HARRISBURG – There will be no broad-based tax increases for individuals and business taxes will be cut by another $400 million under the 2009-10 state budget proposed by Gov. Edward G. Rendell.
“The worst economic crisis of our lifetime has dramatically re-ordered priorities in Washington, in Harrisburg, and most importantly, around the kitchen table in homes all across our commonwealth, where families are asking themselves questions that were unthinkable just six months ago,” Rendell said.
“The budget that I propose today is designed to keep Pennsylvanians working, put more residents to work, relieve the impact of the recession on hard-working families and keep down the cost of state government,” he said. “My budget does not require a tax increase on families, it does not require a personal tax increase, a state sales tax increase or an increase in business taxes.
“I recognize that inequities still exist in our business tax system, I believe it is vital to protect the $1.6 billion in business tax cuts that we have enacted since 2003. I propose to continue the phase-out of the Capitol Stock and Franchise Tax for this year, which will boost our total business tax reductions to $2 billion in the past six years.”
Spending in the governor’s 2009-10 budget proposal is 0.2 percent less than the current fiscal year spending despite mandated increases in:
-union wages;
-health care costs;
-corrections spending, and
-federally required expenditures.
While the impact of federal stimulus funds reflected in the 2009-10 budget proposal help keep spending down, Rendell cautioned against assuming that the federal stimulus funds provide an easy way to balance the budget.
“The stimulus money comes with definite requirements about how it is spent, and more importantly, it will carry with it the requirement that the funds be spent over the next two or three years,” he said.
The 2009-10 budget proposal cuts nearly $1 billion ($977 million) in state spending compared to the current year through the elimination of funding for 101 line items and reductions to another 346 lines in the budget.
“State spending since 2003 would have grown by another $5 billion had we not instituted fiscal discipline in administrative and welfare costs,” Rendell said. “Our efforts to contain costs and implement responsible budgets will help avoid saddling future generations with debilitating debt.
“This budget contains broad-based cost-containment reforms and revenue replacement initiatives to fund needed services in critical welfare programs. In my 2009-10 budget, we have instituted cost controls and imposed cuts totaling nearly $800 million in DPW spending.”
Cost-containment reforms will be guided by three principles:
-Minimize the impact on seniors, children, families and other vulnerable individuals.
-Apply cost reductions across all program areas.
-Avoid program changes that could result in costly placements in institutional settings.
Examples of cost-containment reforms include implementing a Smart Pharmacy Program and replacing the managed care assessment. Under Smart Pharmacy, the Department of Public Welfare will administer the pharmacy benefits currently managed by HealthChoices providers. This will:
-have no affect on consumers,
-simplify prescribing, dispensing and claims submission for providers,
-maintain consumer access to quality health care, and
-enable the department to receive federal drug rebates, resulting in substantial savings in taxpayer dollars of $146 million each year once fully implemented.
Implementing the Smart Pharmacy initiative will makes it possible to expand access to health care without increasing the budget or taxes.
The department will implement a 2 percent assessment on all managed care organizations (MCO) beginning Jan. 1, 2010 to replace the existing Medicaid MCO assessment, which the federal government will discontinue on Oct. 1, 2009.
Reducing the Cost of Government
“Since 2003, we have greatly reduced the cost of operating our state government,” Rendell said. “We instituted new business practices, and by the end of this year we expect to achieve $1.75 billion in reduced spending due to efficiencies that now recur annually. Our efforts have fundamentally changed the way the commonwealth provides services to its citizens.
“Increased government efficiency and strategic, targeted investments focused on leveraging private sector job creation in the past six years put Pennsylvania in a strong position to weather the current economic storm far better than most states.”
Pennsylvania’s current year projected budget deficit of $2.3 billion is relatively low compared to many states, including:
-Massachusetts’ deficit is projected to be $3.1 billion
-Ohio faces a $3.5 billion deficit, and
-New Jersey’s deficit is projected at $4 billion.
-To address the current budget gap, in the past six months, Governor Rendell cut spending by a half-billion dollars, implemented a general hiring freeze that left more than 4,500 positions unfilled, froze the wages for 13,600 managers and other non-union employees, restricted out-of-state travel and prohibited the purchase of new vehicles for the state’s fleet.
Rendell’s mandated management and productivity improvements in the past six years mean that the overall cost of state government is $1.5 billion lower now. Those efforts will continue and another $250 million will be cut by the end of the calendar year through initiatives such as:
-removing 1,000 cars from the state fleet,
-lowering energy costs,
-making smart technology purchases, and
-lowering the cost of pharmaceuticals for state agencies and retired state employees.
“As a result of these efforts, state administrative spending in the 2009-10 budget will be the same as in 2002-03,” Rendell said. “When adjusted for inflation, we have decreased the administrative costs by 18 percent in the past six years.”
Some state costs have increased since 2003, in large part due to skyrocketing costs to meet the needs of the elderly and people with disabilities. Those costs have increased 276 percent in the past six years because there are more residents needing services.
“In these difficult economic times, we must remain committed to helping Pennsylvania families and other people in need of assistance,” the governor said.
Relieving Property Tax Pressure
“One of the most immediate steps we can take to help Pennsylvanians in difficult economic times is to keep property taxes from rising further. In the past six years, we have made tremendous investments in education, committing more than $2.7 billion in additional state funding for public schools. My new budget will continue that effort by increasing state funds for public schools by $300 million,” the governor said.
As the state continues to pick up more of the cost of education, school districts will have the resources to provide quality education without raising taxes on hard-working families.
In 2009-10, Pennsylvania will continue its historic property tax relief with nearly $800 million in savings for homeowners — building on the elimination of school property taxes for more than 110,000 seniors this year and delivering the second year of property tax relief for all homeowners.
Streamlining Government
Rendell’s 2009-10 budget includes several initiatives to reduce the size of government, from merging services for senior citizens to consolidating school districts and making municipal services more economical.
He proposes to put long term living services under the umbrella of one agency that would be renamed the Department of Aging and Long-Term Living. This shift will improve services to Pennsylvanians, streamline paperwork for providers and improve businesses practices to make it possible to expand our aging and disabled services.
Creating this seamless governmental infrastructure will:
-allow senior citizens and adults with disabilities to access services with a minimum of confusion;
-ensure that Pennsylvanians have fair and equitable access to services, no matter where they reside;
-encourage full cooperation between providers of long term living services;
-leverage programs such as the PACE senior pre scri ption program, family caregiver support, nutrition meals programs, senior centers and home modifications so that they complement and enhance the ability to keep seniors at home, safe, independent, healthy and engaged in their communities.
Rendell asks the General Assembly to form a commission with the goal of reducing the number of school districts from 500 to 100 to eliminate duplication of services and reduce taxpayer costs.
“Almost everyone agrees that Pennsylvania has too many school districts,” Rendell said. “This means that we have ever-increasing pressure to increase local property taxes.”
The governor proposes to address this pressing issue by:
-increasing the state’s share of education funding,
-following the House Education Committee’s proposal to consolidate health care benefits for all school employees in the state, and
further reducing the number of school districts, as was done with success in the 1950s and 60s.
“Full-scale school consolidation provides a very effective way to relieve the local property tax burden all across Pennsylvania. There is nothing sacred about the need to maintain 500 separate schools districts – each with its own staggering, and growing, administrative costs.
“For the record, consolidation is not a new idea in Pennsylvania. In 1955, there were 2,700 separate school districts when the General Assembly authorized consolidations which reduced the number of separate districts to 1,900 within two years.
“I am proposing that we establish a legislative commission to study how best to right-size our local school districts and report back within one year. We need to stop spending our taxpayer funds on redundant administrative costs and put those funds in the classrooms where they belong.”
Rendell called on the General Assembly to advance two other initiatives that will improve the level of services to the public, while also dramatically reducing the cost of government.
Pennsylvania is home to 2,566 local governments that employed upwards of 400,000 people in 2008.
“At this rate, government is far and away the largest employer in Pennsylvania,” the governor said. “Yet common sense dictates that the cost of providing local government services can be significantly reduced if local communities join forces to share a host of administrative or even police or fire services — all without surrendering their individual identities and the features that make them unique.
“I urge you to enact the recommendations of our State Planning Board which would accelerate local community mergers where it makes sense to do so.”
Inter-municipal approaches can provide for more effective and efficient service delivery while reducing fiscal pressures for services such as:
-regional police agencies,
-emergency response equipment,
-computer systems, or
-energy management programs.
In Washington County, West Alexander Borough recently merged with Donegal Township. Taxes will eventually stabilize because the costs of police protection, snow removal, tax collection services and road maintenance are shared among more residents. The merger was the first in Pennsylvania since South Philipsburg Borough, Centre County, combined with Rush Township in 2005.
The governor asked the General Assembly to seriously consider and enact the proposals of the Sustainable Water Infrastructure Task Force to improve the efficiency and management of our drinking and waste water systems. The new budget includes $294.5 million to continue repairs to the state’s aging water and sewer infrastructure. In addition to creating jobs that cannot be outsourced, these improvements will improve the efficiency of municipal water and sewer systems thereby reducing operating costs and the need for additional taxes.
