Thursday, June 3, 2010

Courtesy of "The Advocates’ Agenda" - “Productive” Budget Meeting Held

From The Advocate's Agenda, published by Cathleen Palm.  To sign up, please email Cathy at cpalm@theadvocatesagenda.com.

June 3rd – According to Senate Republicans, there was “a productive meeting” this morning between Governor Rendell and legislative leaders about the state budget.

Of course after 101 days of budget trauma and dueling press conferences last year with very different interpretations of what had or had not happened behind closed door – clearly there are likely to be many views of what exactly “productive” means.

Senate Majority Leader Dominic Pileggi said that Rendell “acknowledged the fact” that as of now the budget the put forth in February “is substantially out of balance.”

Neither party set a line in the sand about the bottom line “spend number” for 2010-2011, but Republican leaders reminded that “right now according to the balance sheet” the Commonwealth only has about $27.5 billion to spend (Rendell put forth a spending plan of $29 billion in February).

So to spend beyond the $27.5 billion a balance sheet number “essentially agreed to” by all parties “takes revenue increases, new taxes or transfer of funds.”

A key discussion point this morning was what to expect from Congress in terms of action or inaction on temporarily extending the enhanced federal Medicaid match rate (FMAP), which was initially provided to states via the federal American Recovery and Reinvestment Act (ARRA).

The FMAP extension, which Senate Appropriations Committee Chairman Jake Corman reminded Rendell built into his budget to the tune of nearly $850 million, remains, at best, on life support after Congress went home for Memorial Day without approving the FMAP extension.

A reporter asked if Rendell should be faulted for building his budget “on hope” to which Corman said that in February there was “at least respectable reason to believe” that the FMAP money would be approved by Congress.

Now, however, Republican leaders said all indications are “that there are not the votes in Congress” to win approval of an FMAP extension.

Growing pessimism that Congress will let Pennsylvania and twenty-nine other states down as the states still are battered by staggering unemployment and increased demand for health and human services has Rendell and leaders bracing for a plan b.

Pileggi acknowledged the alternative planning assuring that if it becomes “clear that it is never going to materialize” then the next step is “to reduce spending to close that budget gap.”

However, leaders indicated the “how to move forward” without FMAP is not a settled discussion point.

Governor Rendell appears willing to advance the budget in time to meet the state June 30th deadline with the $850 million included in the plan regardless of final Congressional action on FMAP. Corman noted, however, that such a choice would require later recissions (taking back money programs and services were counting on later in the fiscal year) should Congress never gets the job done on FMAP.

The evaporating hope of FMAP and its nearly $850 million in revenue comes in the same week that the Rendell Administration recorded another dismal month of overall tax collections bringing the deficit between revenue projections (the figure the current year’s budget was built upon to stay balanced) and actual collections at a gap of $1.23 billion.

Rendell’s budget plan for the next fiscal year expected a deficit but projected that red ink at something closer to $500 million than $1.23 billion.

Assuming that the June revenue collections will follow the trend of the last year it is likely that the final deficit climbs to approximately $1.4 billion creating an automatic gap of somewhere between $800 and $900 million (and that is a gap separate and apart from the nearly $850 million shortfall created by Congressional inaction on FMAP). There is also mounting worries that another revenue source – getting tax scofflaws to pay up via a tax amnesty program – won’t produce quite as robust rewards as anticipated.

In recognition of the fact that there are now much less revenues available to spend, Senate leaders said Rendell today put forth “some spending cuts, some fund transfers, and some revenue enhancers otherwise known as new taxes.”

On the revenue raising, tax front side of the equation, they indicated Rendell is looking to somewhere between $200 and $300 million in new revenues (taxes) similar to unfolding discussions in the PA House.

The PA House had planned on moving a revenue measure (House Bill 2435) but ran into problems with their own band of Democrats as a result of a number of provisions folks didn’t want to take up in a tough election cycle, including those related to closing some business tax loopholes and taxing of certain tobacco products.

Resistance on that bill shifted attention and action toward House Bill 325 complete with a bigger than expected ($.30 cent) tax increase on cigarettes, a new tax on smokeless tobacco (but not cigars) as well as a severance tax on the extraction of natural gas at Marcellus Shale.

Given the complexities and waning hope of FMAP materializing, House leaders (and Governor Rendell) need to fully understand what appetite there is in the House for revenue raising, tax increases to establish, in their mind, what is the appropriate “spend level.”

Republican leaders Thursday didn’t dismiss or endorse any elements of a tax debate (outside of the continued mantra of no new broad based taxes and now isn’t the time to be taxing anything more) reserving comment until they can “see what those taxes will be.” Specific to taxing related to Marcellus Shale they need to see the “format and critical details” to be assured that “we have the full benefit of the industry in Pennsylvania.”

As for handicapping the timing of getting to a completed budget, Leader Pileggi put the responsibility for achieving an on-time budget directly on Rendell’s shoulders.

He said the “timing of a budget resolution starts with the Governor’s orientation about the importance of that date.” The leader indicated he already sees a willingness of Rendell to compromise and make an on-time budget a “priority” which differs from last year in that, in Pileggi’s view, it took until October for the Governor to get to that point.

He suggested that the budget process may be a slightly easier this year given that the Governor has already “acknowledged with the drop off of revenues that there need to be spending reductions” so the big debate now is about the degree of such cuts “where they come from.”

Leaders waved off any discussion of “specific lines” reinforcing there is all around “acknowledgement that there has to be a reduction in spending” but that it is fruitless to get into “this cut or that” until they know the bottom line amount of money available to spend.

In light of how critical FMAP is to the 2010-2011 budget and efforts to fend off deep cuts that will cut across education, health, human services, and beyond make sure help plug the $850 million HOLE in the PA Budget by clicking here.

Add your individual/organization’s name on a letter to Senators Casey and Specter to assure that there is a 6-month extension of the federal enhanced Medicaid match rate (FMAP) to help fend off deep state budget cuts!

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