HARRISBURG – Gov. Edward G. Rendell today proposed a Fiscal Year 2007-08 budget that continues to build on progress made over the past four years by delivering property tax relief to Pennsylvania homeowners this summer – a full year ahead of schedule, offering a comprehensive transportation solution, and expanding pre-kindergarten to thousands of children.
The Governor said this year’s spending plan posed unique challenges as the state faced fundamental problems that need to be solved, including more than $2 billion worth of federal funding cuts since 2002-03 for federally mandated programs, and a $1.7 billion transportation funding crisis that threatens to cripple the state’s entire transportation network if not addressed.
In his address to a joint session of the Legislature, Rendell said: “The voters resoundingly approved of the progressive agenda that we have developed together. We must continue to move forward through the new Agenda for Pennsylvania Progress, a comprehensive strategy to address the long-term challenges that still confront us. And with this budget, I intend to deliver on that agenda.”
Building on the success of his management and productivity program that has saved taxpayers more than $1 billion, Rendell also challenged his administration to identify additional ways to cut costs, increase efficiencies and save an additional $500 million in the next four years. He also said that this budget reduces the jobs complement by an additional 708 positions without any layoffs, furloughs or service cutbacks.
PROPERTY TAX RELIEF
Building on the strong momentum generated by the support of legislative leaders during last year’s property tax debate, Governor Rendell today proposed a bold new plan to accelerate the delivery of property tax relief and begin to reduce property taxes for millions of Pennsylvanians this summer, a full year ahead of schedule.
The accelerated property tax relief plan will return more than $900 million to homeowners, which includes $199 million already scheduled to be delivered to seniors this summer. By combining gaming funds already being generated with a sales tax shift, millions in new revenue included in the 2007-08 budget can be immediately returned to taxpayers.
“The tax shifting plan I am proposing today will provide nearly $720 million in property tax relief this summer,” the Governor said in his address. “That is a full year ahead of schedule, and it finally gives all Pennsylvania homeowners real cuts in their property taxes.
“Most important, this is not a one-year benefit. I am asking you to agree to allocate $700 million of the increased sales tax revenues to permanently reduce the commonwealth’s reliance on property taxes. This reduction would be over and above the relief that will arrive once Pennsylvania’s new gaming facilities are fully operating and generating an estimated $1 billion per year in additional property tax relief funds. Under the plan I am proposing today, property tax relief in Pennsylvania will grow to at least $1.7 billion a year.”
The remaining portion of the sales tax increase collected in 2007-08 is required to meet the cost of the underfunded federal mandates and federal tax cuts that will be described later in this release.
TRANSPORTATION FUNDING SOLUTION
The Governor’s budget includes a $1.7 billion transportation package that successfully avoids increasing the gasoline tax, saving consumers money at the pump.
Based on a review of the report released in late 2006 by the bipartisan Transportation Funding and Reform Commission, Governor Rendell proposed options that will repair and restore fiscal stability to public transportation, bridge and highway systems at no cost to Pennsylvania residents.
Under Rendell’s plan:
* The commonwealth would develop a plan to take advantage of the value of the Pennsylvania Turnpike. The proceeds would be used to create a new revenue stream for transportation projects. Preliminary estimates show this could produce as much as $965 million a year for transportation.
* A new tax will charge oil companies that continue to profit at astronomical rates and generate $760 million annually, and help avoid an increase in the gasoline tax. The 6.17 percent Oil Company Gross Profits Tax would be levied on oil companies that do business in Pennsylvania, beginning in 2008.
In his address, the Governor said that since 2004, oil companies have reported $368 billion in profits nationwide. He said taxing these companies is the right choice for Pennsylvania consumers burdened by ever-rising gasoline prices.
“We propose a tax on gasoline, but for the first time, we propose to tax those who make gasoline rather than those who buy it,” said Rendell. “I believe that the imposition of this tax places the burden squarely on the shoulders of those who enjoy tremendous benefits from the commonwealth’s operation of state highways and bridges. America’s oil companies have earned record profits in the past few years, and these profits come from one source: the pockets of the American people,”
INVESTING IN OUR FUTURE
Governor Rendell said that to continue on the progress we have made over the past four years we must continue investing in our future through strategic education funding increases and targeted economic development planning. One of the economic development tools is the creation of the Jonas Salk Legacy Fund.
* The Jonas Salk Legacy Fund will provide $500 million in accelerated funding to spur medical innovation and life-saving treatments – at no expense to taxpayers. The fund will help draw world-class researchers to Pennsylvania by fueling the expansion of bioscience laboratories, incubators and research parks, and help colleges, universities and academic medical centers nurture entrepreneurship in the life sciences.
Two major types of investments for these institutions will be available through the Legacy Fund:
* Starter Kits will provide grants to renovate, furnish and equip research facilities, including the acquisition of equipment and advanced instrumentation to assist in attracting highly rated research faculty to the state; and
* Bricks and Mortar Grant Financing to cover projects that will expand, remodel, renovate, alter or construct biomedical research facilities, including in-demand amenities such as wet, dry and special-function laboratories.
“The Salk Legacy Fund will catapult Pennsylvania to the top of the class in scientific research, with the goal of supporting groundbreaking medical and scientific research, while fostering dramatic growth in the business of science as well,” said Rendell.
The Governor said that his Energy Independence Strategy, combined with the continued investment in Pennsylvania’s successful economic stimulus programs, will help to maintain the highest level of employment in recorded history. For the past eight months, more Pennsylvanians have been working than in any other period.
* The Pennsylvania Energy Independence Strategy will save consumers $10 billion in energy costs over the next decade. It calls for the expanded use of “smart meters” that conserve energy, greater use of solar energy, product rebates to swap old air conditioners and refrigerators for new, more energy-efficient replacements, helping industrial businesses statewide purchase cheaper energy and lock in more stable energy prices, and finding new ways to reduce energy
consumption during peak periods.
As part of the strategy, Pennsylvania will require that all fuels sold in the commonwealth must include bio-diesel (up to 20 percent) or ethanol (up to 10 percent), which are made from coal and agricultural products.
To ensure that Pennsylvania’s economy and our jobs are benefiting from the national growth in this sector, the $850 million Energy Independence Fund will:
* Accelerate the role that Pennsylvania companies play in the production of clean energy components and systems;
* Initiate clean energy economic development projects; and,
* Keep energy jobs close to home.
The centerpiece of this strategy is the creation of the fund, which will fuel this expanding market through strategic investments that provide access to critically needed seed money or venture capital, working capital, loans and limited grants.
“The Energy Independence Strategy is a win-win for Pennsylvania. It provides strategic investments to support the development of alternative sources of clean energy, thereby reducing our dependence on foreign energy even as we create a growing clean energy industry that produces jobs and new opportunities for Pennsylvania residents,” the Governor said in his speech.
Elsewhere, the Governor’s 2007-08 proposal increases Pennsylvania’s investment in pre-kindergarten through 12th grade education by $527.8 million. The Governor said major new initiatives will dramatically improve the health and achievement level of all students.
New early education investments include:
* Pennsylvania Pre-K Counts, a new program, expands the Accountability Block Grant by $75 million. This initiative will give 11,100 more children an early start to learning through voluntary quality pre- kindergarten programs.
* Healthy Starts School Breakfast adds $30 million in state and federal funding ($6.5 million in state funds leverages over $23 million in new federal funds) to expand the critically acclaimed school breakfast program and improve the nutritional quality of food sold in cafeterias and vending machines.
* Full Day Kindergarten investment of an additional $25 million will bring Pennsylvania one step closer to universal, full-day kindergarten.
“Study after study has proven what parents all over Pennsylvania already know: quality pre-kindergarten and full-day kindergarten give young children the early skills they need to prepare them for a lifetime of achievement,” said Rendell.
Among the Governor’s education proposals:
* PreK-12 Education – $9.3 billion in total, a $527.8 million, or 6 percent, increase;
* Accountability Block Grants – $350 million in total, or a $100 million increase;
* Basic Education Funding – a $166.7 million, or 3.5 percent, increase – a total of $4.95 billion – to support PreK-12 education, including $58 million in Foundation Funding to help 169 school districts reach the statewide research-based funding target;
* Special Education Funding – a $29.4 million, or 3 percent, increase, to a total of $1 billion;
* Career and Technical Education Funding – a $1.8 million, 3 percent increase;
* Head Start – continuing to invest $40 million for the Head Start Supplemental Assistance Program – making it possible to enroll 5,790 three and four year olds
* Science: It’s Elementary – $15 million, a $5 million increase, to help nearly 50,000 more students in 85 school districts become active science explorers;
* Classrooms for the Future – $90 million to continue changing the way teachers teach and students learn in Pennsylvania high schools by putting a laptop on every student’s desk and using the power of the Internet to engage the Technology Generation and make learning come alive. This budget adds to the 103 high schools that are already building Classrooms for the Future;
* Dual Enrollment – $10 million, a $2 million increase, to allow more high school students to take college credit courses; more than 10,000 students participated last year;
* Project 720 – $11 million, a $3 million increase, to enable up to 30 more schools to participate. These schools are leading the way in transforming their academic programs to ensure that all students take a rigorous high school curriculum;
* Public Library Subsidy – $75.8 million, a $250,000 increase, for the highest funding level in history;
* Technical Colleges – $2 million to launch the first two technical colleges, which will enable Pennsylvanians to earn industry certificates and associate degrees in high-demand, high-skill fields in regions of the state where students do not have access to community colleges or other affordable higher education options;
* State System of Higher Education – $504.2 million total, including a 3.5-percent increase in the state universities’ appropriation to help keep down the cost of student tuition; and,
* Community Colleges – $229.4 million for operating costs, a 3-percent increase, along with a $2.5 million increase for community college capital investments.
“These are the investments that will pay dividends for years to come because they prepare our young people to take their place in an ever more competitive global economy that today requires the best education and the highest skill level to succeed,” said Rendell.
The Governor also asked for full legislative support of the recommendations made by the Governor’s Commission on College and Career Success.
“I ask you to enact into law the Commission’s recommendation that Pennsylvania join the vanguard of states that have adopted graduation requirements for every student. It sets the bar high — but I believe that Pennsylvania students will reach as high as we ask them to go,” said Rendell.
PENNSYLVANIA CARES
Rendell once again renewed his commitment that no Pennsylvania citizen who currently receives health and human services will lose eligibility, and he once again pledged that no child will experience any reduction in services, despite dwindling federal support.
The Governor also said that gun violence, which rose twice as fast in the rest of the state in 2005 as it did in Allegheny and Philadelphia counties, should be considered a public health challenge and he called for a renewed commitment to reduce gun crimes through new legislation.
The Governor urged the General Assembly to address the issue of gun violence in the following ways:
* Upgrading possession of a stolen gun to a felony so that the penalties can be significantly upgraded.
* Adopting new laws to make it mandatory to report the loss or theft of a gun to police, which would have a dramatic impact on illegal gun trafficking in Pennsylvania.
* Offer support for legislation that enables local communities to enact their own restrictions on the flow, distribution and use of handguns.
* Enact a one-gun-a-month law to end gun trafficking. Such legislation will put a stop to gun runners who sell so many of our crime guns and will put no burden on lawful gun owners.
As part of his Pennsylvania Cares agenda, Rendell proposed Prescription for Pennsylvania, a multi-faceted health care reform program that targets ways to improve the quality of health care delivered throughout the commonwealth, helps to bring costs under control for employers and employees, and encourages programs promoting wellness.
Cover All Pennsylvanians, part of the Prescription for Pennsylvania, will give small businesses that currently do not offer insurance and uninsured individuals the chance to buy affordable, basic insurance in the private market that will cover physical and behavioral health care and prescriptions. First-year costs will be $302.2 million, funded in part by a 3 percent fair share assessment levied on the payrolls of businesses that do not offer health care coverage to their employees.
The Governor’s Pennsylvania Cares initiative also includes:
* Long Term Living includes $17.2 million in state funds to make significant investments that expand home and community-based services to serve an additional 2,200 persons over age 60 and 1,000 persons with disabilities;
* Cover All Kids — $12.2 million in state funds and $20.5 million in federal funds for 21,000 children;
* PACE Plus Medicare – $276.4 million to fund a comprehensive state pharmaceutical benefit that complements Medicare Part D and ensures that PACE enrollees will not incur an increase in out-of-pocket costs; will enable 357,725 (10 percent increase) people to be served by PACE by June 2008;
* Medical Assistance – $5.1 billion in state funds to provide services
to 1.969 million people, with no reduction in eligibility requirements.
* Child Care – $87 million (34 percent) increase to expand services to 400 children; increase of $9.1 million in Keystone STARS to improve the quality of early learning experiences for more than 176,000 children;
* Community Mental Retardation – $78.5 million (9.9 percent) increase, including $29.3 million to provide home and community-based services for 3,428 additional people;
* Autism Services — $2.3 million (65 percent) increase; and,
* Early Intervention Children Services — $45 million (18 percent) increase.
During his address, Governor Rendell said that the growing list of unfunded federal mandates represents at least $700 million in additional obligations in the 2007-08 state budget. Among others, Pennsylvania has been forced to cover the cost of these mandates:
* Intergovernmental Transfers and related federal matching funds. Since 2003, Pennsylvania has absorbed a loss of $1 billion in federal IGT funds and a shrinking federal match for Medical Assistance and child support programs. The 2007-08 budget absorbs an additional $209 million to compensate for severe federal funding changes. Like most states, Pennsylvania has historically used its IGT funds to maintain nursing home payments, and address critical funding needs for health care for the indigent.
* Medical Assistance. The 2007-08 budget includes $369 million to pay for federally mandated services for increased Medical Assistance eligibility, increased rates for managed care, and increased Medicaid utilization services, on top of $41 million of these federal compliance costs built into our budget over the last four years;
* Other Federal Mandates. To meet federal welfare requirements, the 2007-08 budget includes $118 million for federally mandated services
for disabled and special needs children and increased child care costs. These state funds are added on top of $221 million already built into the budget this year to absorb the cost of these federal mandates over the last four years.
While the current year’s budget must already absorb the federal “clawback” for Medicare Part D, it is important to note that this controversial federal effort to take state funds to fund federal programs continues:
* The federal government is requiring states to help pay for Medicare Part D. This year, the federal government expects the commonwealth to pay $391 million for the so-called “clawback” payment, which has already cost Pennsylvania $338.5 million in the current fiscal year.
A number of states are challenging the clawback in federal court. The portion of the sales tax increase not dedicated to property tax relief in 2007-08 is required to meet the cost of these federal mandates. In his address, the Governor said it was difficult to propose raising taxes, but explained there is no other choice for Pennsylvania if we choose to protect our most vulnerable citizens.
“We must put our own house in order, regardless of the fact that others are responsible for damaging it,” the Governor said. “We must fund the obligations imposed on us by federal law. And we must continue to provide services to our most vulnerable citizens.
“To meet the combined impact of these federal cuts and underfunded federal mandates requires Pennsylvania taxpayers to shoulder more than $2 billion in costs since 2003. This is an extraordinarily heavily load for us to bear, and it is the direct result of decisions made in Washington, which is trying to balance the federal budget – and the projected $319 billion federal deficit – by foisting on the states the difficult choice between cutting services to citizens or raising state revenues, while at the same time taking credit for cutting federal taxes.
“How we respond to this challenge will define us for years to come. We can either lament the difficulties that confront us, hoping against hope that Washington will ride to our rescue, or we can decide to meet the problem head on by developing an effective, long-range Pennsylvania strategy to address this issue. And so, with this 2007-08 state budget, I propose to implement a long-term plan to assure Pennsylvania’s progress for generations to come.”
The proposed 2007-08 General Fund Budget is $27.3 billion, an increase of 3.6 percent, and it reduces spending by $162 million in all areas other than the departments of Education, Public Welfare, Corrections and Probation & Parole.