Pennsylvania state budget (2008-2009)

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State Information


Pennsylvania faced a $2.0 billion budget deficit for fiscal year 2009 and an approximately $4.8 billion deficit for fiscal year 2010, according to the Center on Budget and Policy Priorities.[1] Reports in late May 2009 projected the FY 2009 budget gap closer to $3.2 billion, $1 billion more than Gov. Ed Rendell predicted three months prior. To quell the crisis the governor proposed a series of spending cuts, use of federal economic stimulus money, taking money from the Rainy Day Fund and limited taxes. However, Gov. Rendell noted that he would only consider an income-tax hike if all other options failed.[2] He said the government's first job "was getting people back to work ... We need to reduce our spending overall. We can't cut economic development."[3]

Finalized budget

Exceeds deadline

For the seventh year in a row Pennsylvania government failed to pass the budget by its deadline of June 30. The Republican-led Senate and Gov. Rendell could not agree on how to close the budget shortfall of $3.2 billion dollars. Rendell was proposing tax increases, withdrawing from the Rainy Day Fund and the expansion of the General Fund by 2.5 percent.[4] Republicans called for a 1.4 percent decrease in state spending.[4] Hospitals, nursing homes, doctors, mental health organizations and child welfare were among the organizations whose funding might have been frozen until the new budget could be agreed upon.[4] Rendell said that as many as 800 layoffs might occur if he had to shave $72 million off his initial plan, yet the Senate was asking for an additional $1.5 million difference in order to balance the budget and not increase taxes.[5][6]

The governor hinted that budget talks could extend into August.[7]

  • Pennsylvania was withholding pay for 69,000 state employees for time worked after July 1 until a state budget was approved. However, approximately 80,000 state employees were already seeing smaller paychecks. In the early weeks of July some state employees received only partial paychecks.[8] Gov. Rendell said that a 2008 court ruling prevented the state from issuing payments to employees without a budget in place. The ruling was on appeal to the state Supreme Court[9]
    • In July, state workers protested state policy that required them to work without pay until a budget was passed.[10]
  • Just before the fifth week of the budget stalemate, the governor said that he was looking for options in order to pay state workers. One such method, he said, would be stop-gap funding legislation.[11]
  • In budget negotiations, the governor said he continued to insist on increasing the state's personal income tax. Rendell argued that the tax increase was the "easiest and fairest" way to balance the budget; however, lawmakers said that they remained hesitant because they were concerned about its potential impact on the economy.[12]

Partial budget signed

On August 5, 2009, Gov. Rendell signed an approximately $11 billion "partial" state budget. Additionally, the governor vetoed $13 billion in expenditures. The signed budget included includes $1.8 billion in federal stimulus money.[13] The signed partial budget restored paychecks that were previously being withheld due to the budget impasse. Paychecks were expected to be sent starting August 10, 2009.[14] However, during the same week, the governor announced that 255 employees would be laid-off. Lay-offs were expected to begin September 30.[15]

According to state Democrats, Gov. Rendell's proposed income tax increase was "off the table." The income tax increase proposed raising the rate to 16 percent for three years. Shortly following the announcement, the governor's state aides confirmed the end of the tax increase debate. "But at every point in this process," Snyder said, "the governor has stressed his flexibility. He continues to believe that the (personal-income tax increase) was the fairest way to produce recurring revenue . . . but he has consistently said he was not wedded to it," said Gov. Rendell's spokesman.[16]

Impact of budget woes

See also: State budget crisis, 2009-2010
  • In April 2009 the seasonally-adjusted unemployment rate was 7.8 percent. Previously, Pennsylvania saw an increase in the unemployment rate for 14 consecutive months. In March 2009 the number of unemployed people decreased by 3,000 to 6.4 million and stayed steady throughout the month of April.[17]
  • Proposed Senate Bill 850 attempted to reduce the state's budget deficit by closing approximately 35 Pennsylvania parks and 1,000 miles of state forest roads, according to the Department of Conservation and Natural Resources. The state had a grand total of 117 state parks and 2.1 million acres of state forests. The bill also proposed a cut of $19 million from the department, in addition to already proposed cuts in the state budget. The department estimated that closing the parks would turn away three million tourists and eliminate approximately $57 million in revenue.[18]
  • Gov. Rendell wanted to increase the state's Children's Health Insurance Program (CHIP) by $8 million in 2010, but some legislators wanted to keep the expense at the 2008-2009 level. There were 193,000 children enrolled. Without additional funding to the program, the state was estimated to lose $17 million in federal CHIP aid, creating a waiting list. Senate Republican lawmakers said that they defended their proposal to keep CHIP at its 2008-09 level. Senate GOP spokesman Erik Arneson said that if a waiting list developed, a supplemental budget bill could be passed.[3]
  • The state budget exceeded the annual deadline and in early August, local county officials said that they might have to furlough employees if a state budget was not approved soon.[19]
  • Students at several state universities were told that there would not be any more admissions accepted into the university. They were not told this through the letters they received but by faculty who knew what was really going on. Due to a budget not being passed, the universities decided to freeze all admissions into both undergraduate and graduate programs.

Budget background

See also: Pennsylvania state budget

Pennsylvania's fiscal year begins July 1 and ends June 30 of the following year. According to the state constitution, every year the governor must present a spending recommendation to the legislature. Agencies prepare budget requests starting in August for the governor to review prior to making his/her own recommendation in February. Between the months of February and June both the House and the Senate review the budget proposal before finalizing the budget for the upcoming fiscal year. The governor may sign, take no action, veto, or line-item veto an appropriation bill. If the governor signs a bill, it becomes law upon signature. A bill also becomes law if the governor fails to take action on the bill within a time certain.[20]

Budget figures

The following table provides a history of Pennsylvania's expenditures and gross domestic product (GDP).

Fiscal year Expenditures (billions) GDP (billions)  % of GDP
2000 $75.5[21] $389.6[21] 19.3789%
2001 $80.7[21] $406.7[21] 19.8426%
2002 $85.9[21] $423.1[21] 20.3025%
2003 $90.2[21] $440.7[21] 20.4674%
2004 $94.4[21] $459.9[21] 20.5262%
2005 $101.3[21] $482.4[21] 20.9992%
2006 $104.0[21] $508.8[21] 20.4403%
2007 $107.8[21] $531.1[21] 20.2975%
2008 $111.8[21] $548.7[21] 20.3754%
2009 $116.0*[21] $547.8*[21] 21.1756%*
  • NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.

Ideas about why the crisis occurred

  • On June 1, 2009 the Pennsylvania Revenue Department reported that Pennsylvania collected $1.6 billion in General Fund revenue in May, which was $287.5 million, or 15.1 percent, less than anticipated. Fiscal year-to-date General Fund collections totaled $23.3 billion, which was $2.8 billion, or 10.9 percent, below estimate. Sales tax receipts totaled $607.4 million, $106.4 million below estimate for the month. Personal income tax (PIT) revenue in May was $721.4 million, $55.7 million below estimate for the month.[22]
  • Despite the price of gasoline dropping in 2009 from the 2008 price of $4 per gallon, officials noted a sharp revenue decline in the state’s Motor License Fund.[23] According to the Revenue Department, the Motor License Fund received $186.3 million for the month, $31.7 million below estimate. Fiscal year-to-date collections for the fund totaled $2.4 billion, which was $137.2 million, or 5.4 percent, below estimate.[22] The state received 31.2 cents for every gallon of gasoline at the pumps, while the federal tax was 18.4 cents. Approximately 60 percent of the Motor License Fund came from fuel taxes. “People are driving less,” said Rich Kirkpatrick, PennDOT spokesman. “Tax collections are well below estimates for the entire fiscal year."[23]

Proposed actions

See also: Pennsylvania state budget proposals, 2009

Governor Ed Rendell


Gov. Ed Rendell talks about job lay offs in Pennsylvania and stimulus funds.

Gov. Rendell proposed a $29 billion budget that increased spending on economic development and education but made cuts elsewhere.[24] In an effort to generate more revenue for the state, the governor recommended a tax on smokeless tobacco and an increase in the state cigarette tax, all of which he estimated would generate approximately $100 million in revenue. Additionally, the governor called for a 0.5% point increase in the state's 3.07% personal income tax as an easy and fair way to balance the state budget.[25]

Republicans

In response to the governor's proposed budget and the state's increasing budget gap, Republican lawmakers proposed a budget that equaled $27.3 billion, approximately $1.7 billion less than the governor's budget recommendation. The proposal, also known as Senate Bill 850, included no tax increases, but it called for deep program cuts.

Republicans said that they would not support an increase in any broad-based tax and proposed tightening spending instead. In mid-July Republican legislators said that they approved of a $27.1 billion budget plan but Gov. Rendell and other lawmakers said that budget plan would require drastic cuts that they did not support.[25]

Democrats

In an effort to reduce the state's budget deficit, Democrats were proposing raising the income tax as a solution. The proposal had not been officially submitted, but lawmakers stated that the increase would be the quickest way to raise millions for services like healthcare and education. At the time, the income tax was 3.07 percent.

Economic stimulus package

Pennsylvania was expected to receive $16 billion from the $787 billion dollar economic stimulus.[26] All told, the federal stimulus plan would create or save 143,000 jobs in Pennsylvania, based on White House estimates.[27]

According to preliminary reports, Pennsylvania was expected to receive:

  • $4 billion towards health care[28]
  • $2.56 billion towards education[29]
  • $1.4 billion towards transportation infrastructure[30]
  • $4 billion to help pay for health care costs for the elderly, disabled and poor families under the Medicaid program[31]
  • $120 million for child care services and Head Start[31]
  • $118 million for job training and improved unemployment services[31]
  • $100 million for aid to indigent families[31]
  • $523 million in funds for affordable housing construction[32]
  • $223 million for drinking water and sewer system improvements[32]
  • $373 million to promote energy independence[33]

Budget transparency

Despite the absence of a statewide site as of 2009, there were several places to obtain the line items in the Pennsylvania budget online. As part of the new state Open Records law, the Pennsylvania Treasurer launched a database of state contracts. The Commonwealth Foundation's policy report titled Government on a Diet:Spending Tips 2009 identified for citizens how the state spends their money on certain projects.

State budget websites and analysis

The Pennsylvania Office of the Budget has several documents on Governor Rendell's proposed 2009-10 budget, including the line items of his Pennsylvania state budget proposal.

The Commonwealth Foundation has made an Excel version of the revised and proposed Pennsylvania budget available online.

For a comprehensive look at Pennsylvania state spending (which includes "special funds" and federal funds spent by the state), see the Governor's Executive Budget.

Each of the four legislative caucuses has a budget page with spreadsheets and analysis:

  • Pennsylvania House Democratic Appropriations Committee
  • Pennsylvania House Republican Appropriations Committee
  • Pennsylvania Senate Republicans
  • Pennsylvania Senate Democrats

The Commonwealth Foundation has a 2009 report identifying what they viewed as wasteful spending in the Pennsylvania budget, as well as additional analysis of the Pennsylvania budget.

The Pennsylvania Budget and Policy Center also offers analysis of Pennsylvania government spending.

See also

External links

Additional reading

References

  1. Center on Budget and Policy Priorities,"State Budget Troubles Worsen," May 18,2009
  2. Philadelphia Inquirer,"Projected Pa. budget gap grows to $3.2 billion," May 30,2009
  3. 3.0 3.1 Philadelphia Inquirer,"Rendell says he would offer more cuts," May 28,2009
  4. 4.0 4.1 4.2 Daily Pennsylvanian, State budget has yet to be passed, July 7, 2009
  5. Penn Live, 800 potential job cuts were above state jobs already frozen, governor's aide says, July 8, 2009
  6. Philadelphia Inquirer, Rendell: Budget process slowly progressing, July 8, 2009
  7. The Sentinel, Sentinel Morning Update: Rendell pushes budget plan at schools, July 8, 2009
  8. The Associated Press,"Rendell mulls skeleton budget to pay Pa. workers," July 27, 2009
  9. Pittsburgh Post-Gazette, "Budget strife may violate right to pay," July 25, 2009
  10. [Meadville Tribune,"Local state workers protest budget stalemate," July 16, 2009
  11. KYW,"Rendell Explores Ways to Pay State Workers and Vendors," July 27, 2009
  12. Associated Press,"Pa. governor insists income tax hike plan not dead," July 17, 2009
  13. Pittsburgh Post-Gazette,"Rendell's budget veto hurts Pa.'s 67 counties," August 12, 2009
  14. Associated Press,"Paychecks restored for Pa. government workers," August 5, 2009
  15. Associated Press,"Pa. lays off 255 as Rendell advocates spending," August 10, 2009
  16. The Philadelphia Inquirer,"Pa. House Democrats say income-tax rise dead," August 4, 2009
  17. Pittsburgh Business Times,"Pennsylvania unemployment rate at 7.8 percent for second straight month," May 21,2009
  18. NBC Philadelphia,"Budget Cuts Might Close 35 State Parks," June 1,2009
  19. York Daily Record,"'Crisis' for county if state budget impasse too long," August 8, 2009
  20. State of Pennsylvania,"The budget process in Pennsylvania," accessed June 1,2009
  21. 21.00 21.01 21.02 21.03 21.04 21.05 21.06 21.07 21.08 21.09 21.10 21.11 21.12 21.13 21.14 21.15 21.16 21.17 21.18 21.19 US Government Spending,"Pennyslvania State and Local spending," accessed May 31,2009
  22. 22.0 22.1 Pennsylvania Revenue Department,"PA Revenue Department Releases May Collections," June 1,2009
  23. 23.0 23.1 The Tribune-Democrat,"Revenue squeeze: As people drive less, gas-tax collections plummet," June 1,2009
  24. The Morning Call,"Rendell points out consequences of Pennsylvania GOP budget plan," May 16,2009
  25. 25.0 25.1 The Patriot-News,"Pennsylvania state budget makers enter talks today 'very far apart'," July 27, 2009
  26. Pennsylvania Recovery,"Welcome to recovery.pa.gov," accessed May 31,2009
  27. American Recovery and Reinvestment Act,"Impact," accessed May 31,2009
  28. Pennsylvania Recovery,"Healthcare," accessed May 31,2009
  29. Pennsylvania Recovery,"Education," accessed May 31,2009
  30. Pennsylvania Recovery,"Transportation Infrastructure," accessed May 31,2009
  31. 31.0 31.1 31.2 31.3 Pennsylvania Recovery,"Job Training and Relief for Pennsylvanians," accessed May 31,2009
  32. 32.0 32.1 Pennsylvania Recovery,"Other Infrastructure/Housing," accessed May 31,2009
  33. Pennsylvania Recovery,"Energy Independence," accessed May 31,2009