The House and Senate have now passed a $32.7-billion state budget — $281 million less than the governor’s proposed budget, which is expected to be passed on to the Senate next week. The General Assembly budget passed easily and proposed no new tax increases or fees.
Like Governor Wolf’s proposal, the budget passed by the General Assembly has many of the right priorities but does not go far enough in funding them. The budget leaves Pennsylvania with a public investment deficit that is getting larger each year.
Closing the public investment deficit is impossible without new revenues. Again, the General Assembly failed to consider the governor’s common-sense proposals to raise recurring revenue such as a shale tax on natural gas (which would bring in between $200 and $400 million a year over the next five years), corporate tax reform like combined reporting, and a fee for local governments that relies on the State Police instead of local police forces.
A failure to raise new revenues not only makes it impossible to invest in more critical public needs, it leaves us with a budget that again relies on one-time revenues and others that will not be available next year. (See below.)
The General Assembly also refused to consider Governor Wolf’s proposal for an increase in the minimum wage, a raise that would not only improve the lives of low-income Pennsylvanians but would have a positive financial impact on the state. A $12 minimum wage would reduce spending by the Department of Human Services by $100 million a year due to decreased reliance on public assistance.
Despite these disappointing decisions not to raise new, recurring revenue this year or the minimum wage, there are some bright spots in the budget, in part due to a positive financial outlook for the state, leading to higher revenue projections. Since the budget is balanced, it is subject to the requirement of a 25% transfer of surpluses to the Rainy-Day Fund estimated to be $25 million. The General Assembly budget will also meet the actuarially required contribution for the third year in a row to PSERS, which is the public employee retirement system, and the state employee retirement system (or SERS) after not doing so for 15 and 16 years respectively. This contribution puts the state in the process of paying down the unfunded liability for pensions.
Below, we review some of the main priorities of the governor and how the General Assembly budget stacks up to his proposal.
PreK-12 Education: One of those priorities is education. The General Assembly budget would increase funding for education to $12.7 billion, an increase of $458 million from last year. This is not as strong as the governor’s proposal of $12.8 billion, but it’s close. This budget increases the funding that goes to classrooms across the state, in a larger amount than the governor proposed. The General Assembly proposal provides $6.1 billion for Basic Education (same as the governor’s proposal) but increases spending on Ready to Learn Block Grants by $18 million — a 7.2% increase from last year.
Early education will see additional investments from last year, but not as much as the governor proposed. The program Pre-K Counts will get an increase from last year of $20 million for total spending for 2018/19 at $192 million — the governor had proposed an increase of $30 million. Head Start Supplemental Assistance would receive a $5 million increase from 2017/18, only half of what was proposed by Governor Wolf.
We see the same trends with special education. The General Assembly passed an increase, but it doesn’t go as far as the governor’s proposal. The General Assembly budget includes an increase of $15 million for special education to $1.14 billion, $5 million less than the governor had proposed.
Early Intervention for 3 to 5-year-olds (in the Department of Education budget) saw even more of an increase than the governor had proposed: $10 million more for a total of $285.5 million, an 8.2% increase from last year.
New in the General Assembly budget is a $60 million initiative for school and community safety, a result of ongoing and pressing concerns for the safety of students across the Commonwealth. The details of such funding is yet unclear, but school districts will likely be able to use the funds in a variety of ways based on their needs. While promoting school safety is a priority we support, we worry that doing so without passing commonsense gun control measures will be an effort in vain.
Higher Education: Governor Wolf’s only proposed increased funding for higher education was for the State System — an increase of 3.3% — which the General Assembly approved. The General Assembly, however, also increased funding for community colleges by 3%, or $7 million, for a total of $239 million. The General Assembly increased funding for the state-related universities (University of Pittsburgh, Penn State, Temple and Lincoln) by 3%, for a total increase of $17 million for all four universities combined.
Human Services: The General Assembly budget on human services is similar to Governor Wolf’s proposal with some programs making out better than others. The General Assembly proposed $12.14 billion for human services but did not accept the governor’s proposal to combine the Department of Health and the Department of Human Services to save on administrative costs.
The General Assembly plan mirrors Governor Wolf’s in areas of intellectual disabilities/state centers, which is a decrease of $11 million from last year due to the closing of the Hamburg Center and savings from the GO-Time Initiative. But the Intellectual Disabilities-Community Waiver Program will see an increase of $61 million which will allow 100 people with intellectual disabilities to come off the waiting list and allow 25 people to move from state centers to a community setting. With the General Assembly plan, Autism Intervention and Services will see a 13.3% increase in funding from last year, $2.7 million more than the governor had proposed.
Mental and behavioral health will not change much from last year. Behavioral Health Services is flat funded as the governor proposed, and Mental Health Services will see a small increase of $15 million, or a 2% increase, from last year.
The General Assembly budget also increased funding for child care, which will reduce the waiting list for families waiting for subsidized care. It will also provide a much-needed rate increase for providers. Child care services will see an increase of 4.4% from last year’s budget — $6.8 million — but not as much as the governor had hoped for.
Early Intervention for youth, birth to 3 years old, will actually see a funding decrease as the General Assembly accepts the governor’s proposal to fund the program at $143 million, $1.3 million less than last year. Early Intervention Services for this age group for children who have Down Syndrome, autism, cerebral palsy or other diagnoses is especially important for learning and development, setting the stage for lifelong success. This program has not seen a rate increase in the past 8-10 years.
Opioid Epidemic: The General Assembly budget also provides important funds to help fight the opioid epidemic and treat those with substance abuse disorder. The General Assembly included even more money in the budget (an increase of 13% to $13.6 million) for Community-Based Family Centers than the governor proposed. This funding will go towards home-based visiting models to serve an additional 800 families impacted by substance abuse disorder and a rate increase for services provided by these centers.
Workforce Development: The General Assembly also supported one of Governor Wolf’s priorities, to increase funding for Career and Technical Education (CTE) and workforce development more generally. CTE, part of the Department of Education, has not seen a funding increase in the last ten years. The General Assembly budget will increase funding by $30 million to a total of $92 million. This falls short of the governor’s proposal of a $50 million increase, but it is still significant.
The General Assembly plan also increases funding for industry partnership and apprenticeship. Industry partnerships would see an increase of $3 million, which is a 166% increase from last year. This is the first year that apprenticeship will be funded at $7 million. This funding will go towards growing the Pennsylvania Office of Apprenticeship, set up in 2016, in order to expand apprenticeship into new industries across the state.
Environmental Protection: The General Assembly plan provides an additional $6.8 million to $153 million, an increase of 4.7%. This is not as much as the governor’s proposed increase of 5.5%, mainly due to the General Assembly’s rejection of the governor’s proposal to increase funding for the Ohio River Valley Watershed Sanitation Commission, the Delaware River Basin Commission, and the Interstate Commission on the Potomac River, which will remain flat funded from last year. The additional investment in the Department of Environmental Protection will allow, as the governor had hoped, the hiring of 35 new DEP staff to help monitor air quality in natural gas drilling areas, review sewage expansion requests, and oversee high-hazard dams.
One-Time Revenues and Other Budget Concerns: As we mentioned above, the 2018-2019 budget, like most budgets in the last decades, relies far too much on one-time or other revenues that will not be available next year. Spending of $130 million for PlanCon will be covered by debt rather than a general fund appropriate. Child care spending will be covered by $66 million in federal funds that may not be available next year. The budget relies on funds from the settlement the Attorney General has reached in regard to back tobacco settlement funds. It is not clear whether, and for how long, these funds will be available in the future. The budget again assumes that a transfer of $200 million from the JUA medical malpractice fund will take place, although the courts have ruled against it so far. The budget relies on a change in the timing of monthly payments to Medicaid managed care organizations that saves $120 million for one year and $351.7 million from the gross receipts tax on Medicaid managed care organizations, a tax that, in accordance with federal rules, will be ended. In addition, 2019-2020 debt service payments on the securitization of tobacco settlement funds will begin, reducing the amount available for the General Fund by $115 million. We also have some concerns about whether actual caseloads for Medical Assistance will be higher than projected in the budget.