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Senator Pat Browne


Senate Appropriations Committee Report
November 2017

Committee Website

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(all tables and graphics can be viewed online)


2017-18 Budget Completed Four Months into Fiscal Year as Revenues Keep Pace

The General Assembly and the Administration finalized the legislative pieces necessary to complete the fiscal year 2017-18 budget. The enacted legislation includes a Tax Code bill (Act 43 of 2017) that authorizes the securitization of up to $1.5 billion in tobacco settlement payments to help close the one-time deficit carried over from fiscal year 2016-17. Despite having express authority to securitize a portion of the tobacco settlement payments, the Administration has been sending mixed signals by moving forward with a plan to sell a specified amount of monies derived from the Pennsylvania Liquor Control Board. The sale would generate upfront proceeds of approximately $1.35 billion, including $1.25 billion that would be transferred to the General Fund. In addition to the uncertainty of its borrowing plan, the Administration is contemplating raising significant revenue by applying new rules regarding the net operating loss deduction (NOL) retroactively to the 2017 tax year in light of the PA Supreme Court’s decision in Nextel. Also, they have unveiled a plan to suspend tax credits that were set to take effect in FY 2017-18.

A gaming expansion bill is also part of the package, and it will provide much-needed revenue to support both the General Fund and Property Tax Relief Fund. The gaming legislation modernizes the Pennsylvania Lottery by allowing it to offer new and exciting games over various platforms, including the Internet and on-site monitored draw games.

Total General Fund revenue for October 2017 was $2.18 billion, which was $59.3 million, or 2.7%, less than General Fund revenue collected in October 2016. The Independent Fiscal Office’s (IFO) monthly estimate for October projected General Fund revenue collections of $2.21 billion, and so actual revenues were $34.6 million less than the IFO estimate for the month. General Fund revenue collections for the fiscal year-to-date are $9.108 billion. The IFO estimate projected collections of $9.118 billion, and so General Fund revenues are $10 million, or 0.1%, below the IFO estimate thus far this fiscal year.

Moody’s Analytics Notes PA Among Least Prepared States to Handle a Recession

A recent report by Moody’s Analytics rated Pennsylvania among the least prepared states in the nation to handle a recession as illustrated in Chart 11 below. The study assessed states’ reserve levels, the potential for tax revenue shortfalls and increased needs for Medicaid spending that often occur during economic downturns. The report also noted that it has been more than eight years since the end of the last recession, which is the third longest expansion period recorded. If we were to enter a recession in the near term, Pennsylvania would again face very significant financial challenges since the state has effectively no reserves.

The full report can be viewed by accessing the link below. The Rainy Day Fund chart on the following page will provide additional information on how Pennsylvania’s reserve balance compares to those of other states.

https://www.economy.com/getlocal?q=91a42834-85af-4773-b408-5da811028c00&app=eccafile

Please note, “ppt” refers to percentage. In a moderate scenario Pennsylvania is approximates 9% short of the reserves needed to weather a recession.

Senator Mensch’s Performance-Based Budgeting Bill Becomes Law

Senate Bill 181 (Act 48 of 2017) was signed into law on October 30, 2017. The landmark legislation requires the Governor’s Budget Office and the Independent Fiscal Office (IFO) to establish a schedule of performance-based budget reviews for all agencies at least once every five years. The reviews will include the following:

  • Detailed descriptions of all agency line item appropriations and programs.
  • Descriptive information and data related to existing performance measures for appropriations and programs.
  • An agency mission statement and goals and objectives for the budget year and successive planning years.
  • Any other information as the IFO may require.

The new law also establishes an independent Performance-Based Budget Board to review the budget plans developed by the IFO and to make recommendations on how each agency’s operations and programs may be made more transparent, effective and efficient.

Performance reviews will also be required for all state tax credit programs.
 


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Allentown
702 W. Hamilton Street
Suite 101
Allentown, PA 18101
610-821-8468
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FAX: 610-821-6798
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Friday
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281 Main Capitol
Harrisburg, PA 17120
717-787-1349
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Upper Macungie Township Building
8330 Schantz Road
Breinigsville, PA 18031
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Northern Lehigh County
North Whitehall Township Building
3256 Levans Road
Coplay, PA 18037
610-769-5566
FAX: 610-769-5568
By Appointment Only


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