First Look at the 2017-18 State Budget

Marc Stier |

While we will need some time to analyze the details of the budget that the House and Senate will pass today, our preliminary view is that it is, as we had expected from the beginning of the year, an austere budget that does not really address the deep public investment deficit of the state, but it certainly could have been far worse. Given that the General Assembly seems utterly unwilling to raise revenues to meet public needs, negotiations by the leaders of the legislature and Governor Wolf have led to a budget that still takes some small steps forward.

We caution, however, that we have only half of a budget so far. No plan has been passed to secure the revenues necessary to balance the budget. And, as we will point out later today in more detail, we are deeply troubled by reports that the deficit for the year that ends tonight and some spending for next year will be met by borrowing from the future at a scale that exceeds previous years.

Here are the highlights of the budget as we currently see them.

The $32 billion spending plan is a tiny bit higher than the current 2016-2017 budget with supplementals and is almost $500 million more than the budget initially approved for the current year. It includes a $200 million spending increase over the House budget approved a few months ago and $600 million less spending than the Governor proposed in February.

Education: The budget includes $100 million in new basic education funding that will flow through the fair funding formula. The budget also has an additional $25 million for special education.

New funding for Pre-K education is in the budget: $25 million more for Pre-K Counts and $10 for Head Start Supplemental Assistance. This is not as much as the governor requested, but a substantial increase over last year.

The budget does not include the governor’s proposal to reduce payments to school district for bussing by $50 million.

Higher Education: The governor’s proposal to increase funding for PASSHE by 2% is include in the final budget. State-related universities are flat-funded, as are community colleges. The Pennsylvania College of Technology would add $2 million to the $20 million it received last year and Thaddeus Stevens would receive an additional $1 million to its $13.2 million appropriation. The governor’s proposal to cut $30.1 million of funding for the Penn Veterinary School is not included in the budget.

Human Services: There is a deep reduction in spending on Medicaid / Medical Assistance compared to the Governor’s initial budget. But there will be no change in either eligibility rules or benefits. The reduction is made possible by augmented revenues (in the gross receipts tax on MCOs and the pharmacy rebate) that reduce the need for state spending by changes in estimates of enrollment for MA (with more projected for Medicaid expansion, which is reimbursed by the federal government at a higher level and less for traditional Medicaid), and by a small change in the federal reimbursement for maternity care.

The increase in funding for Intellectual Disabilities is in the final budget. This important step forward will reduce the waiting list for services by 1,000 people.

The House appears to be on board for consolidating four departments into a new Department of Health and Human Services with a projected savings of $20 million. The Senate is not there yet, and a final decision will be made next week.

Child care funding is below that requested by the Governor; my understanding is that between some additional federal funding and some year funds that are available for the current year, the state will be able to carry out the governor’s plan to reduce the waiting list by 1,800.

The governor’s $4 million increase in behavioral health services funding, which was cut by the House, is in the final budget. The final budget also restores $7 million of the $10 million the governor sought to make naloxone more widely available.

Corrections: The House budget proposed a much deeper cut to the Department of Corrections than the Governor. Half of that reduction has been restored.

Community and Economic Development: The House budget called for funding to the Department of Community and Economic Development to be reduced by 50%. That cut is not in the final budget and the department is flat funded.

The Ben Franklin Partnership, a business incubator program, would also remain at current funding levels of $14.5 million.

State aid for tourism marketing received new funding of $12.9 million, far more $2.5 million budgeted by House Republicans.

DCED’s Pennsylvania First Program receives $15 million, a cut of $5 million below. The House budget eliminated funding for the program.