governor’s 2013-14 budget proposal · 2013-03-12 · governor’s proposed 2013-14 budget •...

Governor’s 2013-14 Budget Proposal

Rep. William F. Adolph, Jr. Chairman

David Donley Ritchie LaFaver Executive Director Deputy Executive Director

Governor’s Proposed 2013-14 Budget

• General Fund Revenue o General Fund revenues for FY2013-14 are estimated to grow by 1.5%.

• General Fund Spending o Proposed FY2013-14 General Fund spending is $28.44 billion.

General Fund spending at the proposed level represents a $678 million or 2.4 percent increase over 2012-13 available funds.

The proposed General Fund spending growth falls below TABOR

allowable growth rate of 2.54 percent. TABOR, or the Taxpayer’s Bill of Rights, allows for budget growth that factors in inflation growth and population growth.

• The Governor’s budget also contains three major policy proposals.

o Transportation Funding o Liquor Privatization o Pension Reform (only plan tied to the General Fund budget)


Personal Income Tax

40%

Corporate Net Income Tax

9%

Sales & Use Tax 32%

Non-Tax Revenue

2%

Inheritance Tax 3%

Capital Stock & Franchise Tax

1%

Cigarette Tax 3%

All Other Taxes 10%

FY 13-14 Projected General Fund Revenues

PreK-12 Education

$10.05 Billion 35%

Higher Education $1.66 Billion

6%

Public Welfare $10.97 Billion

39%

Corrections $1.93 Billion

7%

Debt Service $1.17 Billion

4% All Other $2.66 Billion

9%

Proposed FY 2013-14 General Fund Spending: $28.44 Billion



Policy Proposals


• Pennsylvania’s General Fund budget supports employer contributions for two pension systems:

• State Employees’ Retirement System (SERS) • For state government employees

• Public School Employees’ Retirement System (PSERS) • For Pennsylvania public school teachers/ employees

• Total number of members (employees and retirees) in each system:

• SERS: 228,000 • PSERS: 589,000

• Current actuarial assessments of the systems indicate there is an unfunded

liability of $41 billion. • This represents the amount of money that would be needed if we had to pay the total promised benefit to all 817,000 members at one time.

Governor’s Proposed 2013-14 Budget • What Caused the Unfunded

Liability? • Poor market performance

• Post-9/11 downturn • The Great Recession

• Inadequate/ Suppressed Employer Contributions

• Benefit Enhancements • Multiplier increases • Vesting period reductions

• All these variables together created an unfunded liability which requires higher mandated employer payments to meet the projected actuarial need.

• The state and school districts are

responsible for employer contributions.

The state pays approximately ½ of

school district required employer

contributions


• The Governor’s pension reform plan proposes: o No changes for current retirees. o Closing the current plans and moving all new employees to a 401(k) style plan. o A prospective change to future benefits for current employees by reducing the

multiplier for future service from 2.5 to 2.0. o Allowing current employees to keep a 2.5 multiplier by paying a higher

employee contribution amount. o Benefit changes would not apply until 2015

• The Governor makes the above reforms so he can reduce rate collars on employer

(Commonwealth of PA and school districts) pension payment obligations for FY2013-14 . The money left over from the rate collar reduction is then used in other areas of the budget.


• In April of 2011, Governor Corbett issued an executive order that established a Transportation Funding Advisory Commission (TFAC) to review transportation needs in the Commonwealth.

• In August of 2011, the TFAC issued a report that outlined

transportation needs and made some funding recommendations. • TFAC identified an annual transportation funding need of

approximately $3.5 billion. The funding need was created by: • Underfunding transportation needs over a number of years • Aging infrastructure • Fewer fuel taxes collected due to better vehicle fuel economy

• Generally, the funds are needed to repair and maintain 5,200 structurally deficient bridges and 8,400 miles of road with a poor International Roughness Index score.

PennDOT maintains:

40,000 miles of roads and

25,000 bridges


Source: TFAC Executive Summary

CAFE: Corporate Average Fuel Economy


• To address the transportation funding needs identified in the TFAC report, the Governor presented a funding plan in his proposed budget for FY2013-14.

The Governor's Transportation Funding Plan : • Phases-out the cap on the Oil Company Franchise Tax (OCFT) over a five-year

period.

• Reduces the flat liquid fuels tax assessed at the pump by one cent in 2013-14 and another reduction of one cent in 2014-15. • This will reduce the current liquid fuels tax from 12 cents to 10 cents, a 17

percent reduction.

• Changes vehicle registration renewals to a biennial cycle, and moves driver’s license renewals to a six-year cycle.

• Creates the Multimodal Transportation Fund to assist transit, freight railroads, airports, ports and waterways.


Estimated Additional dollars for Roads, Bridges and Transit 2013-14 2014-15 2015-16 2016-17 2017-18

$509 million

$993 million

$1.148 billion

$1.257 billion

$1.446 billion

Source: Governor's office


• Pennsylvania and Utah are the only two states that have government-run liquor sales.

• The Commonwealth sells wine and sprits through 605 state stores operated by the Pennsylvania Liquor Control Board (PLCB).

• In FY 2012-13 the PLCB will provide approximately $550 million in the form of profits and taxes to fund state government programs in the General Fund as well as state police, and drug & alcohol programs.

• In addition to selling liquor and wine in Pennsylvania, the PLCB is charged with enforcing the Pennsylvania Liquor Code.


• In his budget address, the Governor presented a plan to completely privatize the sale of wine and spirits in Pennsylvania. • The plan would sell off both retail and wholesale operations starting with retail

outlets first. • The divestiture process would take approximately 4 years.

• The Governor’s plan as presented is revenue neutral and is anticipated to produce

$1 billion in one-time funds from the sale of licenses to sell wine, spirits and beer.

• The Governor’s plan would auction off 1,200 licenses to sell wine and sprits. Within the 1,200 licenses, there would be licenses reserved for three categories: big box/grocery retailers, large chain retailers and small businesses.

• The plan would also sell 5,000 beer and wine licenses. Beer and wine licenses would be reserved for the following categories: big box retailers,

grocery stores, convenience stores and pharmacies.


• The Governor’s plan proposes using the $1 billion in proceeds from the initial sale of licenses for public education.

• The proposal would create the Passport for Learning block grant program. • The grant program would distribute $1 billion to school districts over four

years. • School districts can use the grant for four specific areas.

• School safety • Early learning “Ready by 3” programs for k-3 students • Individualized learning programs for students • Science, Technology, Engineering and Math (STEM) enrichment

• The Department of Education would monitor the use of funds to ensure they are

used for one-time expenses and not used to create recurring expenses that would need to be backfilled after the four-year grant program ends. • This grant program is not included in the General Fund proposed budget, but would rather be in addition to the budget that is adopted for FY2013-14.


Analysis by Budget Area


• Overall, K-12 education funds are increased by $338 million or 3.4 percent.

• $223 million of the increase is for the state’s portion of increased pension costs.

• The proposal increases Basic Education Funding by $90 million.

• Subsidies for Pennsylvania’s 262,000 special education students are level funded at $1.03 billion.

• Accountability Block Grants are level funded at $100 million.

• Funds for Pre-K Counts early learning programs are increased by $4.5 million or 5.4 percent.


• All higher education appropriations are level funded. A total of $1.66 billion is dedicated for higher education-related programs.

• The proposed budget would provide the following amounts to Pennsylvania

higher education institutions:

• Pennsylvania's 14 state-owned schools: $413 million • Penn State University: $228 million • University of Pittsburgh: $136 million • Temple University: $ 140 million • Lincoln University: $ 11 million

• On February 1, 2013 the presidents of all these institutions joined Governor

Corbett and made a commitment to keep tuition increases as low as possible given the state’s commitment to continue to support these institutions during difficult economic times.


• Overall, the department’s budget is proposed to increase by $315.642 million or 3 %– for a total of $10.97 billion.

o The increase is largely driven by caseload and rate increases.

• Intellectual Disabilities: An additional $19.9 million is proposed for Community Waiver Programs to provide community-based services for an additional 380 individuals on the waiting list, 700 special education graduates and 100 individuals residing in state centers.

• Obstetrical and Neonatal Services; Home and Community-Based Services; Hospital-Based Burn Centers and Trauma Centers are level-funded.

• Autism Services: An additional $2.15 million is provided for a total of $15.15 million. • The added funding will help serve an additional 118 individuals.

• Domestic Violence and Rape Crisis: Both programs receive a 10 percent increase.


• Funding for corrections increases overall by $60.6 million or 3.2 percent. o A savings of approximately $22 million is realized as a result of closing the

facilities at Cresson and Greensburg and the opening of a more efficient facility at Benner.

o Savings are also realized as a result of the recently passed Justice Reinvestment Initiative. The program slowed the growth of Pennsylvania’s prison population and directed offenders to programs that reduce the likelihood of recidivism.

Source: Governor's Executive Budget


Department of Conservation and Natural Resources (DCNR) • The agency is proposed to receive $52.8 million in the General Fund - an overall

funding increase of $37,000 or 0.1% compared to FY 2012-13.

• The funds help the agency manage the 120 state parks under their jurisdiction. In the 2011-12 fiscal year our state parks registered 39 million park visits.

• DCNR will receive a total of $47.9 million from the Oil and Gas Lease Fund to

support the agency. Department of Environmental Protection (DEP) • The agency is proposed to receive $125.5 million in the General Fund in FY2013-

14, an overall funding increase of $639,000 or 0.5%.

• Environmental Protection Operations increases by $1.9 million.


• All Other Spending : $2.66 Billion

• All other spending amounts to 9 percent of the total budget and supports the operation of some 32 other departments.

• Some of the other major departments include:

• Labor & Industry • Dept. of State • Emergency

Management

• Governor’s Office • Judicial Branch • Legislature • DEP

• Agriculture • Attorney General • DCED • DCNR

• Health • Revenue • Military & Veterans

Affairs


• The House and Senate Appropriations Committees will review information obtained at budget hearings with executive branch agencies.

• After the budget hearings conclude, legislators will seek input from their

constituents on the Governor’s proposed budget.

• With the feedback from constituents, legislators will begin negotiations with the Governor to draft a final budget.

• Legislators and legislative budget staff will continue to monitor state revenues and the economy to see how economic conditions change.

• A final budget will be introduced and approved by the House, Senate and the Governor by June 30th.

Governor’s 2013-14 Budget Proposal

www.PABudget.com

governor’s 2013-14 budget proposal · 2013-03-12 · governor’s proposed 2013-14 budget •...

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