Budget Cuts, Natural Gas Tax Will Close Budget Deficit
Spending total reduced to last year's level for General Fund
AUGUST 18, 2010 | by ERIC BOEHM
A new tax, a much reduced number of layoffs, and a series of budget cuts will close Pennsylvania's $280 million deficit, Gov. Ed Rendell announced on Wednesday.
Mr. Rendell said he will move ahead with his plan to cut discretionary budgets by 1.9 percent, creating $212 million in savings to be placed in a budgetary reserve. Another $70 million will come from a new tax on natural gas extraction the state General Assembly has agreed to pass before the end of the year. As part of the budget cuts, the state's subsidy to school districts will be trimmed by $50 million, but the cut is more than made up for with $380 million in education funding included in the federal state aid package.
The total layoffs fall is far short of the 12,000 jobs Mr. Rendell threatened would have to be cut before the federal funds were passed by Congress. He said higher than expected numbers of retirements and the on-going hiring freeze limited the layoffs needed to close the gap to 100 jobs.
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With $212 million cut from the budget, the Pennsylvania's General Fund spending total for this fiscal year will be $27.8 billion, the same amount the state spent last year.
During budget negotiations, legislative leaders agreed to pass a new tax on natural gas extraction by October 1, to go into effect by January 1, 2011. They did not agree on any details of the tax, such as a rate or who will benefit from the revenues.
If the tax bill is not passed on time, another adjustment to the budget would be necessary, said Mr. Rendell.
The plan Mr. Rendell will enact is identical to the proposal he outlined last week.
Senate Republicans suggested some changes, including a plan to move $200 million from the education budget to the state's troubled public pension funds, but Mr. Rendell brushed the idea aside.
More Info:Schools to Get Funding Windfall in Rendell's Plan (8/11/10) State Reps to Rendell: Cut The WAMs (8/11/10) Education Subsidy Could Help Troubled Pension Plans (8/13/10) |
Instead, he suggested Senate Republicans should pass a pension reform bill passed earlier in the year by the state House if they were serious about correcting the public pensions, or they should contribute $200 million from their own legislative accounts.
"The $200 million is a drop in the bucket compared to the benefits of passing [the pension reform bill]," said Mr. Rendell.
"It is disappointing that Gov. Rendell does not share our view that we should use the opportunity presented by this unanticipated federal education funding to help address Pennsylvania's pension crisis," said Erik Arneson, a spokesperson for Senate Majority Leader Dominic Pileggi (R-Delaware).
Mr. Arneson said the issue will have to be reviewed by the new governor who will take office in January.
A group of House Republicans also wrote to Mr. Rendell to recommend he cut discretionary grant programs, called WAMs, from the budget to close the deficit. On Wednesday, Mr. Rendell said those programs would be subject to the 1.9 percent budget cuts, but doing away with them would be bad for the state.
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None of the other legislative caucuses offered substantial changes to the plan.
The state budget for this fiscal year was passed with the inclusion of $850 million in assumed revenues from federal stimulus funds yet to have been passed. When Congress acted to pass the package of stimulus funding for states, it included only 70 percent of the expected amount, leaving Pennsylvania with only $600 million of what was anticipated and a $250 million deficit.
Increasing costs to Medicaid have also created an additional $30 million deficit, and rather than address the shortfall separately with budget cuts elsewhere, the governor's Budget Office decided to roll the two shortfalls together.
Mr. Rendell said he will unilaterally move 1.9 percent of the appropriated budget from the executive agencies into a budgetary reserve fund to prevent those funds from being spent. He has sent a letter to eight administrative agencies - which the governor does not have budgetary control over - asking them to make the same cut.
Gary Tuma, Mr. Rendell's spokesperson, said the funds moved into budgetary reserve can be written off at the end of the year. Although the funds have been appropriated, there is no money to be spent, so the budgetary reserve is the equivalent of an empty bank account.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
State Education Subsidy Could Help Troubled Public Pension Plans
Senate Republicans respond to Rendell’s plan
AUGUST 13, 2010 | by ERIC BOEHM
Senate Republicans are looking at $380 million in extra education funding from the federal government as an opportunity to address the state's public pension crisis without cutting funding to school districts.
Leaders of the Senate's majority caucus formally responded Friday to Gov. Ed Rendell's plan for allocating the more than $600 million Pennsylvania will receive from the federal government as part of the stimulus extension package passed earlier this week. On Tuesday, Mr. Rendell proposed using $380 million of the new funds for basic education, while cutting $50 million from the state's education funding and $160 million from elsewhere in the budget to help fill the state's $280 million deficit. A new tax on natural gas would also help close the budget hole.
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In this year's budget, basic education subsides from the state to local school districts were boosted by $250 million, a major priority of the governor during budget negotiations in June.
In their response on Friday, Senate Republican leadership suggested maintaining the cuts proposed by the governor, but with one addition.
"We believe that the most responsible course of action for the taxpayers, the Commonwealth, and school districts is to redirect the remaining $200 million in state funds to help meet the state's pension obligations," wrote the Senate Republican leaders.
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Since the extended federal funding will provide $380 million for education, school districts in Pennsylvania will end up with a total of $130 million more than they had received in the original budget, even with the senators' proposed cuts.
"In these difficult economic times, that is an extraordinary outcome," wrote the senators.
A spokesperson for Mr. Rendell's office said the governor was waiting for responses from the other three legislative caucuses before commenting.
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Senate Response to Rendell 081310The letter - signed by Senate President Joseph Scarnati (R-Warren), Majority Leader Dominic Pileggi (R-Delaware), and Appropriations Committee Chair Jake Corman (R-Centre) - called attention to Mr. Rendell's own statements on the need for state pension reform.
"You properly noted that we would be ‘sticking our heads firmly in the sand' if we do not address the pension crisis. No matter what pension reforms are adopted legislatively, everyone recognizes the great need for additional funding in both the Public School Employees' Retirement System (PSERS) and the State Employees' Retirement System (SERS)," wrote the senators.
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The state pension plans have been underfunded for much of the past decade and suffered major investment losses during the recent economic downturn. A major "spike" in pension payment rates to make up for the low contributions made by the state as a part of a 2001 law realigning pension contributions is scheduled for 2012. By some estimates, the state may need to infuse the pension plans with as much as $5 billion per year for more than 20 years to properly fund the plans - meaning tax increases at the state and local level of as much as $1,500 per household.
Rick Dreyfuss, a retired actuary and pension expert with the Commonwealth Foundation, a Harrisburg think tank, said the pension plans need more than $200 million to fix their problems.
"This amount will have little impact given the magnitude of the deficits, although it is certainly better than not contributing the $200 million," said Mr. Dreyfuss. He also wondered why the Senate Republicans were now proposing pension reforms after all four caucuses chose to cut PSERS and SERS funding during budget negotiations.
"Where was all this principled thinking on properly funding our pension plans back in June?" he asked.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
State Reps to Rendell: Cut the WAMs
Claim $100 million could be saved
AUGUST 11, 2010 | by ERIC BOEHM
Note: This story has been updated from its original form. See bottom of story for details.
The same day that Gov. Ed Rendell unveiled his plan for dealing with a $280 million state budget deficit, state Rep. Curt Schroder led a group of 27 House Republicans who sent a letter to the governor calling for pork projects, called WAMs, to be cut.
"Use your Executive authority to eliminate all discretionary grant programs, sometimes referred to as WAMs," wrote the representatives. They provided the governor with a list of 14 grant programs they believe should be trimmed from the budget, saving the state $100 million.
WAMs, or Walking Around Money, is a nickname given by some legislators to the discretionary grant programs operated by various state agencies. Individuals, businesses, and other organizations can apply through the executive branch to receive funding from those programs.
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"Certainly Rep. Schroder is entitled to his opinion, but just because he or any elected official refers to a program as a WAM does not make it so," said Johnna Pro, a spokesperson for state Rep. Dwight Evans (D-Philadelphia) the House Appropriations Chair.
Ms. Pro said the spending by the state is frequently "in the eye of the beholder." Communities and organizations which receive funding through the grant programs would be hurt by cutting them, she said, pointing to one grant which provided $10,000 to an ambulance association.
Mr. Evans flatly denied the existence of WAMs in the budget when he was asked about it shortly before the budget passed in the House.
"While some line items have names reflecting economic development for these troubled times, let's not engage in semantical discourse about the nature of these funds. They are to be used in a discretionary fashion and are therefore WAMS," reads a portion of the Republican representatives' letter.
The authors of the letter noted the budget line items they targeted were either not funded in the fiscal year 2009-2010 budget or they were not funded as part of the original budget proposal made by the governor in February.
State Rep. Jerry Stern (R-Blair) was the only one to sign the letter who had also voted for final passage of this year's budget, which included the discretionary grants in the first place.
Correction: This story originally reported that state Reps. Matt Gabler (R-Clearfield) and Randy Vulakovich (R-Allegheny) voted for final passage of the budget on June 30. They voted against it. PA Independent regrets the error.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
Schools To Get Funding Windfall In Rendell's Plan
Gov wants for $50 million cut and $380 million increase
AUGUST 11, 2010 | by ERIC BOEHM
School districts in Pennsylvania would receive a total $580 million boost in their budgets this year under a plan proposed by Gov. Ed Rendell to legislative leaders Wednesday morning.
The basic education subsidy, set to receive a $250 million boost in funding from the state this year despite cuts to numerous other areas of the budget, would have to sacrifice $50 million of that increase to help fill the state's $280 million budget deficit. In return, schools will get $380 million from the federal government as part of a $600 million stimulus extension aid package for Pennsylvania.
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Gov. Rendell also proposed across the board budget cuts to save $160 million, with the remaining amount needed to close the deficit coming from a new tax on natural gas extraction the General Assembly is expected to pass this fall.
After the meeting, Senate Majority Leader Dominic Pileggi (R-Delaware) said the plan did not adequately prepare for next year if school districts receive large increases in spending.
"School districts are facing a reality where they could be receiving this year $580 million more than they received last year," said Mr. Pileggi. "To the extent that's used for teacher's salaries leaves a huge open question for how school districts are going to bridge that gap next year. "
On top of the newest $380 million, there is another $654 million in federal stimulus funding included in this year's basic education subsidy, which will all expire next year, potentially leaving the state with a $1 billion education hole to fill.
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"We all agree it is unlikely Congress would give an additional $380 million next year to school districts in Pennsylvania. So just to maintain the basic education subsidy without the $380 million next year is going to be extremely difficult," said Mr. Pileggi.
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While there is no mandate for the state to keep education funding level from year to year, the state would likely have to pick up the tab for the increased costs this year in subsequent years.
"We in Pennsylvania have no history of cutting basic education spending," said Erik Arneson, a spokesperson for Senate Republicans. "Everybody's expectations would be that we would maintain that."
Included in the governor's proposal was a plan to cut $825 million out of the budget next year, to be accomplished with new taxes, one-time revenue transfers from other state funds, and raiding the legislative caucus surpluses.
House Democrats recognize the need to make some budget cuts, but are committed to maintaining the investment in basic education, said Brett Marcy, a caucus spokesperson.
"Whether it's through state funding, or through additional federal aid, we are committed to keeping our promise to our children and property taxpayers that we will adequately fund our schools," said Mr. Marcy.
Tuesday, state Sen. Jake Corman (R-Centre), the Senate Appropriations Chair, said the easiest way to fill the hole would be to use the $250 million increase in the basic education subsidy included in this year's budget. Since the aid package from Washington included an extra $380 million specifically for teachers and school budgets, school districts would actually end up with more money than they would have received from the state subsidy increases.
"The worst case scenario is they would have the same money as the year before, so why would you need to have any layoffs?" said Mr. Corman. He reiterated the Senate Republicans opposition to any new taxes as a solution to the deficit.
The U.S. House voted Tuesday to pass the stimulus extension package after the U.S. Senate passed it last week. Pennsylvania's representatives in Washington voted in straight party lines on the bill, with all 12 Democrats supporting and all seven Republicans opposing it. The state's two senators, both Democrats, voted for the package last week.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
No More Stimulus Coming After FMAP, Says Rendell
State will need $2.8 billion to offset end of stimulus in 2011
AUGUST 9, 2010 | by ERIC BOEHM
The U.S. House will return to session earlier than scheduled to pass a $26 billion aid package for states before the end of the week. Pennsylvania will get a $600 million piece of that pie to help prevent a major budget deficit, but a larger problem looms at the end of the fiscal year when all federal stimulus comes to an end.
Pennsylvania's current fiscal year budget relies on more than $2.8 billion in federal taxpayer stimulus dollars - including the $600 million Congress is close to approving - but those funds are all scheduled to expire before the end of 2011, meaning significant reductions in spending or serious increases in revenue will be necessary for the fiscal year 2011-2012 budget. No matter how bad things get next year, the state should not count on further bail-outs from the federal government, said Gov. Ed Rendell on Monday.
"This is it, there's no mistake about it," said Mr. Rendell. "Even if we need it, we're not going to get it."
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Bob Williams, a state budget expert with the American Legislative Exchange Council, disagreed with that sentiment. If a large number of states find themselves in dire economic straits again next summer when the stimulus funds run out, he expects pressure on Congress to force another bail-out of state budgets.
"I think you'll see it as long as Congress is willing to give them money," said Mr. Williams during a conference call with reporters. "You're going to see states going in there and saying, ‘hey, our state economies aren't recovering as quickly as we thought they would.'"
Mr. Williams said many states are on a path similar to California, which he said already receives more money from the federal government than from their own taxpayers.
"The extension of federal stimulus funds is really nicotine for state governments," said Mr. Williams. "It leads to short-term higher level state spending that states cannot sustain."
For now, Pennsylvania seems to have avoided a budgetary catastrophe, if only temporarily. The state will still need to close a $250 million budget hole because Congress passed a reduced version of the stimulus extension including only 70 percent of the assumed revenues.
To address the shortfall, lawmakers will meet with Mr. Rendell on Wednesday morning. Possible solutions include draining legislative caucus surplus funds or cutting back on educational increases included in the current budget.
Though he has said all parts of the budget will be on the table for cuts, Mr. Rendell on Monday cautioned against using one-time fund transfers to close the gap.
"Remember, this additional money goes away too, so do we want to have that big of a structural hole in the education budget next year?" said Mr. Rendell, who urged changes such as eliminating the state's one percent vendor discount on sales taxes and the closing corporate tax loopholes.
After meeting with the governor last week to discuss the potential deficit, Senate Majority Leader Dominic Pileggi (R-Delaware) said the education budget, the only part of the budget to see increases this year, should be the first targeted for cuts.
"School districts over a two-year budget cycle have seen a dramatic increase and a reduction still puts them way ahead of where they were two years ago," said Mr. Pileggi last week.
Republican leaders have repeatedly said they will not consider new taxes this year, including changes to the vendor sales discount.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
Business Representatives Argue for Unemployment Compensation Solvency
Costs outweigh benefits of federal stimulus money in long-term
AUGUST 9, 2010 | by DARWYYN DEYO
Business representatives on a state advisory board for unemployment compensation say expanding benefits in order to get federal stimulus dollars would cost the state in the long run.
Their claims come as the state has borrowed – and continues to borrow – more than $3 billion from the federal government to bolster its unemployment compensation fund.
A lobbyist for the Pennsylvania Chamber of Business and Industry said that for the state to get the first third of $273 million in federal stimulus funding, it would have to expand benefits at too great of a cost.
“Through the Department of Labor and Industry’s own admission, the cost would be between four and six percent of benefits annually,” said Samuel Denisco. “You’re talking a $160 to $240 million cost to the fund to draw down one-third of $273 million.”
Convened by state Department of Labor and Industry Secretary Sandi Vito, the Unemployment Compensation Advisory Council has stalled on proposals and negotiations regarding the state’s unemployment compensation fund’s solvency. Unless some action is taken before the end of the year, Pennsylvania faces a debt estimated to cost $7 billion by 2018, increased through the loss of tax credits to employers and an as-yet undetermined interest rate.
Mr. Denisco said business representatives suggested increasing employer contributions to the unemployment fund, but other council members nixed the accompanying conditions: compelling individuals to look for work, looking at double-dipping with severance and unemployment compensation, and putting a delay on receiving unemployment compensation until severance pay is gone.
“It is important to note Pennsylvania has paid out the most in unemployment compensation second only to California nationally,” Denisco said. “If we’re paying out the second most in benefits, there’s an issue to be addressed holistically.”
The most recent proposal to address Pennsylvania’s unemployment compensation debt, introduced by state Sen. John Gordner (R -Columbia), includes a similar provision to increase the employer contribution on employee wages but also expands benefits to qualify for the first third of the federal stimulus funding, with the other two-thirds requiring more expansion of benefits. The entire $273 million would be phased out over the next three to five years, after which point the unemployment compensation fund would be serving approximately 25,000 to 30,000 more individuals and the stimulus money would be gone.
Another Chamber representative expressed frustration.
“We were trying to figure out how to make the unemployment fund solvent,” said Geoffrey Moomaw. “We wasted too much time discussing how to pay out more benefits just to get more funding from the federal government via the stimulus package, but the changes that were required could cost anywhere from $70 million to $100 million per year. In our opinion, the General Assembly would not go back, after the funding disappeared, and change the law back. I don’t believe a bill to do that five years down the road would have any chance of getting out of any committee.”
For the first third of the $273 million of stimulus money (approximately $91 million), Mr. Denisco said Pennsylvania would be required to change the “alternative base year,” which is how the state calculates eligibility for unemployment compensation. Currently, the state looks at four out of the five last quarters since “separation from employment,” but the federal government’s stipulation to receive stimulus funds would change that to just the past four quarters.
To receive the remaining two-thirds of the stimulus funds, Mr. Denisco said Pennsylvania would have to expand unemployment compensation to those who leave work for family-related reasons, similar to what is already covered under the federal Family Medical Leave Act, and to expand unemployment compensation to part-time workers.
But with the November elections and the end of the federal unemployment compensation extensions drawing closer, Pennsylvania may have to turn to legislation to handle the solvency crisis, Mr. Denisco said.
“We just want to make sure the proposals are a step toward addressing solvency,” he said. “By 2018, we want to be solvent and pay all the debts off to the federal government.”
See Part I: Pennsylvania Ranks Fourth in Unemployment Debt
Darwyyn Deyo is a reporter for PA Independent. She can be reached at darwyyn@paindependent.com
Pennsylvania Ranks Fourth in Unemployment Debt
Without resolution, will increase from $3 billion to $7 billion
AUGUST 6, 2010 | by DARWYYN DEYO
A report issued by the Council of State Governments marks Pennsylvania as fourth among the 31 states suffering from unemployment debt and borrowing from the federal Unemployment Insurance Trust Fund, and fifth among the per capita placed upon the state’s taxpayers.
To date, Pennsylvania has borrowed over $3 billion for its unemployment compensation fund from the federal government, translating to a per capita burden of $238.69, which number would include those who are unemployed and below the poverty line. Adjusted for the unemployed, the per capita cost rises to $262.90, and adjusted for those living under the poverty line, the per capita burden is $271.58.
Adjusted for the expected increase in the debt once tax credits expire and the interest due kicks in, the per capita burden is $555.35.
“We have been trying to do a number of things through the Unemployment Compensation Advisory Committee and those discussions have actually stalled, and we’re left with no resolution to this issue yet” said Troy Thompson, press secretary for the state Department of Labor and Industry, which handles the loan.
He said if the current level is not addressed, by 2018 the unemployment debt fund could grow to $7 billion.
“The problem is that we would need to continue borrowing and then the employers’ financial burden would be significantly increased, beginning in 2011, because that’s when the unemployment waiver on loans goes away. Right now we don’t have to pay any interest on loans. When you combine the fact that, the employers would lose the Federal Unemployment Tax Act Credit (FUTA), a surcharge of sorts, and then the interest payments impose an extra $ 4 billion tax burden,” Mr. Thompson said.
Pennsylvania’s unemployment debt size comes after California, Michigan and New York, and the per capita burden is smaller compared to Michigan, Indiana, North Carolina, and Wisconsin. But Mr. Thompson agreed the situation was “daunting” and admitted right now, there is no plan of action.
“More than 15 months ago we convened the Unemployment Compensation Advisory Council. We thought that we had an appealing proposal that was brought by [state Sen. John Gordner (R – Columbia)] and we thought that we had the agreement of both business and labor. At the last minute the lobbyist that represented business would not agree to the terms of the proposal, just in principle,” said Mr. Thompson. Nothing has happened since then.
While the full proposal was not available, Mr. Thompson said one provision would have set an equal, gradual increase in the taxable wage base, affecting the tax portion employers pay for employee wages. Currently, employers pay taxes on the first $8,000 of wages for every employee, and as of 2007, taxable wages represented 21 percent of wages compared to 43 percent in 1984. A second provision would slow down the growth rate of the benefits being paid out to employees and to increase the employee contribution. Currently, employees pay an additional tax of about 80 cents on every $1,000, for all their wages.
But as things stand now, an interest rate has not even been set, and Mr. Thompson said the department is unable to project past 2018 and the $7 billion debt the state expects to see.
“There are other states in the same situation where they’ve been borrowing and their funds are insolvent and they have to go about addressing those issues in their states. We do see this being a national problem but our focus is on getting things straight in Pennsylvania. We’ve been a leader in terms of workforce development, creating jobs, and we really need to be able to take control of this issue so it doesn’t get out of hand for our employers,” said Mr. Thompson.
According to the American Enterprise Institute, national spending on extended unemployment insurance benefits since July 2008 has exceeded $131 billion, which the U.S. Congress voted last spring to extend by $18 billion, and again this July to extend through November.
See Part II: Business Representatives Argue for Unemployment Compensation Solvency
Darwyyn Deyo is a reporter for PA Independent. She can be reached at darwyyn@paindependent.com
Senate Cloture Vote Moves Reduced FMAP Package Forward
State would be left with $250 million budget deficit
AUGUST 4, 2010 | by ERIC BOEHM
A reworked version of the Federal Medicaid Assistance Percentages (FMAP) bill has cleared its largest hurdle in the U.S. Senate, but even if it passes, it will leave Pennsylvania with a $250 million budget hole.
If finally passed by Congress, Pennsylvania will receive about $600 million in taxpayer money from the federal government, though the state was counting on $850 million. Even without the full level of funding, Mr. Rendell said he was "tremendously" relieved to hear the news from Washington.
"It doesn't extend it at 100 percent, but it extends it at about 70 percent, so instead of losing $850 million, we'll lose around $250 million. So that's significantly better for us," said Gov. Ed Rendell on Wednesday.
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Mr. Rendell said he is backing off his plan to put $850 million of the state's General Fund budget into a reserve after the U.S. Senate voted for cloture on FMAP, ending debate and any possible filibusters. The bill still needs to be passed by both the U.S. Senate and the House before Pennsylvania and 28 other states relying on FMAP funds to balance their budgets will get the money.
Mr. Rendell and legislative leaders will meet next Wednesday to address solutions for the remaining $250 million deficit, likely involving layoffs. They will announce a plan by the beginning of the following week.
Previously, Mr. Rendell threatened up to 12,000 layoffs of state workers if no FMAP funding was available.
The governor said he will also consider new taxes to close the revenue gap, and pushed once again for ending the vendor sales tax discount, which rewards businesses with a one percent tax credit for paying their sales tax collections to the state on time.
Legislative leaders on Wednesday expressed the need for more information before any decisions could be made.
"It is still too early to assume the exact amount we will be receiving. We continue to have conversations with the governor to get a better sense of his plan regarding this issue, both in terms of timing and his recommendations on how to make up the projected shortfall," said Bill Thomas, spokesperson for House Democrat Leader Todd Eachus (D-Luzerne).
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More Info on FMAP: |
"We need to fully understand all the components of what the federal government is doing before we can make intelligent decisions about what the state needs to do in response," said Erik Arneson, spokesperson for Senate Republican Leader Dominic Pileggi (R-Delaware).
Mr. Arneson said Mr. Rendell is in the best position to make the first move because his office controls the budget information.
The state came to the brink of a budgetary disaster a little more than a month after the General Assembly passed, and the governor signed, this year's budget, which included $850 million in assumed revenues from the FMAP bill, despite the fact that it was anything but a political certainty at the time.
The biggest hurdle in the U.S. Senate for the FMAP bill was Republican demands the $26 billion package be paid for with cuts from other programs, following Senate rules requiring pay-as-you-go legislation. As a result, the bill was cut back by 30 percent, enough to gain support from two Republican senators - Susan Collins and Olympia Snowe, both from Maine - for the cloture vote Wednesday, which required a 60 vote supermajority.
Passage in the U.S. House and U.S. Senate will require only a simple majority.
Politico reported Wednesday afternoon House Majority Leader Nancy Pelosi (D-Calif.) is "seriously considering" calling the House back early from its summer vacation to vote on the FMAP package once it fully clears the U.S. Senate.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
Legislative Leaders Will Grab Shovels, Start Filling FMAP Hole Wednesday
State could face deficit of $850 million or $255 million
AUGUST 2, 2010 | by ERIC BOEHM
After a short conference call between Gov. Ed Rendell, legislative leaders and staffers Monday morning, Senate Majority Leader Dominic Pileggi (R-Delaware) said contingency plans for a potential $850 million shortfall in the budget will be addressed on Wednesday.
With the U.S. Senate prepared to vote on the Federal Medicaid Assistance Percentages (FMAP) package Monday evening or Tuesday, Pennsylvania has already assumed $850 million in revenues from FMAP to balance this year's budget.
"The governor, based on his communications with legislative leaders in Washington, is still optimistic that we will get at least a substantial part of the $850 million for FMAP," said Mr. Pileggi. "He will know with more certainty by the end of the day on Tuesday."
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The FMAP funding was stripped from the jobs bill passed by Congress late last month, but a slightly retooled version of the legislation might be able to clear the Senate.
"I don't think anyone is overly optimistic that we'll get the full $850 million," said Mr. Pileggi. "The current working plan is for an amount that is about 70 percent of the $850 million."
Pennsylvania will be left with a $255 million shortfall to address if the Senate passes only 70 percent of the FMAP funding.
If the Senate fails to pass the bill or passes less than the full amount, legislative leaders will meet again with Mr. Rendell on Wednesday.
As for now, there is no indication what form the contingency plan might take. Mr. Rendell has threatened up to 20,000 layoffs of state workers if FMAP fails, but exactly what programs would be targeted for those cuts remains unknown.
Mr. Pileggi said the discussion on Monday did not begin to address specifics of any possible contingency plan, but suggested cuts to the school district education subsidies, the largest purely discretionary increase in this year's budget.
More Info:Sen. Pileggi discusses FMAP situation (audio by Senate Republican Caucus) U.S. Senate Leaves FMAP Behind, Rendell Still Optimistic (7/21/2010) |
"School districts over a two budget cycle have seen a dramatic increase and a reduction still puts them way ahead of where they were two years ago," said Mr. Pileggi.
"If we have to make cuts because if the FMAP shortfall, then all areas of the budget when spending levels are not mandated by law would be vulnerable to reductions," said Gary Tuma, Mr. Rendell's spokesperson.
Mr. Rendell would take the lead on proposing budget cuts to make up the potential shortfall, but legislative leaders would have some say in how the process took place, said Mr. Pileggi.
Since the budget passed July 6, Mr. Rendell has advocated the use of "budgetary reserves" to make up the deficit. In such a move, there would be no reduction in appropriated funds, but the governor would use his authority to prevent the release of funds in certain areas of the budget.
"We plan to talk with the governor again later this week to get a better sense of his plan regarding this issue, both in terms of timing and his approach on how to make up the shortfall. But it is still too early to assume how much funding we will or won't receive," said Bill Thomas, a spokesperson for House Democrats.
The FMAP bill will require a supermajority of 60 votes to pass in the Senate, meaning some Republican Senators will have to support it. Although passage in the Senate does not guarantee the 29 states waiting for FMAP funds will receive them, passage in the U.S. House is a much lower hurdle to be cleared, said Mr. Pileggi.
Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com
Film Tax Credit Tapped Out for 2010
State-subsidized film production could create jobs for non-Pennsylvanias
JULY 29, 2010 | by MATT COYNE
Pennsylvania might not be Southern California, but enough filmmakers flock here that state has promised away all its film tax credit funds for 2010 with no more available until next July.
“Pennsylvania has always complained that we’ve lost manufacturing ... I counter that by saying that the film industry is manufacturing,” said Sharon Pinkenson, executive director of the Greater Philadelphia Film Office. “We're manufacturing entertainment.”
The state handed out $42 million in 2009 and $60 million this year to play host to such film classics as Marley & Me, Law Abiding Citizen, and The Last Airbender. Funding will jump back up to $75 million beginning July 1, 2011. Films are eligible for the state to pay up to a 25 percent tax credit so long as they spend 60 percent of their total production budget in Pennsylvania. Producers receive payment upon completing the project and submitting to an audit.
Proponents of the film tax credit cite job creation and tax revenue for the state. A 2009 study by Economic Research Associates (ERA) found the film industry spends $267.3 million in Pennsylvania, pays $17.9 million in state and local fees and taxes and creates 3.9 million jobs. Ms. Pinkenson said the tax credit has created 4,000 jobs in southeastern Pennsylvania alone.
“The economic impact and job creation speak for themselves,” said Jane Saul, director of the State Film Office. “It's a no brainer. It's bringing people to the Commonwealth and putting them to work.”
According to the Pennsylvania Film Office website 10 of the 15 movies shot in Pennsylvania and released in the past two years were shot in Philadelphia or the surrounding area.
ERA also reports the number of television and film productions in the state has risen steadily since 2002, starting around 50 and now eclipsing 200. Similarly, during that time, a study from the Tax Foundation, a tax policy group, found in 2002 only five states offered financial incentives for production. Compared to 44 now.
“The states are locked in. It’s a classic race to the bottom. They can't win,” said Robert Tannenwald, a senior fellow at the Center on Budget and Policy Prorities. “There are too many states chasing too few productions.”
Mr. Tannenwald contends if the subsidies are not there, the producers will just leave for a state that does.
“The full way in which the media industry is structured makes film tax credits a really bad idea for a state,” Mr. Tannenwald said. “Production is the least profitable. If it’s going to exist, it's got to be subsidized. It used to be subsided by studios, but they're not in control anymore. Who subsidizes them now? Governments.”
Massachusetts, which Mr. Tannenwald said is the only state that looked into compensation for its residents, found that only 16 percent of the pay for production work goes back to Bay State’s populous. The rest of the return goes to California.
“The states that just tried to up the ante by giving out more and more tax credits are not a sustainable program. Ours is 25 percent and ours has never been anything other than 25 percent. Twenty-five percent is very sustainable,” Ms. Pinkenson said. “We would not have production of any sizable amount whatsoever if we didn't have the tax credits.”
“Now we're even with all the great places for filmmaking,” Ms. Pinkenson said.
Matt Coyne is an intern at the PA Independent. He can be reached at intern@paindependent.com
