THE SENATE DEMOCRATIC COMMITTEE ON APPROPRIATIONS

FISCAL YEAR 2008-09 BUDGET PROPOSAL ANALYSIS  

PROTECTING OUR PROGRESS

Tax Rebate Program - $130 million 

The Governor proposes, as apart of the economic stimulus program, a one –time, $130 million personal income tax rebate for low income working families.  A qualifying taxpayer would be eligible for $200 or $400 for a couple filing jointly.  To qualify, a taxpayer would have to be eligible for the poverty exemption provisions under the income tax and have at least one dependent.  For a family of 4 the maximum amount of taxable income they could earn would be $32,000 annually.  The proposal estimates that 475,000 working class families would be eligible for the rebate. 

The Governor wants the rebate to be given to taxpayers before the beginning of the new fiscal year.  To pay for this stimulus program the Governor proposes to borrow $130 million from the rainy day fund and then repay the fund with an equal transfer back to the rainy day fund through the automatic transfer of 25% of the 2007-08 budget surplus.  Therefore, the budget projects an estimated Rainy Day Fund balance of nearly $750 million, even with this recommended transfer at the close of this fiscal year. 

Job Creation Tax Credit Enhancement 

The Governor proposes increasing the amount of the job creation tax credit awarded to businesses from $1,000 per new worker hired to $3,000 in the first year.  It is expected that the business would receive the current amount of $1,000 per new employee for the second and third year that the existing credit covers.  The current program allocates $22.5 million annually for these tax credits. 

Unfinished Business 

The Governor’s stimulus plan recommends immediate action by the General Assembly on several action items unfinished from last year’s session.  These items would include his Energy Independence Strategy, the Jonas Salk Legacy Proposal, an increase in the current limit on Redevelopment Assistance Capital Program debt, and enactment of his Cover All Pennsylvanians health care plan.

Energy Independence - $850 million 

The Energy Independence Strategy would provide an $850 million bond issuance to be used to stimulate Pennsylvania’s alternative energy producers and create a fund to invest in new alternative energy technology.  The proposal would stimulate the economy in two ways: increase industries that are in the renewable energy sector and decrease energy usage by all Pennsylvanians thereby lowering their energy costs, which will provide more disposable income to be used within the economy.

Jonas Salk Legacy Fund - $500 million 

In 2006 the Governor first proposed the creation of the Jonas Salk Legacy Fund which was to build on the world quality medical research that was taking place in Pennsylvania.  This fund was to provide the funding for expanding bioscience laboratories for universities and academic medical centers that foster entrepreneurship in the life sciences. 

The Governor’s 2008-09 budget continues this mission by providing $500 million for the Jonas Salk Legacy Fund.  Like its precursor, the 2008-09 Jonas Salk Legacy Fund creates financial resources for biotechnology commercialization and investment capital.  The source of the $500 million will come from Pennsylvania’s Tobacco Settlement Fund revenues.  Without raising taxes Pennsylvania can jump into the lead as a center for international research in biosciences, while employing 12,000 people. 

The 2008-09 budget proposes that four percent of the tobacco revenue currently used to support the PACE program be re-allocated to provide additional resources for Life Science Greenhouses (two percent).  The Life Science Greenhouses are regional biotechnical centers that address the critical lifeline between university research and company formation.  These Greenhouses also attract private investors that are able to leverage the Commonwealth’s investment.  The remaining two percent that will be re-allocated from the PACE program will be used to provide addition venture investments through the Health Venture Account, to support start-up and emerging life sciences companies in Pennsylvania.   

Raising the RCAP Debt Ceiling - $750 million  

The Governor recommends increasing the Redevelopment Capital Assistance (RCAP) authorization an additional $750 million, from $2.65 billion to $3.4 billion.  An increase of $750 million in authorization will enable more than $1.5 billion in development projects to proceed, as there is a 1 for 1 matching rule with non-state funds.    According to the Governor, there are $500 million in projects that are ready to break ground this year.

Rebuilding Pennsylvania - $250 million 

          Bridge Repair - The Governor proposes an additional $200 million for each of the next 10 years to repair commonwealth bridges.  Over the past 5 years the commonwealth has repaired 1,381 commonwealth bridges.  In spite of this effort an estimated 5,900 state owned bridges remain structurally deficient.  This additional funding will raise total bridge funding to $15.5 billion over the next 10 years, and enable 1,000 additional bridges to be under construction by 2010. 

          Dam Repair Program - The Governor proposes to make $12 million available to fix 24 state owned dams.  These dams are classified as high hazard dams.  This necessary safety work will protect not only those in proximity to dangerous dams but will also create construction jobs.  The Governor wants to commit $37 million in capital funds to repair these dams over two fiscal years. 

          Another 21 unsafe high hazard dams are owned by local governments.  The budget will include $6.6 million matching grant program through PENNVEST where state funds can provide up to 30 percent of the cost of financing.  

          Flood Prevention Program – The budget proposes more than $100 million over the next three years to make flood prone communities safer.  The Department of Environmental Protection will provide capital funding of $13 million this year, growing to $58 million in 2010-11 to fund this assistance. 

          Rail Freight Program – Capital funding for rail freight assistance would be increased from $20 million to $30 million during the next three fiscal years. 

          Aviation Grants – Capital Assistance for Aviation projects for medium/small city/regional airports would be increased by $5 million per year for each of the next three years. 

          PA Infrastructure Bank – The Pennsylvania Infrastructure Bank provides low cost financing for highway, bridge, aviation, rail freight, and public transportation projects.  Since it was created, $72.3 million in projects have been financed.  The proposed budget would provide $30 million per year, a $13 million increase, for each of the next two years from the program. 

Business in Our Sites - $100 million  

            The Business in Our Sites (BIOS) program, through the Commonwealth Financing Authority has already provided $300 million to create shovel ready sites for development throughout the commonwealth.  The Governor recommends providing a new $100 million capitalization to the program. 

Keystone Opportunity Fund Expansion 

            The Governor recommends an extension and renewal of unused portions of existing undeveloped portions of Keystone Opportunity Zones, Keystone Opportunity Expansion Zones and Keystone Opportunity Improvement Zones.  The Governor has proposed a seven year extension of undeveloped areas with existing zones and discretion to designate new zones with local approval. 

Property Tax Relief - $853 million 

            On April 15^th the Budget Secretary is expected to certify the first distribution of Gaming Funds for homestead tax relief and wage tax reductions in Philadelphia.  This initial distribution is anticipated to provide $672 million for state wide tax relief, $134 million for expanded Property Tax Rent Rebate (PTRR) assistance, begun last summer for senior citizens and the disabled, $48 million for expanded PTRR assistance to individuals with high property tax burdens or living in cities with high tax burdens, and $19 million for Sterling act tax credits. 

            Tax relief will vary by school district, but will average an estimated $185 per eligible homeowner.  Wage tax reductions in Philadelphia will lower rates to 3.91 percent for residents and 3.48 percent for non-residents effective in 2009. 

GENERAL FUND 

2008-09 Budget 

            The Governor’s proposed 2008-09 budget has total expenditure growth of 4.19% to $28.3 billion.  The budget is based upon revenue growth of $806 million or 2.86% and a delay in the scheduled decrease in the capital stock tax that puts an additional $40 million in the general fund.  The additional money from the capital stock tax is equal to the amount of general fund transfer required to the hazardous sites clean-up fund.  The proposed budget has a small expected surplus of $2 million.   

2007-08 Budget (Current Year) 

            The Governor anticipates that there will be a revenue surplus this year of $427 million.  That surplus along with expected lapses of $80 million should provide a general fund surplus of $400 million that will be utilized to balance the proposed 2008-09 budget.  The Governor also intends to borrow $130 million from the rainy day fund to provide an income tax rebate for low income working families.  The money would be replaced in the rainy day fund at the end of the year when the surplus is transferred.  This report will detail both tax changes.  

            The expected revenue surplus of $427 million will come primarily from the personal income tax which is expected to bring in $346 million more than was officially estimated in July and the capital stock tax which is expected to bring in $94 million more.  The estimate for corporate net income tax is adjusted downwards by $56.7 million.  Also miscellaneous non-tax revenue is expected to bring in $24 million less than was officially estimated.   

TAX CHANGES 

The Governor proposes three tax changes in his presentation.  The first two are a one –time rebate for low income working families and an increase in the amount of job creation tax credit that a business can receive for each job created.  Both of these changes are discussed in the Protecting Our Progress Section at the front of this report.   

The last proposed change is a slow down of the phase-out of the capital stock tax for 2008-09.  Current law would decrease the tax by 1 mill on January 1, 2009.  The Governor’s proposal would allow for only a .4 mill reduction to 2.49 mills.  The savings is about $40 million according to the Governor and that is equal to the amount of the revenue from the capital stock tax that is to be transferred to the Hazardous Sites Clean-up Fund under Act 77 of 2007.  With this change the General Fund is not reduced by the change under Act 77. 

DEPARTMENT OF AGING 

The Governor proposes spending $100,000 in lottery funds on a new initiative entitled “Improving End of Life Services”, as part of his Prescription for Pennsylvania plan.  Funding would be used to assess the opportunities for increasing the availability of hospice and pain management care services. 

Family Caregiver Support  

The Family Caregiver Support Program appropriation would remain at the current year’s funding level, under the Governor’s proposed budget.  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 7,925 families will receive these services in 2008-09. 

Alzheimer’s Outreach Services 

The Governor’s budget includes $250,000 for Alzheimer’s Outreach Services.  It is also 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 $1.4 million, to provide for additional assessments.  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 2008-09.  Referrals to nursing homes are also expected to increase. 

PENNCARE 

The PENNCARE program provides home and community based services to older Pennsylvanians to enrich their lives and enable them to delay or avoid moving to a nursing home.  This budget proposal includes $247.6 million for the lottery funded PENNCARE appropriation to continue the current Attendant Care Program and provide services to an additional 260 recipients.  Funds are also used for Older Adult Protective Services to investigate suspected elder abuse reports.  As part of this appropriation, the Governor has included $3.0 million to provide additional services to reduce reliance on institutional long-term care and promote growth of high quality home and community based services. 

Home and Community-Based Services – Tobacco Settlement Fund 

A total of $25.8 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 $3.0 million to continue current home and community-based services, as well as nursing home transition activities, and an increase of $1.5 million to provide waiver services to an additional 2,100 recipients.   

Pharmaceutical Assistance 

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 Medicare prescription drug program.  PACE Plus Medicare enables cardholders to take advantage of the features of both PACE and the 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 co-payments.  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 2008-09 that will allow the average number of seniors covered by PACE, PACENET or PACE Plus Medicare to rise to 407,575, an increase of 49% over the last 5 years.  It is estimated that 24,000 additional seniors will be served in 2009-09 than in the current year. 

Reforming the Long-Term Living System 

The Governor’s budget includes a total of $4.2 billion in total funds among departments for nursing home and community based services, including funding to enable 2,100 additional seniors to remain in their homes as an alternative to nursing home care. 

            Pennsylvania has the third oldest population of any state, and is experiencing demographic changes that many other states will not experience for another 10 to 15 years.  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 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.             

The goal of this administration is achieving a balance of 50% institutional care to 50% home and community based care.

DEPARTMENT OF AGRICULTURE