Pattye Benson

Community Matters

Pennsylvania Budget

Is the Answer to Pennsylvania’s Budget . . . Robbing Peter to Pay Paul?

All eyes are on Harrisburg as the clock ticks down to the June 30 state budget deadline. Some say that to reach next week’s deadline would require a final budget in place by the end of today. At this point, Gov. Corbett appears intent on meeting the June 30 deadline . . . that by itself will mark a change from the past administration. I don’t recall if Ed Rendell’s budget was late all eight years of his administration but certainly most years.

There are some hurdles for Corbett’s budget before it is finalized. Some sticking points include whether the $300 million in Tobacco Settlement Fund revenue remains in the general fund as Corbett proposed in his preliminary budget. In the past, the tobacco fund revenue was not included in the general fund but helped fund social and welfare programs. There was a claim in March by Pennsylvania’s Auditor General Jack Wagner that over the past few years, over a $1 billion has quietly diverted from the Tobacco Settlement Fund to the general fund to help balance the state’s budget. You know the saying, ‘robbing Peter to pay Paul’.

If the $300 million revenue from the Tobacco Settlement Fund were to come out of the general fund, it is possible that some of the spending cuts to basic and higher education and welfare programs could be restored. If you recall, Corbett’s preliminary budget announcement back in March indicated excess tax revenue of $78 million but to date, he has refused to increase spending. The state tax revenue in March and April of this year was higher than expected so it would seem to suggest that Corbett could afford to restore some of the education and welfare spending cuts.

Will Corbett’s final budget package include a Marcellus shale impact fee? My guess . . . highly unlikely. But the real question is why is the state not charging an extraction tax or impact fee to the drilling companies? It defies logic; I absolutely do not understand why the opposition to charging the companies– especially given the current and potential future damage to the environment and roads caused by the gas drilling.

I certainly do not claim to be any political guru; but when you look around this country and see that every other state is charging some form of a drilling tax, impact fee, or whatever you want to call it; it does beg the question, why doesn’t Pennsylvania? Is the answer so that Corbett can stand on his campaign promise of no new tax increase? Is the administration’s reluctance to impose a Marcellus shale fee have anything to do with campaign financing support? I wonder how much revenue the state has already lost and will continue to lose by not imposing a Marcellus shale impact fee.

As school districts across the state are challenged to balance their own budgets and taxpayers face property tax increases – again I have to ask, why not tax the Marcellus shale drilling companies.

Expecting Good News for Public and Higher Education in House GOP Budget Next Week . . . Welfare Programs Not so Lucky

According to John Micek of the Morning Call, the state House will introduce a $27.3 billion budget plan next week that contains good news for public and higher education but the state’s public welfare programs are not so lucky.

Here are some noteworthy items expected in the House GOP budget unveiling next week:

  • The budget will trim $470 million from public welfare programs. Social service programs aid veterans, abused children, the elderly and the mentally ill. Taking funding from the welfare programs but restoring some of the public and higher education funding is a bit like “robbing Peter to pay Paul”; a reshuffle of the allocations.
  • $43 million to help school districts meet their Social Security payments.
  • Increase state public education funding by $210 million for kindergarten through 12th grade. The budget funding should restore school district funding to the 2008-09 level (pre-stimulus money).
  • $100 million appropriated for ‘Accountability Block Grants’ which school districts use to fund after-school tutoring. (The program was eliminated in Corbett’s proposed budget) This could be good news for T/E school district . . . after-school tutoring (value $85K) was on the budget strategy list. In fact, FLITE has been working on fundraising to keep the program.
  • It is expected that next week’s budget announcement will include restoring some of the funding to the state’s higher education – If you recall Corbett’s proposed budget slashed higher education funding by 50 percent. Apparently, there has been a change of heart in Harrisburg and higher education will see an increase of funding of $380 million in next week’s budget. There is good news expected for Temple, Lincoln, Pitt and Penn State Universities when the budget is unveiled; these four universities will see their funding going up and they should receive 75 percent of their current level.

I am going to be curious to see how the better-than-expected general fund collection surplus plays in to the budget. The fiscal-year information released this week indicates the current surplus at $506 million. In the remaining two months in the state’s fiscal year, the surplus could grow even further – some are suggesting the surplus may grow to nearly $600 million.

How will Harrisburg use the unexpected $500+ million surplus? I would like to see some of this ‘found’ money help restore public education funding cut by Corbett’s proposed budget . . . making education a priority in Pennsylvania. It appears that Corbett and some of the top leadership of his own party is at odds over what to do with the surplus in the current fiscal year. Corbett wants to place the $500 million surplus in reserve and continue with the proposed cuts. However, the majority of the Senate Republicans disagrees and wants at least some of the surplus to restore cuts in the budget proposal, including public education.

Corbett’s Budget, the Day of Reckoning . . . Who should be worried?

March 8, 2011 – the ‘Day of Reckoning’.

In a few short hours, Gov. Corbett will take center-stage with his much-anticipated 2011-12 budget. Government agencies across the state have every reason to be on edge, waiting for Corbett’s budget ax to swing this morning. Since Corbett promised not to raise taxes, this budget is expected to slash spending dramatically.

In the days leading up to today’s budget address, there has been much speculation met with few details from the Corbett administration. Facing a $4 billion state deficit, who should be most worried?

With federal stimulus money funding running out this year for education and health care assistance, those two areas are expected targets for major cuts.

Rumors are swirling that the governor’s budget contains $1 billion in education cuts. With many of school districts trying to manage looming deficits in next-years budgets, the severity of the anticipated state education cuts could send them over the edge. The loss of major educational spending from the state could have a direct impact on the taxpayers. If there is less education-directed funding coming from Harrisburg, will taxpayers be expected to pay higher property taxes to make up the difference? In some school districts in the state, we know the answer is ‘absolutely’.

Another probable target in today’s budget address is state workers. Of the 19 state employee unions in the state, contracts are expiring in June for 17 unions. Timing could not be worse for these union members . . . how many will lose their jobs due to budget cuts? One possible offset for state job loss, may be an increase in employee health care contributions. Will Corbett choose to push for substantial healthcare and pension contribution concessions from the union members?

A couple of other areas that may see major funding cuts are the state university system and the state parks. Colleges and universities are experiencing a decrease in aid as federal stimulus money diminishes. Combine the loss of federal aid with expected state budget cuts and college students in Pennsylvania may be facing higher tuition bills. Speculation has also swirled that the budget may contain significant funding cuts to the State Park system. Beyond diminished programming funding, it is possible that some of the parks will be forced to close.

March 8th, 2011, the ‘Day of Reckoning’ . . . as many feel the pain of Corbett’s budget. Tighten your seatbelt and brace for major cuts; the road is going to be rocky.

Pennsylvania Legislators can use Tax-Free Per Diems for Home Purchase . . .What about taxability issues or fraud possibilities?

I tripped across an interesting article in the Pennsylvania Independent about a fascinating perk that is available to our Pennsylvania senators and representatives. Did you know that our legislators can use their per diem ($154) towards an investment home purchase?

I wonder how many of our state legislators have taken advantage of this apparently ‘legal’ perk? Using government tax-free per diem for home purchase leaves me wondering about the taxability issues . . . and what about fraud possibilities? Interesting to have this discussion as the state’s General Fund budget of $29 billion is expected to pass today. Remembering last year’s late budget which took a catastrophic toll on thousands of Pennsylvania’s residents, makes you wonder about this perk of our elected officials, doesn’t it?

Per Diems Can Be Used to Purchase Homes

By Darwyn Deyo

Despite the budget deficit facing the Pennsylvania legislature this year, representatives and senators are able to use tax free per diems to cover the cost of their housing, even if they live within 50 miles of the Capitol.

“If you live within 50 miles of the capitol you’re not eligible for the housing per diem. There’s nothing in the regulation that says you’re eligible for a second mortgage,” said Eric Epstein, coordinator for Rock the Capital. “Per diems were not designed to underwrite home mortgages or provide equity. If per diems are being used as an investment vehicle then we need to look beyond ethical lapses and explore tax fraud because they may be eligible. If they use the money as an investment and are accruing interest, that should be a taxable event. If they are harvesting an interest break off a mortgage payment, that’s a taxable event.”

Per diems can also be used by legislators who live within 50 miles of the Capitol but travel beyond that for committee meetings.

The Internal Revenue Service’s daily per diem limit for Harrisburg is $154, which would cover the cost of a hotel in the area, but some legislators, including State Reps. Todd Eachus (D – Luzerne) and James Wansacz (D – Lackawanna), purchased homes near the Capitol. While a per diem for housing at a hotel would cover the cost only of each night at the hotel, applying a per diem to a mortgage creates a commodity the owner can re-sell at a later date. Per diems, for example, can be used for travel expenses but not for the purchase of a new car. Mr. Wansacz also spoke with high school students last week as part of a forum on youth and government at Keystone College, where the representative answered questions on putting in for per diems for take-out meals.

Beyond the housing-as-investment use of per diems, however, lays the taxable element. Whereas a non-legislator is required to pay taxes on their income and then budget for items like housing, meals, and travel, a legislator using tax free per diems to pay for housing, meals, and travel essentially receives a supplement to their legal salary, a supplement controlled by rules set by legislature itself.

In an interview with the Scranton Public Policy Examiner, Mr. Wansacz said “There is nothing illegal about accepting per diems. I can tell you, the House and the Senate would have to change that next session. If that comes up for a vote, I would have no problem changing that. I have to show that I have living expenses. What I can tell you is that I’m not making any money off this. I’m not a wealthy individual. The only income I have is my salary.”

But Mr. Epstein said per diems are rarely denied and the legislature doesn’t even require receipts or vouchers to reimburse. Pennsylvania taxpayers cover about $2.7 million a year in reimbursed per diems. If taxed at Pennsylvania’s current income tax rate of three percent that would put $81,000 back into the General Fund.

Governor Rendell's Proposed Budget Includes $354 Million in Increased School Funding

Governor Ed Rendell released his 2010-11 budget proposal yesterday. His budget proposes over $11 billion of taxpayer funding for educational services, which includes an increase of $354 million for school funding. Several reasons were cited for the funding increase including advances in achievement scores. In Governor Rendell’s proposed budget, education support services would receive $31.8 million in funding; basic education spending would receive $9.5 billion, for students in pre-kindergarten through 12th grade; and $1.8 billion for higher education with nearly $424 million of that allotted for financial assistance for students. State-aided private schools – including Drexel University and the University of the Arts in Philadelphia – would lose all their funding under the proposal. The exception is the University of Pennsylvania’s veterinary school.

Pennsylvania Secretary of Education Gerald Zahorchak offered that Pennsylvania was leading the nation in achievement improvements. Mr. Zaharchak emphasized a focus on increasing enrollment at a pre-kindergarten level. He feels that that there is an adequacy gap between where students should be performing and where they are currently performing which needs to be corrected. Mr. Zaharchak is suggesting that the gap would need to be filled by taxpayer funded state-subsidies. Accordingly, more than 300 Pennsylvania school districts would require more than $2,000 of taxpayer funding per student from the state to close this gap.

The pressures faced by school districts will result in local property tax hikes unless the state continues its commitment to close the adequacy gap, the Governor said. “On average, it would take a 40-percent increase in local property taxes to generate the same investment as the state will contribute over the course of our multi-year funding formula,” the Governor said. “When the state pays its fair share, school districts can keep property tax increases to a bare minimum.”

Here is Pennsylvania Department of Education 2010-11 Budget if you would like to read the details.

In case you are interested, here is Governor Rendell’s Executive Budget 2010-11 if you would like to see the entire proposed budget.

Will Governor Rendell’s proposed state budget have an impact on TESD’s 2010-11 budget? Comments Anyone?

Specifics on Pennsylvania $161 Million Budget Cuts Announced

In December, Governor Rendell vowed to cut an additional $170 million from Pennsylvania’s state budget in order to make up for lower-than-anticipated tax revenues. It looks like the specifics of those cuts have now been finalized. Here is a press release with the specific cuts but I am confused. I thought that the recent approval of the tables games was to help the budget situation? And here I thought that the state was going to help us with the teacher’s pension contribution increase? How is that going to be possible?

Pennsylvania Budget Cuts Another $161 Million

Pennsylvania’s budget took another hit, as the state released details of a $161 million round of cuts, which Gov. Ed Rendell ordered last month. Each department was instructed to cut another one percent from its current budget and while some trimmed each program equally, other departments eliminated programs to make the cut.

The Department of Community and Economic Development shed almost $11 million, cutting in whole the $200,000 previously allotted for the Super Computer Center, $1.23 million for infrastructure technical assistance and $1 million for minority business development. Funding for agile manufacturing, powdered metals and digital & robotic technology, together less than $1 million, was also cut.

The Department of Conservation and Natural Resources lost $1 million even as its forest land fetched bids above $5,000 per acre today from natural gas drillers looking to tap into the Marcellus Shale. Cuts to the Department of Environmental Protection totaled $3.8 million and were an even one percent across all programs.

Education funding fell by $27.8 million, eliminating the $1.9 million mobile science education program, $400,000 of higher education assistance, and $2 million for community education councils.

In health services, a $2.6 million biotechnology research program was stripped of its funding. Children’s Hospital lost its $200,000 share from the Department of Emergency Management while the Children’s Institute of Pittsburgh had its $431,000 health appropriation cut to $215,000. Health care clinics that were due to receive $3 million from the Department of Public Welfare were cut from the budget, as were acute care hospitals, slated for $4.7 million in funding.

Several programs under the executive branch were eliminated, including safe neighborhoods, violence reduction, and $1.25 million for agricultural research, promotion, education and exports. Food marketing and research and the farm school nutrition initiatives were also axed.

Another $1 million was cut from the governor’s grants to the arts. Museums took another hit during this round. Museums took another hit during this round. General museum assistance grants were slashed by a third and specific funding for the Carnegie Museum of National History and the Carnegie Science Center was cut in half from $113,000 each to $57,000.

The Department of Labor and Industry cut is New Choices/New Options program, a $1.5 million initiative to retrain and place individuals looking for new careers.

Roulette & Blackjack Needed to Resolve State Budget

When I decided to begin writing Community Matters, I assumed it would be issues relating to Tredyffrin Township. But I now recognize that exploring how other areas are handling similar situations makes for an interesting comparison. Governor Rendell’s notion for solving some of the budget issues at the state level with an expansion of the table-games bill caught my attention. Somewhere in the dark recess of my brain, I think someone told me that Tredyffrin’s past included ‘betting’ places, and I recall one was located where Barnes & Noble now stands; this was also before there was the Valley Forge Music Fair but I believe the betting window was at that general location. Am I dreaming this? If Bill DeHaven is reading this, perhaps he could weigh in . . . I’m thinking that this was back in the day when he was working in Tredyffrin as a local cop. Anyway, this is how I move from Tredyffrin’s community to my interest in using roulette and blackjack to help the state budget problems.

The clock is ticking on the state budget. Although Governor Rendell signed the budget in October there remains an unresolved issue of the table-games bill. This table-games bill is estimated to be worth $250 Million in license fee and tax revenues to the state; the governor believes that the passage of the bill is necessary to keep the government running. The tables-games bill would permit blackjack and roulette games at slots parlors. Apparently the House and the Senate can not agree on whether to add another resort-casino license to the 14 slots licenses already authorized. There is also debate on how to distribute the gambling proceeds in Philadelphia. Part of this problem stems from Mayor Nutter’s unwillingness to give up the city’s control on the distribution of gambling proceeds. Mayor Nutter is absolute that gambling proceeds generated in Philadelphia should remain in Philadelphia.

If the table-games bill is not passed by January 8, there is a good possibility that 1,000 state employees will lose their jobs. During 2009, 800 state government jobs were cut as a result of the budget crisis and additionally 1,800 open state jobs went unfilled.

Another sad reality to the current state budget situation is that there is once again talk of closing state parks, the State Museum and decreasing discretionary grants. Many nonprofits (particularly historic preservation) are finding themselves in a precarious situation due to our nation’s economic downturn, so the idea of losing state grant opportunities is cause for concern. The Pennsylvania Historical and Museum Commission laid off 85 employees last month which represented approximately one-third of their staff. They received the highest percent employee layoffs of any agency as part of the overall state employee downsizing. It is unclear how the Historic Commission would function if further cuts are imposed. As a member of the Tredyffrin’s Historic and Architectural Review Board (HARB), our board and all state HARBs and Historic Commissions rely heavily on the expertise and advice from the Historic Commission.

I am reaching out to our State House Rep Paul Drucker for his comments on the table-game bill — where do you stand?

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