the system benefit charge but are expected to save $10,500 a year. Other goals of the proposal include: requiring at least 10% ethanol in every gallon of gasoline sold in the commonwealth by 2017, a modernization of the act that deregulated electric generation to prevent huge increases in the cost of electricity when rate caps expire in 2012, installation of smart meters that allow consumers to save money by using electricity at off peak times and ultimately reducing the amount of Pennsylvania money that currently is spent on foreign oil by two-thirds. 2007-08 Fiscal Year The Governor’s proposed general fund budget contains modest expenditure growth of 3.6% or $27.27 billion for the 2007-08 fiscal year. However, he anticipates revenue growth to be only 2.25% so he proposing a tax increase of $921 million to balance the budget. The tax increase revenue will primarily come from a 1% increase in the sales tax. Each 1% of sales tax brings in over $1.4 billion in revenue, the Governor’s plan, however, diverts $420 million to Property Tax Relief Fund so only $826 million goes to the General Fund. The remainder of the tax proposal will be detailed later in this report. 2006-07 Fiscal Year (Current Year) The Governor’s budget book shows two changes to the 2006-07 fiscal year. First the amount of requested supplemental appropriations increases from $39.5 million expected in December in his mid-year briefing to $211.6 million. These additional supplementals are entirely for spending in the Public Welfare realm and will be listed elsewhere in this report. The second change is there is $161.7 million more revenue expected in this fiscal year. This revenue results from a reduction of $95 million in the amount of money expected for tax refunds and an expected revenue surplus of $66.7 million at the end of the fiscal year. In order to balance the budget the Governor is recommending $921 million in additional taxes and revenues. As the chart below shows 90% of the expected new revenue is from a 1% increase in the sales tax.
Sales Tax The sales tax increase should raise about $1.424 billion annually. The increase would be effective July 1, 2007. Since there is a one month delay from the time the sales tax is collected by the merchant and when it is sent to the Commonwealth the first year will only contain 11 months of collections. The Governor’s proposal transfers $420 million to the Property Tax Relief Fund, which leaves $826 million for the General Fund. For all subsequent years half of this sale tax increase or about $700 million will go into the Property Tax Relief Fund. Transfer from Oil Company Gross Profits Tax The Governor’s transit plan creates a new tax that will be utilized to fund that proposal. There is, however, a small impact on the General Fund: If oil companies are going to be paying this new tax they will be exempted from the CNI collected into the General Fund. This transfer of $17 million simply makes the General Fund whole. Cigarette Tax There is a10 cents a pack increase proposed for the cigarette tax. That increase is expected to raise $49.7 million. Other Tobacco Products A new tax is proposed on other tobacco products such as snuff, pipe tobacco and cigars. These items are current only taxed under the sales tax and not by an excise tax. Abusive Tax Shelters The Governor continues his campaign against abusive tax shelters used by corporations to avoid paying taxes to Pennsylvania. This proposal is expected to raise $10 million this year. There will be additional costs to the Department of Revenue in order for them to raise this additional money. Educational Improvement Tax Credit A small increase of $1.4 million is proposed for this popular tax credit. Fee Increases Within DEP Various fees that have not been adjusted in some time are slated to be raised to bring in an additional $9.1 million. Fees such as inspection of dams are the fees to be raised here. The Governor proposes funding all general fund line items, with the exception of the Alzheimer’s Outreach program, from the lottery fund. This would save the general fund in excess of $19.0 million. Family Caregiver Support Program The Family Caregiver Support Program appropriation contains a small increase to provide for a 3 percent cost-of-living adjustment. This program is also supported by $10 million in federal funds. The program assists families who maintain frail relatives in their home. Working through AAA’s, the program provides benefits counseling and, depending on income, financial assistance including supplies, services and home adaptations and devices. It is anticipated that 5,545 families will receive these services in 2007-08. Alzheimer’s Outreach Services The Governor’s budget includes $250,000 for Alzheimer’s Outreach Services. Federal Funds used for Memory Loss programs are no longer available, however it is anticipated that Pennsylvania will receive $350,000 in federal funds for an Alzheimer’s Demonstration Grant program. Pre-Admission Assessment Funding for the Pre-Admission Assessment Program is increased by 34 percent for a total of $10.3 million in lottery funds, in the Governor’s recommended budget. This increase reflects the transfer of assessment activities from PENNCARE to maximize federal earnings. This nursing home pre-admission screening program helps older Pennsylvanians and their families determine the least restrictive environment needed and assists them in securing and managing intensive in-home services tailored to their needs. It is anticipated that assessments and referrals to community services will increase in 2007-08. Referrals to nursing homes are expected to decrease. This budget proposal includes a $15.0 million increase in the lottery funded PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 346 recipients. Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports. The increase would also be used to provide a 3 percent cost of living adjustment for direct care workers and to provide services as a result of nursing home transition activities. In addition, the Governor is proposing an initiative – Reforming the Long-Term Living System – aimed at reducing reliance on institutional long-term care and promoting growth of high quality home and community-based services. The PENNCARE appropriation includes $4.8 million to fund this initiative. Home and Community-Based Services – Tobacco Settlement Fund A total of $21.3 million in Tobacco Settlement funding is included in the Governor’s budget to provide home and community-based services to older Pennsylvanians. This includes an increase of almost $2.0 million to continue current home and community-based services and expansion to additional recipients, as well as nursing home transition activities. In addition, $4.6 million is proposed to be used for the Governor’s Reforming the Long-Term Living System initiative, to reduce reliance on institutional care. Federal funds in the amount of $2.4 million are also provided for this initiative. Reforming the Long-Term Living System The Governor’s budget includes a total of $12.9 million in lottery, tobacco and federal funds under the Department of Aging to fund an initiative to reduce reliance on institutional long-term care and promote growth of high quality home and community-based services. An additional 2,200 individuals over the age of 60 will be able to remain in their homes or a community-based setting rather than moving to a nursing home. Pennsylvania has the third oldest population of any state, and the fastest growing segment of this population is over age 85. The demand for services is expected to grow over the next several years until the 85+ population stabilizes in 2011. Providing services for the rapidly growing number of seniors, especially those 85 and older, will present a major challenge for the commonwealth in the coming years. The number of seniors using home and community-based services has increased 70 percent since 2002-03. An additional 14 percent increase is projected in the current year. The problem will come to a head in the near future, as 2006 was the year that the first wave of baby boomers, many struggling to care for elderly parents, joined the ranks of the 60-plus year olds. By the year 2020, one in every four Pennsylvanians will be age 60 or older. PACE and PACENET The Pharmaceutical Assistance Program provides help to qualified older Pennsylvanians who are 65 years of age and over and whose cost of drugs is a burden to them. The program is financed by the Lottery and Tobacco Settlement Fund revenue. The commonwealth has expanded its PACE and PACENET programs to make them compatible with and complementary to the new Medicare prescription drug program. PACE Plus Medicare enables cardholders to take advantage of the features of both PACE and the new Federal Medicare Part D benefit by filling the gaps encountered by cardholders in Medicare Part D including deductibles, the donut hole phase of no Medicare coverage, and co-payment differentials between the Part D plan coverage and the PACE and PACENET copayments. PACE Plus pays the Medicare premiums for Part D coverage PACE cardholders, while PACENET cardholders pay the Part D premium.
With a heavier reliance on lottery funds and a
reduced use of tobacco settlement funds, the Governor’s budget proposes funding
for 2007-08 that will allow the average number of seniors covered by PACE,
PACENET or PACE Plus Medicare to rise to 357,725 which represents an additional
32,000 seniors. This represents a 10 percent increase over those receiving
services in 2006-07 and a 60 percent increase since 2002-03. The budget
includes $276.4 million in state funds to continue these programs. The Animal Health Commission, which protects the quality and safety of food, has been funded at $6.675 million. This agency develops testing for the Chronic Wasting Disease Monitored Herd program as well as the Avian Influenza Monitored Flock program. The department has received $1 million in federal funds to work with other lead state agencies to test flocks for Avian Influenza. Given the threat of pandemic additional funds may be necessary. The Pennsylvania Food Purchase program is flat funded at $18.7 million in the 2007-08 fiscal year. There is a new initiative in the department’s 2007-08 budget entitled, Farm School Nutrition Management Initiative for $500,000. This program is to provide financial support to schools for agricultural and nutrition education programs. DEPARTMENT OF ECONOMIC DEVELOPMENT Economic Stimulus programs, community and business incentive spending, and other investments in education and training initiatives continue to produce an expanding state economy. Nearly 3,000 stimulus project commitments, totaling $3 billion, have created nearly 193,000 new jobs and retained an additional 17,731 jobs during the past four years. Total nonfarm employment reached another high of 5,787,600 by the end of 2006. However, Pennsylvania’s rate of annual growth of 50,000 net new jobs was only about half the national average in a US economy where payrolls increased by more than $2.2 million. A slowing housing market and lower expected GDP growth provide a cautionary note for the 2007 state economy, making commonwealth investments for new jobs and expanded commerce even more important this year. Commonwealth Financing Authority Economic Stimulus resources invested through the Commonwealth Finance Authority (CFA) have already committed $300 million in infrastructure financing to prepare new sites for business development, and $200 million for water infrastructure improvements. Other CFA programs have provided nearly $45 million for venture investments, $50 million for commercial development targeted to rebuild town centers throughout the commonwealth, and nearly $45 million for new agricultural development opportunities. CFA costs, including debt service payments to finance the bonds issued to support these investments will rise to $61.6 million, an increase of $24.7 million above current year expenditures. Business Financing Programs A recapitalized Machinery and Equipment Loan Fund (MELF), through a $75 million transfer from the Commonwealth Finance Authority, $49 million Opportunity Grant program, $22.5 million Infrastructure Development program, a revitalized Small Business First Fund, and revolving loan investments through the Pennsylvania Industrial Development Authority will combine to provide an estimated $400 million for business investment and job development. Pennsylvania’s aggressive array of business financing programs remains among the largest in the country. These investments continue to be vital to attract and retain jobs here in the commonwealth. In 2005 the commonwealth lead the nation in attracting new manufacturing facilities. Last year these projects accounted for 10 percent of all projects locating in North America, mitigating the loss of total manufacturing employment continuing to decline here in the commonwealth (net loss of 12,000 jobs), and throughout the country. Since 2000 manufacturing employment in the commonwealth has declined by 248,000 jobs. This decline has reduced the manufacturing share of our workforce from 16.3% to 11.9%. Long term stability of our manufacturing sector will depend upon strategic investments to strengthen our competitiveness of these industries. Among such investments, the proposed budget would redirect 4% of annual Tobacco Settlement Fund payments ($13.4 million) to invest $6.7 million in new Health Venture Account projects, and $6.7 million for biotechnology commercialization. The budget recommends a $7.5 million increase for Infrastructure & Facilities Improvement Grants, providing $22.5 million for the 2007-08 fiscal year. Technology Programs The budget would increase support to the Ben Franklin Technology Development Authority Fund by $2.5 million, to total $52.7 million. The increase would support the creation of up to 6 new Keystone Innovation Zones, created to foster business, higher education and community collaboration to spur development. Film Grant Program The budget recommends a $10 million increase in the Film Grant Program. The grants are used to stimulate film production here in the commonwealth, including early project development work. Community Revitalization The budget would include $35 million, a $5 million increase, for Housing & Redevelopment Assistance. New community initiatives included in the proposed budget include a $1.9 million increase in Land Use Planning Assistance, and a new $2 million appropriation to the Community Action Team to support downtown development, merger, and other consolidation initiatives to improve local service delivery. DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES In the proposed budget, funding for state parks operations is increased by approximately $5.3 million. Of this increase, it is proposed that $3.3 million be used to maintain operations of state parks at the current level. In addition, it is recommended that the appropriation for state parks be increased by $1.8 million. There is also a recommended increase for Forest Pest Management in the amount of $648,000. One of the main pest problems that affect the Commonwealth’s forests is the gypsy moth. The growing number of these moths, along with other insects in the 2.1 million acres of forest land represents the need for additional funding for forest pest control. DCNR manages almost 2.4 million acres total of state park and forest land. The state park system consists of 116 parks and 2 conservation areas within 62 counties in the Commonwealth. In addition to managing facilities, the department is also responsible for upgrading facilities where needed. These services are needed to provide quality visitor services which would allow for increased tourism and enhance revenue opportunities. Included in the proposed budget is a new initiative of almost $2 million for these state park enhancements. This initiative’s purpose is to provide for enhancements to state park operations which include the added expenses of seasonal staff. The budget for 2007-08 also includes funds from the Growing Greener II bond initiative. Growing Greener II was established in May 2005 and will provide the department with $218 million over the next six years to improve state parks and forests, community park and recreation grants and for open space conservation. Also included in the proposed budget is an increase in the municipal waste disposal fees. These fees, when collected, are dedicated to the Environmental Stewardship Fund. It is anticipated that in FY 2007-08 these fees will contribute $8.4 million and in the following years $11.2 million annually and will contribute to the debt service cost in the amount of $625 million that was incurred by the Growing Greener II environmental bond issue. The following chart shows the improvement project totals through July 2006 that were accomplished with Growing Greener II monies.
This $625 million, six year Growing Greener II plan is providing: · A total of $217.5 million to DCNR for the projects like above. · Programs that have already received this critical funding include: · $40.6 million for 63 community parks, recreation and state park & forest improvement projects. · $26.1 million in order to preserve 13,214 acres of open space · In order to ensure continued funding to maintain expenditure levels, this budget proposes a $0.50 per ton increase to the municipal waste disposal fee. Through the Environmental Stewardship Fund there are also increases in some appropriations. They are an increase in the amount of $1.2 million for Parks and Forest Facility Rehabilitation, $1.3 million in Community Conservation Grants and $230,000 for Natural Diversity Conservation Grants. The Keystone Recreation, Park and Conservation Fund are used for rehabilitation, repairs and upgrades of facilities and for land acquisition for state park and forest lands. In the proposed budget this transfer is reduced by approximately $5.3 million. In the Governor’s proposed budget, state spending for the Department of Corrections would reach nearly $1.6 billion, an increase of $155.4 million or 11% over current year funding level. Increases in the daily inmate population have required the Department to request a $163 million increase for the State Correctional Institutions. The increase is necessary to house an offender population that reached nearly 44,365 inmates in December 2006. Currently, there are 4,313 inmates in excess of operational bed capacity. Inmate population forecasts show an average increase of 1500 inmates per year over the next five fiscal years. Of the $163 million, $11.7 million is for The Community Corrections Centers, which will also see a capacity increase and require additional housing unit needs. The 2007/2008 cost per inmate is projected at $34,021, an increase of $3,185 per day per inmate over current year funding level. The increase in the inmate population is the biggest challenge facing the Department and the Commonwealth. In order to begin to deal with prison overcrowding, the Governor is reactivating SCI Pittsburgh, with an initial capacity of 750 beds by July 2007. The cost to reopen SCI Pittsburgh is $32.5 million. The Governor has proposed two new initiatives to reduce prisoner recidivism. The Vocational Education Improvement initiative will receive $2.4 million to better equip offenders with vocational skills to increase their chances at employment and lessen their chance of recidivism. Another initiative, Reintegration Program, will receive $792,000 to enhance inmate skills and treatment in order to improve their chances of success outside of the prison environment. As the inmate population continues to rise so do the medical care expenses for the inmates. The Department has requested a $12.6 million (6.6%) increase in the medical care appropriation for the continuation of current medical services. The Governor has recommended an increase in General Government Operations spending by $12.6 million, or 17% from last fiscal year. The $12.6 million increase includes $8 million to continue current programs and two new initiatives for $4.6 million. The Enhanced Community Re-entry initiative will provide additional resources to individuals to enhance community re-entry preparation and offender management. The second initiative, Enhancement of Parole Supervision Services will provide additional resources to maintain a favorable agent to parolee ratio. The Sexual Offenders Assessment Board received an additional $480,000 to continue current program, while the Drug Offenders Work Program received a minor increase of $40,000. The Improvement of Adult Probation Services has been recommended at the current year funding level. The State Parole population is projected to be 31,312 by June 2008, an increase of 2,169 offenders on parole from FY 2006/2007 projection. The estimated State Supervision Fee Collections for FY 2007-2008 are $2.8 million, which is an increase of $83,000 over current year collections. The proposed budget would provide a $525 million increase in basic education spending. This increase would boost funding by $2.3 billion above spending levels when the Governor’s first term began. These investments continue to demonstrate results. The commonwealth was one of only 7 states where 4th graders progressed significantly between 2003 and 2005 in both math and reading tests, while 8th graders have improved scores above tests taken three years ago in 5th grade (6% in math, 13% in Reading). Budget highlights include a 3.5% increase of $166.7 million in the Basic Education Subsidy, including foundation funding of $58 million targeted to the lowest spending districts within the commonwealth. This year’s foundation proposal would include a second tier targeting funds to relatively poorer lower spending districts with higher education costs. Accountability Block Grant funding would be increased by $100 million, and science and technology initiatives would grow by $75 million. Early Childhood Assistance Targeted initiatives to fund early education programs would be maintained or expanded. These investments have already enabled 4,287 additional students to enroll in pre-kindergarten, while an additional 5,800 students are now able to participate in Head Start. The budget targets $75 million of the requested increase for the Accountability Block Grant for school district expansion of Pre-K programs. The other $25 million of the requested increase would fund new full day kindergarten programs. Head Start funding would remain at $40 million. Science & Technology Initiatives The elementary science initiative begun this year would receive $15 million, a $5 million increase. The program supports efforts to improve elementary science instruction through hands on learning and new curriculum training. Classrooms for the Future would receive $90 million to fund the second year of a multiyear program to place internet-equipped laptop computers in math, science, English, and history classrooms and equip teachers with multi-media technology. High School Reform High school reform, through the Project 720 initiative, created to insure more rigorous curriculum standards and graduation requirements, would receive $11 million, a $3 million increase above the current year. The budget would also provide $10 million for dual enrollment programs, a $2 million increase above the current year. An estimated 10,000 college credit courses were taken this year by high school students through dual enrollment programs. The budget also includes $2 million to open 2 new post secondary technical colleges in underserved rural areas. Special Education Special Education programs would receive an additional $29.4 million, a 3% increase. Early Intervention funding would be increased more than $30.9 million, totaling $173 million. Approved Private Schools would receive $89.9 million for the next fiscal year, a $3.4 million increase. Chartered Schools for the Deaf and Blind would receive $34.2 million, more than a $1.2 million increase. The budget would also request $5 million to resolve prior year audits for approved private schools and chartered schools for the deaf and blind. Aid to Non-Public Schools & Charter School Reimbursements Aid to Nonpublic Schools would be increased by 3.4%, including $86.5 million for Services to Nonpublic Schools and $26.45 million for Textbooks, Materials and Equipment. Charter school reimbursements to public schools would be increased by nearly $30.5 million, with a request of more than $157.26 million. The increase reflects an attempt by the commonwealth to reimburse districts for about 30% of their charter school costs. Rapidly rising charter school enrollments continue to increase these costs dramatically. Public Library Subsidy The Public Library Subsidy Program supports and improves state and local library services and ensures access to these services. Last year’s budget increased the subsidy to $75.5 million dollars, a ten year high. The Governor’s budget proposal for FY2007-08 suggests slightly increasing the Public Library Subsidy to $75.75 million dollars. Other Increases Other significant funding increases would include a $7 million increase for Teacher Professional Development, to total $30.37 million, a $7 million increase for Pupil Transportation, totaling $514.46 million, a $20.18 million increase, totaling $494.8 million for School Employees’ Social Security costs and a requested $452.17 million appropriation for School Employees’ Retirement costs, a $83.4 million increase to cover increasing employer contribution rates. The budget would include a new $6.54 million school food services initiative to increase the number of school breakfasts served and fund incentives for schools that adopt best practice nutritional guidelines, and $1 million to encourage school districts to explore better service delivery through shared services with other districts. The Governor is also recommending a consolidation of all school district health care plans. Property Tax Relief Plans The Governor officially reopened the debate over expanding property tax relief by recommending an increase in the state sales tax, in part to be used to provide more funds for property tax relief. Special Session Act 1 of 2006 will provide tax relief this summer to eligible senior citizens through an expansion of the Property Tax Rent Rebate Program. However, tax relief for all other homeowners, funded through gaming revenue, is not expected before the 2008-09 fiscal year. The Governor’s new proposal would provide an additional $420 million to the Property Tax Relief Fund and insure property tax relief will be provided to all homeowners during the coming fiscal year. The additional funds would be sufficient to provide an estimated $643 million in homestead tax relief to homeowners, while $257 million will fund expansion of the Property Tax Rent Rebate program for eligible seniors and disabled. Income eligibility will be increased to $35,000, reaching an additional 420,000 claimants. Maximum benefits will be increased from $500 to $650, plus residents of Philly, Pittsburgh, and Scranton and homeowners with relatively higher property tax burdens, in excess of 15% of annual income, will receive an additional 50% benefit increase. Spending limits are now in place for all school districts. For the 2007-08 school year districts must limit future tax increases to an inflation index that has been set at 3.4%. Less wealthy school districts receive a modest increase in that index, based upon their school district aid ratio. All school districts also have a list of exceptions from the index for expenditure increases beyond their control such as mandated special education and pension costs. Tax increases above the school district’s allowable index may only be approved by voter referendum at the Spring Primary. During the Spring Primary voters will also be given the option to vote for a local tax shift to provide greater property tax relief. These local referendums, as determined by local school districts in consultation with local tax study commissions, will ask voters if they favor increasing local earned income taxes or shifting to a personal income tax to fund additional tax relief. Community Colleges The Governor’s budget includes a 3 percent increase for operating funds for community colleges, or an additional $6.7 million. In addition, a total of $44.5 million is included for the commonwealth’s annual share of approved capital debt service and lease payments. Together this represents an overall 3.5 percent increase in spending on community colleges. Funding for the community colleges is shared by sponsoring counties or school districts, the students through tuition payments and the commonwealth. State appropriations are based on a formula that ensures predictable base operating funding, provides a stipend for students enrolled in economic development programs that focus on high priority occupations and recognize the capital cost of the colleges. The Governor has included a $2.0 million initiative to create new opportunities for postsecondary education and training in underserved regions in high-demand technical fields by launching the state’s first two Technical Colleges. The Technical Colleges will be located in parts of the state where students do not currently have access to affordable certificate and associate degree programs to prepare for high-skill technical occupations like engineering. State System of Higher Education The State System of Higher Education would receive an additional $16.4 million, or a 3.36 percent increase over the current year overall; however funding for the Education and General line is increased by 3.5 percent. Funding is distributed through the Chancellor’s Office to individual universities in accordance with a formula that considers the enrollment and programs of the school and the cost of operating and maintaining the individual campuses. In addition, the System will receive $15.5 million in Keystone Recreation, Park and Conservation Fund money for deferred maintenance projects. State-related Universities Penn State, University of Pittsburgh, Temple University and Lincoln University each are slated to receive a 2.0 percent increases over the current years appropriation for their Educational and General appropriation lines. Combined, state support for the state-related institutions is increased by more than $12.0 million. State-Aided Institutions Overall and on average, state support for the State-Aided Colleges and Universities would receive a modest increase of .5 percent. PA HIGHER EDUCATION ASSISTANCE AGENCY Grants to Students The Governor’s budget includes no increase in the Grants to Students appropriation. This is the commonwealth’s scholarship program which helps students pay tuition at an accredited college or university. Students who attend private schools, which charge higher tuition, generally qualify for more aid. The budget assumes an additional $88.6 million will be provided by PHEAA to supplement the grants to students program. In the current year, PHEAA provided $72.5 million in its earnings revenues for the grant program. The Governor estimates this level of funding will provide for grant amounts which will cover 13.5 percent of a student’s educational cost in 2007-08. The PHEAA Board annually determines the distribution of funds to applicants on criteria including family income, family size and the cost of the institution the student will be attending. Currently the number of grant recipients is 166,210 students, the average award amount is $3,100 and the maximum award is $4,500 for students attending the highest cost institutions. It is anticipated that the there will be 173,250 grant recipients in 2007-08. Institutional Assistance Grants The budget includes no increase in the IAG program. These funds assist independent, post-secondary institutions to stabilize education costs which benefits student grant recipients enrolled at those institutions. This funding level will provide for a per capita grant of $1,005 for an estimated 41,332 students. Matching Funds Program The Matching Funds Program, which disburses matching funds as a percentage of the federally-required match for the Federal Perkins Loan Program and the Federal Work-Study Program, is slated to receive no increase in state funding. Agricultural Loan Forgiveness Program The budget continues the Agricultural Loan Forgiveness Program. The Governor has included an appropriation of $85,000. The program forgives up to $2,000 each year with a maximum forgiveness of $10,000 per recipient. Sci-Tech Scholarships The Governor is proposing to continue funding the SciTech and Technology Scholarships in the amount of $6.8 million, to provide an incentive for Pennsylvania students to pursue education and training in science and technology and stay in Pennsylvania after graduation, thus expanding Pennsylvania’s skilled workforce. It is estimated that 4,500 students will receive these scholarships in 2007-08. Cheney University Keystone Academy An appropriation of $2 million is included for the Cheyney University Keystone Academy, to recruit gifted students to enroll at the university. DEPARTMENT OF ENVIRONMENTAL PROTECTION The Governor’s proposed budget for DEP could be called a return to core functions. There are hefty increases in the Environmental Program Management and Operations line items which increase by 11% and 14% respectively. But total General Fund expenditures actually decrease by 1.9%. The decreases are primarily in the grant programs administered by the Department. The following grant programs are eliminated in the Governor’s proposal: Safe Water, Storm Water Demonstration Project, Water Contamination Remediation, Alternative Energy Initiatives and Chesapeake Bay Education. The Governor’s Energy Independence Initiative clearly makes the Alternative Energy Initiative unnecessary.
Environmental Stewardship and The Governor’s budget proposes two increases in the tipping fees paid for municipal trash. A 50 cent per ton increase will go to the Environmental Stewardship Fund (ESF) to help pay the fund’s share of the debt service on the Growing Greener II bonds. The fee should raise about $8.5 million annually. A more substantial tipping fee increase of $2.25/ton of municipal waste is proposed for the Hazardous Sites Clean-up Fund. This increase should raise $37 million and will keep the fund at a minimal operating level. The appropriation recommended in this budget is for $31.3 million. Prior to the opening of any facilities, the initial funding for the Board was provided through the General Fund in FY 2004-05. The State Gaming Fund, which was established through the Act, is scheduled to repay this initial loan from the General Fund. Because the primary assumption made by the Board, upon which the revenue estimate was based, was the projection that all 14 slot venue licenses would be “issued” during the next fiscal year. However, it is now evident that 11 slot venue licenses will be “issued.” Because of this the estimates made by the administration will now be different. In December 2006 the PGCB issued 11 permanent operator licenses. Five of the licenses issued were to Category 2 applicants and six Category 1 licenses. However, payment of these license fees is not due until such time that the license is issued. Due to the fact that many of these facilities have yet to open, the Board is faced with a short fall of revenue that had not been anticipated. They do expect funds to come in once licensed facilities begin repaying the Board for their investigative fees. However, because the anticipated opening dates are staggered, the return of those fees to the Board will be as well. In order to make up for this shortfall, the PGCB has now implemented a draw down program from the facilities that are already operating. What this entails is that on a weekly basis the Department of Revenue will “draw down” from each facility $800,000 and 1.5% Gross Terminal Revenue (GTR) from each facility. These draw downs are being taken out of the Section 1401 accounts which were created by the General Assembly under Act 71. Each facility is required to deposit $5 million into this account two days prior to opening. Today only three of these accounts exist. This amount will be repaid in the same way as the $36.1 million General Fund loan and will be recovered once all 14 licenses are operating. The draw of 1.5% GTR will continue through the remainder of this fiscal year, ending June 30, 2007. Upon issuance, each $50 million licensing fee will be deposited into the Gaming Fund. At that time, it is anticipated that the Gaming Fund will repay the prior General Fund loans and fund the operations of the Board on an ongoing basis. The revenues from gaming will be used for several different programs. These programs are listed below.
For Fiscal Year 2007-08, it can be anticipated that the total expenditures by the PGCB will be approximately $34.2 million. Of this amount, $6.5 million will be needed for operating costs and $28 million, or 81%, will be needed for personnel costs. In addition to the budgetary needs of the Gaming Board it is also important to bear in mind the budgets for the Pennsylvania State Police, the Department of Revenue and the Attorney General’s office. The State Police are requesting a total budget request if $15 million. This primarily made up of the costs associated with having officers posted at each facility. The total cost for personnel is $14 million, 94% of their required funding. In terms of the Department of Revenue, the majority of their expenditures lie with the administration of G-TECH, the computer system. The cost of DOR’s operations is $6.6 million, and their personnel costs are $2.7 million. The Attorney General’s office comprises the most minimal requirements for their role in gaming. It is estimated that they will need $569,000 for personnel and $231,000 for their operating expenses. The Department of Health’s budget this year is highlighted by the Governor’s Prescription for Pennsylvania. Much of this program is spelled out in another part of this report which deals with the new initiative, Prescription for Pennsylvania, in a comprehensive way. This new health program provides a dramatic increase to affordable health care in a meaningful way. This budget contains $120,000 to develop recommendations for the review and approval of the health care delivery services and facility planning. Pennsylvania can ensure that health care dollars will be effectively used to provide the best access care without being an economic burden. Pennsylvania health care facilities have no way of assessing what proper technique or medical testing is the most cost effective. Both the patient and the health care provider will benefit from efficient resources. $1 million in this budget is appropriated to reduce health disparities by increasing the number of health professionals equipped to address the myriad needs of racial and ethnic minorities. Additionally, $719,000 is recommended by the Governor this fiscal year to enhance the delivery of health-promotion and risk-reduction messages through an integrated and coordinated approach to health literacy. The Department of Health through the initiative, Prescription for Pennsylvania, will address the dearth that exists in mostly rural portions of our state in which many Pennsylvania residents do not receive adequate primary health care. It provides a budget of $5.4 million to increase access to primary health care in under served rural areas through community health care centers, mobile wellness clinics and a long standing loan-forgiveness program. The Prescription for Pennsylvania provides $510,000 within the Department of Health’s budget to develop and enforce standardized admission criteria and fair billing and collective procedures for uninsured and underinsured patients. Having the health care providers re-examine the manner in which they treat patients may also reduce 20,000 cases of hospital acquired infections. These available infections have contributed in nearly 2,500 deaths per year. These cases could be seriously reduced and save $3.5 billion in hospital care. An appropriation of $2.3 million will be used to identify the best practice procedures directed to reduce infections. The Governor recommended that $14.056 million be used to purchase and stockpile antiviral medicine. This effort is part of the Commonwealth influenza panademic perpardness planning efforts that have been recommended by the federal government. In the Governor’s 2007-08 budget there is an increase of more than $2 million in the program entitled, Quality Assurances. In the 2006-07 fiscal year this appropriation received $16.057 million while in the 2007-08 fiscal year the governor is recommending $18.308 million. It is expected that much of this money will be to step up efforts in this Bureau to inspect birthing centers and rural health care clinics. HISTORICAL AND MUSEUM COMMISSION The Historical and Museum Commission provides state and local museum assistance. Museum Maintenance Program The Commission’s Maintenance Program is slated to receive $2.0 million in 2007-08, as in the current year. Funds from the Keystone Recreation, Park and Conservation Fund for historic site development are expected to be $11.2 million. Funding is available to Pennsylvania non-profit organizations and public agencies that operate a publicly accessible historic property listed in, or eligible for, the National Register of Historic Places, or that operates a contributing historic property in a National Register historic district. Grants are awarded on a 50-50 matching basis and support projects in the areas of redevelopment, preservation and rehabilitation and restoration. Museum Assistance Grants The Governor includes $4.1 million in funding for the Museum Assistance Grant Program. The Museum Assistance and Local History Grant Program is a competitive financial assistance process available to all qualified history related institutions within Pennsylvania. It is anticipated that 200 museum assistance competitive grants and 155 general operating support grants will be awarded in the 2007-08 fiscal year, although the number of grants awarded may vary depending on the average award amount. Non-preferred Museums The Governor’s budget includes a 9 percent decrease in funding for the individual Non-Preferred Museums that historically receive funding. These amounts are identical to the funding levels the museums received in 2005-06. Although much of the Governor’s proposed budget for the Insurance Department is dominated by the Prescription for Pennsylvania (see Prescription for PA section), there are a couple of other items in the Governor’s Insurance Department budget that warrant mentioning. The enabling legislation for the Cover All Kids program was adopted by the legislature in the fall. For FY2007-08 the Governor’s budget includes $12.2 million in state money and $20.5 million in federal money to cover a total of 21,000 additional children. Current enrollment in the CHIP program is 152,349 as of January 2007. Current enrollment in the adultBasic program is 52,310. This program will be funded for half a year through the Tobacco Settlement Fund ($28.5 million) and the Community Health Reinvestment Agreement ($47.4 million). In the second half of the fiscal year the adultBasic program will be collapsed into the new Cover All Pennsylvanians program. The Governor also proposes spending $6 million to repay the loan to the General Fund made by the Underground Storage Tank Indemnity Fund. This is the same amount that was enacted in the FY2006-07 budget. INFRASTRUCTURE INVESTMENT AUTHORITY Including all State and Federal funding sources, the budget proposal for FY 2007-08 calls for $439 million in Pennvest expenditures. The Federal contribution is $115.6 million and the remainder is comprised of various funds which total $306.7 million. This budget proposes $16.4 million from the Environmental Stewardship Fund for storm water, waste water and sewer grants. This is a special revenue fund that has a proposed increase of almost $2.7 million. This Fund is used for grants for combined sewer overflow, sanitary overflow and nutrient reduction projects. Also included in this fund are interest earnings on the fund’s cash flow and payments made on loans. These funds are used for loans and grants to municipalities and municipal authorities. In addition, loans are available to individual homeowners in order to upgrade their septic systems.
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