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Capitolwire: Wolf Budget Proposal Spurs Debate on Mental Health Funding
By Robert Swift

HARRISBURG (Feb. 14) — A budget proposal by Gov. Tom Wolf is spurring a new debate about providing more state mental health services during this time of pandemic-related stress.

The governor proposes spending $36.6 million from the taxpayer-supported General Fund in Fiscal Year 2022-23 to restore much of a decade-old cut in state aid to county-run mental health programs.

He would also direct $75 million in federal American Rescue Plan funds for support payments to help keep and hire new employees for qualifying home and community service providers.

A 21-member Mental Health Safety Net Coalition sent a letter Monday to lawmakers asking them to consider the proposed $36.6 million increase as a starting point in budget negotiations.

“The governor’s proposed increase will help offset the loss in purchasing power due to a decade of level funding,” wrote the coalition that includes service providers, hospitals, treatment centers and professional groups. “This money is critical to help counties get back to the effective level of resources they had 10 years ago, but it does not even begin to address all the gaps in our mental health system or surging demand for mental health services as we enter the third year of the global pandemic.”

Not only has the pandemic increased demand for services, it has also led to significant health staff shortages and increases in suicides and opioid deaths, the coalition said.

Also the County Commissioners Association of Pennsylvania issued a statement Monday calling on lawmakers to support Wolf’s proposal. It would restore two-thirds of a 10 percent cut to the budget line item in 2012 if enacted.

“If the funding continues to be uneven with the growing demand, counties will continue to struggle to in meeting the needs of their residents,” said CCAP President and Bradford County Commissioner Daryl Miller.

A key feature of county mental health programs is they are available to the entire community regardless of income, said Brinda Penyak, CCAP deputy executive director.

CCAP made rebuilding a “crumbling” mental health system its top priority this year. For the past six decades, counties have carried the responsibility to provide and contract for a range of community-based mental health services, including crisis intervention, treatment, education and prevention.

“We would strongly support advance planning and (mental health funding) increases that are practical and sustainable to ensure increased system availability for the long term,” said Dr. Kathy Quick, executive director of the Pennsylvania Mental Health Consumer Association while voicing concern that the proposed funding hikes for this year can’t be sustained in the future.

The issue of pandemic-related mental health challenges facing the general population and students as well has been the subject of several legislative hearings during the past two years.

The Senate Agriculture and Rural Affairs Committee held a hearing last month focusing on mental health issues facing agricultural workers. Pennsylvania has received a $500,000 grant from the U.S. Department of Agriculture to provide more resources to support mental health programs in rural areas by linking to national hotline networks and providing education and training, said state Agriculture Secretary Russell Redding at that hearing.

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Capitolwire: GOP Leader Urges PA Executive Agencies to Begin Planning to Reinstate Regulations Suspended Because of the COVID-19 Disaster Emergency

The General Assembly, thanks to the power restored to it by Pennsylvania voters, terminated Gov. Tom Wolf’s COVID-19 disaster emergency in June, which means many of the actions taken by executive agencies under the auspices of that declaration have come to an end, with others on track to end in the near future.

Hundreds of existing state regulations were waived or suspended by various Commonwealth agencies while the declaration was in effect, and even with the termination, lawmakers worked with the Wolf administration to keep nearly 500 suspended until the fall, specifically Sept. 30.

On Monday, House Majority Leader Kerry Benninghoff, R-Centre, sent letters to the Department of Health and the Office of Administration reminding them the Sept. 30 deadline is coming and urging the agencies to be ready to reinstate the suspended regulations, as well as work with the legislature to identify those that could be reformed or permanently repealed.

Within that context, Benninghoff, in his letter to the Health Department, singled out telehealth regulations, stating, “Since your department does have jurisdiction relative to telehealth services provided in Pennsylvania, I want to make it clear nothing in current law prohibits telehealth services from being provided at pre-pandemic levels should the regulatory framework return to normal.”

(Source: Capitolwire, July 27, 2021)

If you have any questions, please contact Jack Phillips, Director of Government Affairs.

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By Robert Swift, Staff Writer, Capitolwire

HARRISBURG (July 26) – The proposed $26 billion national opioid legal settlement creates a new pot of money that could help shape state budgets for years to come.

Pennsylvania’s share of the settlement announced last week by State Attorney General Josh Shapiro is anticipated at $1 billion provided in payments over a number of years.

A key factor determining Pennsylvania’s share is how many local governments opt to participate in the settlement and drop their own opioid lawsuits.

The settlement with Johnson & Johnson, an opioid manufacturer, and three major opioid distributors – Cardinal, McKesson and AmerisourceBergen — is designed to resolve nearly 4,000 lawsuits filed by states and local governments responding to a wave of opioid overdose deaths and addictions across the nation.

The settlement also requires the four firms to take a number of steps to prevent a future opioid crisis.

“This settlement puts in place controls that will go a long way to make sure that this never happens again, and the money that will come to Pennsylvania will help offer and expand life-saving treatment options across our Commonwealth,” said Shapiro.

Earlier this month, Shapiro announced a $4.5 billion multi-state settlement with OxyContin manufacturer Purdue Pharma to settle lawsuits. Pennsylvania’s share from this settlement is $225 million.

The opioid settlements come two decades after Pennsylvania and a number of states reached a settlement with the tobacco industry to address the public costs of chronic health issues caused by smoking.

The new state Fiscal Code (House Bill 1348) establishes the Opioid Settlement Restricted Account from which deposited settlement money will be distributed through legislation. This account is under the state treasurer’s office.

Shapiro said a substantial amount of the second settlement money would be spent on opioid treatment and prevention.

The dollar share for each participating state is determined by a formula that includes the number of overdose deaths, number of residents with a substance abuse disorder, quantity of opioids delivered and population.

Pennsylvania reported 5,172 overdose deaths last year as the COVID-19 pandemic started.

Pennsylvania plans to sign the agreement while local governments have up to five months to sign. Pennsylvania will get its maximum share provided full participation by local governments.

The state/local distribution will depend upon an intrastate allocation agreement.

“The Wolf Administration commends the work of the Attorney General in reaching this historic settlement,” said Gov. Tom Wolf’s spokeswoman Lyndsay Kensinger. “We hope that states and localities will opt into the settlement so that Pennsylvania can maximize the benefits and direct new resources into mitigating the continuing damaging effects of the opioid epidemic here in the commonwealth.”

The Republican caucuses that control the General Assembly already have some ideas for targeting the money.

“The caucus leaders of the House and Senate are working with the Attorney General to determine next steps and how to best appropriate the nearly $1 billion in funds allocated to Pennsylvania as part of the opioid settlement…” said Erica Clayton Wright, spokeswoman for Senate Majority Leader Kim Ward, R-Westmoreland. “Based on that agreement, we will identify ways the funds can be used for state and local governments to put measures in place to help prevent such a crisis from happening again while also offering treatment options to communities currently effected by the crisis.”

The settlement is drawing pushback from some local officials.

Philadelphia District Attorney Larry Krasner quickly sued Shapiro’s office over the settlement saying the money coming to Philadelphia would be too little to address the costs and the payments too slow.

A Cambria County lawmaker said his county should receive a fair share from the settlement since it’s among the hardest hit by overdoses and pill dumping.

“We know all too well the damage these pills have done – everyone in our areas has been affected in one way or the other,” said Rep. Frank Burns, D-Cambria. “If we’re stuck dealing with the problem, when the settlement comes, we should be getting the bulk of that money to correct the devastation caused by the influx of these pills to our community.”

Cambria is regularly listed in the top five counties in per capita overdose deaths while a 2018 study found Cambria the most saturated county with shipments of opioid painkiller pills, said Burns.

The story with the state Tobacco Settlement Fund could offer clues to how the Opioid Settlement Fund would work.

The multi-state tobacco settlement was reached in 1998 with a main goal of reducing smoking, especially among youth. The settlement placed no requirements or restrictions on how state spend their annual tobacco payments, according to an analysis by the House Democratic Appropriations Committee.

Three years later, the tobacco fund was created under Act 77 of 2001 after lawmakers debated various spending proposals.

The state budget typically sets percentages for distribution of some $350 million in annual tobacco money to a range of programs.

Since 2001, there have been appropriations for such programs as tobacco use prevention and cessation, aid to hospitals, health research grants and Medical Assistance for Workers with Disabilities and aid to help biotechnology programs to name a few.

The state budget for Fiscal Year 2017/18 authorized borrowing against $1.5 billion in future tobacco payments to help balance the budget.

In 2018, Shapiro announcement a settlement with tobacco firms to resolve two decades of disputes relating to the original settlement. This provided a cash infusion to the fund.

The new state fiscal code creates some new beneficiaries for tobacco funds, including spinal cord injury research, pediatric cancer research and capital and equipment grants to entities engaging in biotechnology research.

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If you have any questions, please contact Jack Phillips, Director of Government Affairs.

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Capitolwire: Gov. Wolf’s COVID-19 Disaster Emergency Declaration Will Come to an End Once PA Certifies the May 18 Primary Election Results

By Chris Comisac, Bureau Chief, Capitolwire

HARRISBURG (June 10) — Led mostly by the bodies’ Republican majorities, the state House of Representatives and Senate on Thursday approved a concurrent resolution to terminate Gov. Tom Wolf’s COVID-19 disaster emergency declaration.

Additionally, the General Assembly sent to the governor legislation that would to give executive agencies an extension, until Sept. 30 of this year, of the regulatory flexibility they have had under the governor’s COVID-19 disaster declaration for more than a year.

“The people of Pennsylvania have spoken and our members have turned their vote on May 18th into action by exercising the will of the people to immediately terminate the COVID-19 emergency disaster declaration,” said House Majority Leader Kerry Benninghoff, R-Centre, author of House Resolution 106. “With Pennsylvania rapidly returning to normal thanks to a legislative-led vaccine rollout and the need to keep our economy on a track to vigorously reopen, we did not want to wait a minute longer to terminate this emergency disaster declaration that has been responsible for so much economic devastation over the last 16 months.”

Republicans noted Wolf has already lifted nearly all of his mitigation orders, with the masking mandate to end before the end of June, while vaccination rates continue to climb as COVID-19 case numbers and hospitalizations have been dropping dramatically for several weeks – all suggesting the emergency has passed, and it’s now time for the General Assembly and governor to work together to address matters going forward.

The resolution was amended both Wednesday evening and then again Thursday morning (a technical fix to the measure) by the Senate prior to that chamber’s vote later Thursday morning, a 30-20 tally that saw one Democrat – Sen. Lisa Boscola, D-Northampton – join the Senate’s Republicans and Sen. John Yudichak, I-Luzerne, in adopting the concurrent resolution.

In a statement issued following the vote, Senate Majority Leader Kim Ward, R-Westmoreland, said: “Delivering on its promise to the people of Pennsylvania who voted ‘Yes’ on the ballots in the primary election, the Senate officially voted today to end the COVID-19 pandemic emergency declaration. A collective effort by the legislative and executive branches resulted in actions that terminated the current emergency declaration while preserving the health and safety of Pennsylvanians. The extension of waivers provides health care and economic flexibilities to protect Pennsylvania families, especially our elderly and vulnerable populations, while ending the most stringent and unnecessary restrictions still in place since the onset of the COVID-19 pandemic. This vote restores liberty by helping to reinstitute legislative powers throughout times of an emergency by giving the general assembly a seat at the table. Pennsylvanians deserve a government that works for them, and the senate looks forward to continuing to do its part to lead this effort and in the best interest of all Pennsylvanians.”

Senate Democrats, as they did Wednesday evening in committee when considering HR106, questioned the authority by which senators were voting on the resolution when the state has yet to certify the results of the May 18 primary which saw voters approve two constitutional amendments limiting some of the governor’s disaster declaration power and giving the General Assembly the ability to terminate a declaration by majority vote on a concurrent resolution by both chambers.

The results have yet to be certified by the Pennsylvania Department of State, but GOP lawmakers noted that would likely occur during the next few days, since counties had until this past Monday to certify their results to the state agency.

Concerns about the future of programs and services that have been delivered by use of executive order under the authority of the COVID-19 disaster declaration, as well as federal funding providing those services and benefits to Pennsylvanians, were likewise expressed by Democrats who claimed the emergency isn’t over, people are still suffering and it remains unknown if the COVID-19 situation could worsen as it did last year.

Some House Democrats attempted to minimize the importance or meaning of the HR106 vote – which saw eight House Democrats join all House Republicans in adopting the measure 121-81 – with House Minority Whip Jordan Harris, D-Philadelphia, repeatedly saying during his floor remarks before the vote, “This resolution does absolutely nothing.”

And Bill Patton, press secretary for House Minority Leader Joanna McClinton, D-Philadelphia, sent an email to members of the press suggesting that as reporters write about the HR106 vote, “if you happen to reference the May 18 vote on statewide ballot questions 1 and 2 please know that neither one got more than 52% approval (51.7 and 51.8 to be more precise). Slightly higher numbers were reported early on when the counting was incomplete but the latest tally is available here [Pennsylvania Elections – Summary Results (pa.gov)]. While there’s no question about the outcome on May 18, the numbers do still carry some weight. Also please bear in mind these numbers have not yet been certified.”

A source who wished to remain anonymous reacted to the comments about the constitutional amendment vote totals by pointing out President Joe Biden only received 51.3 percent of the national popular vote in the 2020 presidential election, and only 50.01 percent of Pennsylvania’s vote – with both percentages less than what was cast for the constitutional amendments on May 18 (and a slightly greater percentage opposed to Biden in Pennsylvania than those opposed to the ballot questions) – but Biden still won Pennsylvania and he’s still president.

Responding to the floor remarks of Harris and other House Democrats, Benninghoff observed during his closing remarks prior to the HR106 vote, “I think there is a little merit to wondering, at least on my part, why people have spent so much time and energy dialoging about something they say means nothing – how do you fight so much about something that means nothing? It has to mean something.”

The General Assembly’s actions seemed to mean something to the governor and his administration.

“Over the last few weeks the administration has worked hard to educate and inform the general assembly of the risks associated with ending the Covid disaster declaration prematurely,” said Wolf spokeswoman Lyndsay Kensinger in an email reacting to Thursday’s votes. “The governor is disappointed that the Republican-controlled General Assembly has not taken action to extend the disaster declaration. To avoid serious consequences, the administration will do everything it can to work with the federal government to try to maintain federal funding in the absence of a declaration. Now, when the election is certified, and the constitutional amendments become effective, the COVID-19 disaster declaration will be terminated.”

However, Kensinger said the administration welcomed the General Assembly keeping the various COVID-19 waivers put in place by his administration.

“The administration appreciates that the General Assembly agreed with the administration’s recommendations on the significance of keeping the important regulatory suspensions associated with Covid disaster declaration provisions in place,” said Kensinger. “The governor plans to sign the bill.”

The bill in question – House Bill 854 – was unanimously approved by lawmakers in both chambers Thursday, and grants an extension, until Sept. 30, 2021, existing regulatory flexibilities authorized by various executive agencies as part of the COVID-19 disaster declaration.

“Over the past 16 months, Pennsylvania’s regulatory framework has been upended,” said Benninghoff. “As our economy continues to emerge from the effects of government-induced shutdowns and our health care community continues to be reliant on existing flexibilities, I was glad to see both chambers quickly come together to effectively manage the remaining days of the pandemic.”

Regarding HB854, Sen. Yudichak said the bill “protects access to critical federal funding and waivers that benefit health and safety, such as the emergency authorization of telemedicine, temporary staffing at nursing homes and personal care homes, and other staffing issues in health care facilities.

Added Sen. Ryan Aument, R-Lancaster: “While many of the provisions in the Governor’s COVID-19 mitigation orders were overburdensome, arbitrary, and unfair, there were some provisions like the telemedicine waiver that we all agree have improved the lives of Pennsylvanians throughout the last year. We voted today to ensure that these provisions remain in place as our Commonwealth continues to recover and rebuild in the aftermath of this pandemic.”

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By Robert Swift, Staff Writer, Capitolwire

HARRISBURG (June 9) – A Senate-passed bill to expand eligibility for a medical assistance program for working individuals with disabilities was approved unanimously Wednesday by the House Health Committee.

Members from both parties call Senate Bill 156 a bipartisan bill.

SB156 which now heads to a floor vote would increase the income eligibility limit from $32,000 to $76,000 annually so more individuals are eligible for the Medical Assistance for Workers with Disabilities (MAWD) program.

This would cover newcomers to the program and those defined as a “worker with job success” being age 16 an older, earning at least the minimum wage and meeting federal poverty income guidelines.

MAWD provides disabled workers access to home and community-based services that are important to them, but typically aren’t covered by private insurance.

The worker pays a percentage portion of their income to MAWD to cover health care.

Under SB156 sponsored by Sen. Bob Mensch, R-Lehigh, workers with the job success designation will pay 7.5 percent of their income to cover health care, a 2.5 percent increase above the current rate.

The bill would allow individuals to work to their full potential without fear of losing health benefits, said Mensch. Only 35 percent of people with disabilities are working with only 21 percent of that category working full-time, he added.

Increasing the income limit will improve the quality of life for the disabled, said Rep. Kate Klunk, R-York, sponsor of the related House Bill 1115 and of a previous bill that passed the House last session.

If SB156 is enacted, MAWD enrollment will increase by more than 1,000 individuals, according to a state Department of Human Services estimate. This is based on the number of MAWD recipients disenrolled due to being over income limits.

A Senate Appropriations Committee fiscal note estimates SB156 would cost $9.7 million with $4.6 million coming from state funds.

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Capitolwire: After May’s $1.6 Billion Tax Revenue Collection Overage, PA is Sitting at $2.9 Billion in Excess Revenue With One Month to Go in the Current Fiscal Year

By Chris Comisac, Bureau Chief, Capitolwire

HARRISBURG (June 2) — Less than a week after the state’s Independent Fiscal Office forecast Pennsylvania would end its current fiscal year with a $3.16 billion revenue surplus, the state Department of Revenue announced the commonwealth is well on its way to reaching that mark.

General Fund revenue collections for the month of May came in far stronger than originally estimated – totaling $3.9 billion, which was $1.6 billion, or 65.4 percent, ahead of expectations – mostly due to a one-month delay of the collection deadline for personal income taxes (PIT), pushing the state’s year-to-date collections to $2.9 billion, or 8.5 percent, above estimate with one more month of collections to go.

“We are also nearly $2.9 billion above our estimate for the fiscal year as of today,” said Revenue Secretary Dan Hassell on Tuesday in a press release announcing May’s General Fund Revenue collections. “This is very positive news with one month to go in the current fiscal year.”

Last week, the IFO updated its revenue forecast for the current fiscal year, FY2020-21, indicating the state’s General Fund would end the year with $1.674 billion more than the agency had estimated in January, pushing the estimated General Fund total, once June’s collections are in, to $40.111 billion, which is $3.16 billion more than was expected when the budget was finalized in November. The IFO’s report also included the agency’s initial revenue estimate for the coming fiscal year,FY2021-22, with that figure being over $2.1 billion less than what the state is expected to collect during the current fiscal year.

PIT collections totaled $1.9 billion last month, which was $1 billion, or 111 percent, more than anticipated, due to the tax filing deadline extension until May 17, more than making up for the $571.8 million shortfall experienced in April by the PIT because of the deadline extension. Through 11 months of the fiscal year, the PIT has collected $14.9 billion, which is $747.7 million, or 5.3 percent, above estimate.

While May’s revenue collection results were mostly due to the PIT, the PIT wasn’t the only revenue source performing above expectations, with those performances in most cases directly tied to the billions in federal dollars pumped into the state as part of the various COVID-19 stimulus initiatives during the past year. The IFO last week indicated there have been nearly $78 billion in direct federal payments to individual Pennsylvanians (by way of unemployment benefits and stimulus checks) during Calendar Years 2020 and 2021, along with another nearly $79 billion in federal support to businesses, as well as the state government and the commonwealth’s local levels of governments.

Revenue collections from the state’s Sales and Use Tax (SUT) continued their strong performance over the past several months, with the tax – helped by heightened consumer demand due to both additional federal dollars in people’s pockets as well as the COVID-19 virus in decided retreat prompting more people to get out and engage in economic activity – producing $1.2 billion in May, a total that was $211.8 million, or 22 percent, above estimate. Year-to-date SUT collections total $11.6 billion, which is $741.7 million, or 6.8 percent, ahead of expectations.

May corporation tax revenue collections were $163.7 million, or 61.4 percent, more than anticipated, producing a monthly total of $430.1 million, of which $417.5 million came from the state’s Corporate Net Income Tax (CNIT). For the year thus far, corporation taxes have generated $5.6 billion, which is $892.2 million, or 18.9 percent, above estimate.

An unfortunate side-effect of the past year of COVID-19 and the deaths the virus has caused has been a boost in the revenue generated by the state’s inheritance tax. In May, the tax’s collections were $136 million, which was $53.5 million, or 64.8 percent, above estimate, pushing total collections for the last 11 months of the fiscal year to $1.2 billion, which is $216.5 million, or 21.1 percent, above estimate.

The real estate market has been on fire in most areas of the nation, and Pennsylvania has been no exception. In May, the realty transfer tax produced $56.9 million in revenue, which was $14.8 million, or 35.1 percent, above estimate. Year-to-date, the tax has brought it $575.1 million, which is $95.5 million, or 19.9 percent, ahead of expectations.

The state’s “sin taxes” – including cigarette, malt beverage, liquor and gaming taxes – also continued to perform well in May, totaling $191 million in revenue, which was $24.5 million, or 14.7 percent, above estimate, pushing the fiscal-year revenue total to $1.6 billion, which is $132.3 million, or 9.1 percent, more than anticipated.

Non-tax revenue was likewise above estimate last month, by a total of $45.6 million, or a whopping 377 percent, which the IFO attributed to higher-than-expected license and fee collections, as well as other miscellaneous collections. May’s $57.7 million in collections brings the year-to-date total to $1.1 billion, which is $42.8 million, or 4 percent, above estimate.

June begins what most hope will be the homestretch toward a finalized budget for FY2021-22, though reports emanating from the state Capitol suggest there are several areas of disagreement between Democrat Gov. Tom Wolf and the Republican-controlled General Assembly, including issues related to proposed tax and spending hikes (as well as the redirection of existing education and other spending), and the appropriation of the more than $7 billion in federal COVID-19 stimulus/relief funding distributed to Pennsylvania as part of the last federal stimulus initiative.

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Capitolwire: New IFO Report Indicates PA Should End FY 2020–21 With a Sizable Revenue Surplus, But With Direct Federal Payments Ending, Things Look to be Far Different for the FY 2021–22 Budget Now in Development

By Chris Comisac, Bureau Chief, Capitolwire

HARRISBURG (May 27) – Pennsylvania’s current fiscal year should wrap up on a very positive revenue note, but the coming fiscal year could be a rocky one to negotiate for state lawmakers preparing a state budget, according to the latest revenue updates released Wednesday afternoon by the Independent Fiscal Office.

Thanks to nearly $78 billion in direct federal payments to individual Pennsylvanians during Calendar Years 2020 and 2021, along with another nearly $79 billion in federal support to businesses, as well as the state government and the commonwealth’s local levels of governments, the IFO forecasts the state’s General Fund will end with $1.674 billion more than the agency had estimated in January.

What makes that upward adjustment to $40.111 billion even more impressive is that when the IFO forecast in January the state’s General Fund would end Fiscal Year 2020-21 with $38.437 billion, that total, after applying estimated tax refunds and expected state expenditures, produced a revenue surplus of $1.481 billion.

And while there are more state expenditures to rectify than had been contemplated by the IFO in January, the total revenue surplus from which those additional expenditures will be deducted now appears as though it will be more than $3.1 billion.

It’s important to note the IFO’s revenue estimates and overall General Fund forecasts differ from those used by the state Budget Office. Revenue collections for May won’t be released until the start of June next week, but the figures for the month are expected to be in excess of estimate by a sizable amount given that the deadline for personal income tax (PIT) return filing was delayed from April 15 until May 17. That pushed into May a significant portion of PIT collections that would have been received by the state in April. Even with those delayed payments, Pennsylvania’s General Fund collections in April managed to stay slightly ahead of estimate, with the Fund, through April, having $1.3 billion more than expected.

So, while the state might not end the current fiscal year on June 30 with a surplus of more than $3.1 billion, things do appear to be trending in a positive direction.

That’s a good thing, since there’s around $1 billion in state Department of Human Services spending, in excess of approved appropriations, that will have to be paid, and having a surplus makes that easier to do. And whatever is left over may be needed to address what the IFO says will be a decidedly different story in Fiscal Year 2021-22.

The IFO initial General Fund revenue estimate for FY2021-22 is built on the expectation that once there’s an end to the massive amount of COVID-19 federal spending – much of it direct payments to individuals in the form of unemployment benefits and stimulus payments – the state’s economy, and the revenues generated from various sources, will revert back to the former path it was on prior to COVID-19.

While that doesn’t sound problematic, it is forecast by the IFO to result in FY2021-22 General Fund revenue retreating to $37.96 billion, a decline of $2.152 billion compared to FY2020-21.

That’s bit of a problem since the IFO in January projected state expenditures would hit $37.975 billion in FY2021-22, and the $37.96 billion in General Fund revenue forecast by the IFO for FY2021-22 isn’t the final amount of revenue that would be available, as tax refunds (normally around $1.3 billion) would still have to be deducted. There’s also the matter of the considerable amount of one-time revenues and expenditure offsets – approaching $5 billion – used to construct the FY2020-21 state budget, with at least a portion of that adding to the hole to be filled in FY2021-22.

Additionally, this all assumes the General Assembly doesn’t approve plans to generate additional expenditures or revenue, both of which Gov. Tom Wolf would like to do as part of the FY2021-22 budget he proposed in February.

While it remains unclear how much of a hole will have to be filled for the FY2021-22 budget to balance, it will be a daunting figure.

Of course, the state lawmakers developing the budget always seem to find ways of moving money around to fill holes, and with some amount of FY2020-21 surplus likely to be available after all the bills are paid, and potentially some amount of the $7 billion in federal COVID-19 stimulus available for budget stabilization (though lawmakers have been warned about using those federal dollars to pay for recurring expenditures), it’s not outside the realm of possibility that the hole – whatever it ends up being before the budgeteers get to it – could be made smaller or erased as has been repeatedly done in the past.

Not factored into the IFO’s revenue forecast is the more than $13 billion in federal funds from the latest round of stimulus, of which, as already noted, roughly $7 billion is coming directly to state government (the rest of which is flowing to local governments throughout the state), and has yet to be appropriated for anything.

IFO director Matt Knittel said that money could have some impact on the state’s economy, though not nearly the same effect that the nearly $78 billion in direct payments made to individual Pennsylvanians who injected quite a lot of that money directly into the state’s economy.

The IFO forecast also does not contemplate the impact of additional stimulus initiatives, such as plans to direct more federal dollars to infrastructure or other items that could provide more direct payments to Pennsylvanians.

“Bear in mind, there’s a lot of moving parts for the revenues … it’s more complicated than usual,” said Knittel at the outset of his presentation Wednesday, noting the difficulty in determining what will occur when federal dollars are no longer being injected into the state’s economy and the effect that will have on the behavior of Pennsylvanians who no longer have access to those additional federal dollars, as well as the tax shifting that could occur as businesses not only react to those dollars but also potential tax changes being considered at the federal level (with the Biden administration suggesting a repeal or at least a trimming of the business tax reductions made during the Trump administration).

The IFO report identified one of the big wildcards as employment, as the state is still well over 400,000 jobs short of where it was pre-COVID-19.

Knittel warned it’s unlikely all those Pennsylvanians currently unemployed – roughly 900,000 potential workers as of April (which excludes most high school and college students) – will find a job when their unemployment benefits run out, particularly if they wait until September when the extra federal unemployment benefit is scheduled to end.

He said many businesses have already adjusted to the current economic climate and labor market, filling some jobs with workers earning higher wages, and finding other ways to improve productivity – through such things as automation and using other forms of technology – to replace the jobs that employers can’t currently fill.

It’s possible those who wait until the fall to begin looking for jobs may find there are more people looking for jobs than there are available jobs, said Knittel, a situation that will put negative pressure on wages and ultimately impact state revenues based on personal income and consumer spending.

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Capitolwire: Senate Appropriations Chair Browne Says Governor’s Proposed Budget Doesn’t Do Much About PA’s Structural Deficit; Need More Thought About How to Best Use State’s Assets and Improve Productivity

By Chris Comisac, Bureau Chief, Capitolwire

HARRISBURG (April 23) — The state Senate Appropriations Committee closed the book on another year of state budget hearings Thursday, with one of the more interesting observations made during the multiple weeks of hearings coming on Thursday from committee majority chair Sen. Pat Browne, R-Lehigh, during his closing comments.

With all the talk by Gov. Tom Wolf and his administration about the need to raise taxes, including a 46-percent hike of the state Personal Income Tax, to make more “investments” as well as address the commonwealth’s structural deficit, Browne noted the governor’s plan, ultimately, doesn’t do much about the deficit.

Browne, pointing to information supplied to his committee by the Wolf administration and that it differentiates from Senate GOP appropriations financial data, acknowledged that for about two years the increased revenue from the PIT hike would help with the deficit, but by Fiscal Year 2023-24, the deficit retuned because of continued growth of state spending.

“Taking us out to post-stimulus year [Fiscal year] 2023-24, the growth of expenditures [being] $591 million above the projections that you had provided us – this is a point for us to talk about in terms of our different assumptions – puts us again in fiscal deficit in that year, notwithstanding the fact that we’ve increase our Personal Income Tax by 46 percent,” said Browne. “So, it’s [PIT hike] not a one-time solution. It takes us through a couple years, but it’s just a couple-years solution.”

“At the end of the day, we go through this process of greatly increasing our revenue capacity – I would argue by potentially sacrificing our competitive position – but only taking us two years out to still be in fiscal deficit,” Browne continued. “That leads us to a conversation of where do we go? How do we solve this challenge? Because if it’s just the growth of mandatory expenditures that we want to fulfill for the people for whom we want to fulfill, even with the proposal you’re presenting on behalf of the chief executive, we’re not solving the fiscal challenge.”

Browne noted that some will say the solution is to increase revenue again through additional taxation, but he said it’s his belief there comes a point when taxation begins to produce diminishing returns – lower revenue – even with higher tax rates.

Pointing to Pennsylvania’s growing demographic issues – the state is becoming older with fewer people of working age, meaning more government spending for the state’s aging population but less productivity, and consequently available tax revenue, to pay for that spending due to fewer workers – Browne said, “We’ve got bigger problems to address.”

He said he doesn’t have a solution, but added, “The only thing that I can think we need to work on is how do we use Pennsylvania’s enormous inventory of valuable assets that we have available to us – our higher education institutions, our natural [resource] assets, our cultural assets, diversity – all the things that we have – to maximize their value to increase productivity.”

The state’s revenue picture has improved dramatically from prior estimates – as of the end of March, the state is $1.3 billion ahead of revenue estimates – thanks in large part to the various COVID-19 federal stimulus packages implemented during the past several months, and those figures do not include the potential impacts from the latest $1.9 trillion federal stimulus, of which Pennsylvania state government is expected to get $7.3 billion (with local governments to get another nearly $6 billion).

While some lawmakers argue the federal stimulus dollars should not be used as an excuse to avoid raising taxes to address what they say are the state’s spending needs as well as the structural deficit, others have argued that as the state’s economy and many businesses are still emerging from a COVID-19 environment – with the state still having 319,000 fewer people working than a year ago, and 369,200 fewer available jobs – it’s counterproductive to put on the economy and employers additional fiscal burdens, such as the proposed PIT hike, a new natural gas severance tax, combined profits reporting for the purposes of determining corporation taxes, a substantial hike of the minimum wage and the continued pursuit of a carbon tax on the state’s electricity producers as part of the Regional Greenhouse Gas Initiative.

The current fiscal year ends on June 30, with the new one to start on July 1.

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