Legislative Advocacy
Legislative Updates
2010-2011 PA State Budget
On Tuesday, July 6th, Governor Rendell signed the 2010-2011 State Budget into law. It is a $28.04 billion budget, far short of the $29 billion budget he proposed in February. The budget revenues are based on $25.29 billion in State dollars and $2.75 billion in Stimulus dollars. Pennsylvania faced a $1.2 billion revenue shortfall which made balancing the 2010-2011 State Budget a difficult process. In order for the budget to balance many programs and departments faced significant funding cuts, and federal stimulus funds were used as well as various other fund transfers such as $180 million from the Oil and Gas Lease Fund. The Budget uses $850 million from the Federal Medical Assistance Program to balance, however this money has yet to be allocated by Congress and may cause the State to make further spending cuts if the money is not approved in the near future. There were no broad-based tax increases included in this budget.
As you may recall, Governor Rendell's original budget proposal included new revenue sources in five areas: a severance tax on natural gas (Marcellus Shale), a tax on smokeless tobacco and cigars, mandatory unitary combined reporting, an expansion of the sales and use tax, and the elimination of the 1% sales tax discount. However, the 2010-2011 State Budget includes only a proposed severance tax on natural gas. By October 2010, the General Assembly and the Rendell Administration have agreed to approve a severance tax on natural gas that would be effective as of January 2011-no details on this tax have yet to be determined.
Though this was a tough budget to pass, there are various issues that will need to be addressed this fall and in upcoming budgets. As noted, the agreement and language for the severance tax on natural gas will need to be determined by October of this year and this would dictate how the gas would be taxed: a flat-rate at the well-head, the value of the gas or a combination of the two. The rate of the tax and the allocation of the revenue also need to be decided which is likely to lead to a cumbersome and lengthy discussion for the legislature in the Fall. A second issue Pennsylvania is facing is a nearly $500 million shortfall of transportation funding. The Governor has convened a Special Session on Transportation that is charged with considering options for statewide funding for roads, bridges and mass transit. Thirdly, the federal stimulus funds end next year and this is a $2 billion plus issue for the Commonwealth to address. Lastly, the State is facing significant issues with its pension system and unemployment compensation fund. This is a multi-billion dollar problem that the Commonwealth will need to address in the next administration.
To view the budget in its entirety, please click here.
The Budget Process : The Fiscal Year begins on July 1 and preparation for the next fiscal year budget begins every August. Agencies submit budget requests in August to the Office of the Budget. This department reviews requests through January with the Governor. During this review, all agency budget requests and programs are evaluated to see if there is existing revenue to fund these areas or if a new revenue source is needed through taxes or fees.
The Governor makes his final decision on the budget based on these requests and vision for the state, and submits it to the General Assembly in February in an annual Budget Address. After the legislature receives the budget, the House and Senate Appropriations Committees convene to evaluate the budget and agency requests with department heads. This gives the legislature an opportunity to gather more information and specific details on aspects of the budget and proposed programs (or the performance of current initiatives).
The budget is then drafted into a bill like all other legislative action. Any program that is presented in the budget, i.e. Cover All Pennsylvanians, must also be introduced in legislative form. From this point until passage, these bills are debated on the floor and reviewed in committee.
Once the budget is passed, agencies must implement programs and funds. After the Fiscal Year, there is also an audit of financial and program performance.
More details on this process are available on the Office of the Budget's website at http://www.budget.state.pa.us/portal/server.pt
