PathWays PA Special Budget Alert - October 14, 2009

PA has a budget!

Pennsylvania’s budget impasse finally ended last Friday night when Governor Rendell signed the three bills (taxes, spending, and the fiscal code) necessary to complete the budget. The final step, passage of legislation to approve table games at casinos and then payment of “non-preferred” items is scheduled to happen later this week (please see “More to Be Done” section below for more information).

We would like to thank our legislators for finally coming together to end the budget impasse, but we also urge them to ensure that this impasse does not happen again.

PathWays PA would especially like to thank all of our readers for their support and feedback on our alerts. We are particularly grateful for everyone’s efforts to urge legislators to pass a fair, responsible budget.

In an effort to improve future alerts, we have created a brief survey. Please take a few minutes and let us know what you thought of our Budget Alerts and how we may be able to improve them. Also, please stay tuned, as next year’s budget is already right around the corner.


Budget Update

The $27.799 billion budget does not include any broad-based tax increases and will spend $500 million less than last year’s budget.

Under the budget:

• Adult and Family Literacy will receive funding of $17,687,000 (more than in SB 850, but less than in the Governor’s original budget)
• Child Care Assistance will receive $198,147,000 in funding (the same as under SB 850, and less than the Governor’s original budget)
• Children’s Health Insurance will receive $97,112,000 in funding (more than in SB 850 or the Governor’s budget)
• Community Colleges will receive $214, 217,000, $22 million less than previously received
• Community Services Block Grant will receive $29,500,000 (which is $1.5 million less/more than what it received previously)
• Family Savings Accounts were zeroed out (the program received $987,000 in the previous fiscal year)
• Industry Partnerships will receive $2,000,000 in funding (after being zeroed out in SB 850, but had been expected to receive over 3 million under the three-caucus budget)
• Minority Business Development will receive $1,000,000 (this is a cut of $2,000,000)
• New Choices, New Options will receive $1,500,000 in funding (after being zeroed out in SB 850)
• Nurse Family Partnerships will receive $11,978,000 in funding (more than in SB 850 and in the previous fiscal year)
• Pre-K Counts will receive the same funding level from the previous year, $86,412,000
• Teen Pregnancy and Parenthood’s previous appropriation of $1,703,000 was zeroed out
• Women’s Commission will receive $238,000 (after being zeroed out in SB 850)

The revenue bill and other budget bills:

• raises the cigarette tax
• delays the phase-out of the Capital Stock and Franchise Tax
• legalizes table games at slot-machine casinos
• expands gas drilling on state-owned land
• levies a gross receipts tax on managed care organizations (which triggers the release of hundreds of millions of dollars in federal assistance)
• makes major withdrawals from the Rainy Day Fund
• withdraws funding from the surplus of the MCARE fund

While having a state budget is a relief, the impact of the cuts to programs and services throughout the state are still being assessed.

Please continue to see our PathWays PA Policy Blog for updates on the budget and other important policy issues.


Budget Payments

Now that we finally have a state budget many service providers, school, organizations, and others are wondering when they will start to receive payments for services provided during the impasse (and for some, services provided since April).

The State Treasury Department has approved a record number of checks and electronic deposits (1,400 checks, 3,000 deposits). These checks and deposits total about $3 billion.

According to some reports, money is being disbursed based on need: in other words, day care centers and social service providers should be receiving it first. Direct deposits should be in accounts and checks should begin arriving in the next few days. The Treasury Department expects to have sent all checks by early next week. Some businesses, known as the “non-preferreds,” will continue to wait for funding until the final bill on table games is passed. Non-preferreds include universities, hospitals, and museums.


More Work to Be Done: Legalization of Table Games

Talks continue on the legalization of table games at Pennsylvania's slot machine casinos. There are competing proposals in the House (34 percent tax rate, $20 million license fee) and the Senate (14 percent tax rate, $15 million license fee). Both chambers are in recess until their leaders can reach an agreement.
Without the table games legislation the budget is staying balanced due to inaction on “non-preferred” appropriations. Some “non-preferred” appropriations include funding for Penn State, hospitals, museums and other institutions. Once a budget is signed, legislators have 10 days to act on the appropriations.


Long Term Impact of the Budget Impasse

During the 101-day impasse:

• Turning Points for Children Philadelphia, which provides services for lower-income children and their families, laid off 13 workers - 20 percent of staff - and delayed the start of several programs.
• The owners of Pam & Pam's Latchkey Kid Program in Bensalem had to withdraw $112,000 in retirement savings to see them through the budget crisis, and now they fear they won't recoup the interest lost.
• At Personal Touch Child Care Center in North Philadelphia, the owner has a stack of bills that accrued during the impasse, and she can't say for certain that the center - where five workers serve 29 children - will survive.
• Creative Play Day School in Chester County's New Garden Township had to delay the start of a state-funded early-childhood class for nine Spanish-speaking children. Now the Center is unsure if they will be able to hold the class sine the person who was hired to teach was unable to wait out the impasse.
• The Domestic Abuse Project of Delaware County, with an annual budget of $1.7 million and a staff of 25, went through a $100,000 line of credit and $75,000 in savings, costing it $5,000 in interest and fees.

While a budget has finally been passed and signed, many service providers, schools, and others who went without funding for 101 days will now have to figure out how to move forward after laying off workers, cutting programs, and taking out loans. Even with the money flowing, it will take time for many providers and institutions to recover.

Many providers are calling on the state to pay for interest accrued on loans they had to take out to stay open during the impasse. Governor Rendell and legislators have said they would consider a proposal that called for that payment, however, the likelihood of such a bill being passed depends on the state’s ability to afford it.