Governor Announces Mid-Year Budget Cuts as Revenues Dwindle

January 13, 2010

The Rendell Administration has identified $161 million in cuts to the 2009-10 state budget to address a revenue shortfall driven by the severe recession. These funds are actually being placed in budgetary reserve, rather than being cut, but because of the revenue deficit it is unlikely that those funds will be available.

The plan eliminates 33 line items, including state funding for health care facilities, bio-technology research, regional community college services, rural cancer outreach, zoos, and regional history centers. More than 240 other programs, including county child welfare, mental health services, autism intervention, children’s health insurance, and Pre-K Counts, received cuts ranging from 1% to 97%. Funds from the cuts are being put into budgetary reserve, meaning they cannot be spent.

Déjà Vu, All Over Again: How Did We Get Here?

As of December, the state's revenue deficit exceeded $250 million. The Rendell Administration is estimating that the Commonwealth will end the 2009-10 fiscal year in June with a $450 million revenue shortfall. Last month, the Governor proposed to address the growing deficit through $170 million in budget cuts, $50 million in unused prior-year funds, and gaming license fees from the addition of table games to casinos. The Governor said that those actions will produce a $124 million year-end surplus.

However, in the first half of the fiscal year, revenue collections are below even cautious estimates for 2009-10 and below collections in 2008-09.  As more than half of all tax receipts come in during the second half of the fiscal year, the deficit could grow at a faster pace between January and June. That, together with questions about the timeliness of gaming revenues, suggests that the defict could grow and that the reserves will turn into permanent cuts.

The Final Tally

• 33 programs eliminated ($30.4 million cut)
• Funding reduced for 244 other programs ($130.8 million cut)
• Total reductions: $161 million

Notable cuts

In agencies under the Governor’s jurisdiction, general state government operations were cut between 1% and 1.8% ($8.3 million, in total, cut).

More than one-third of the announced cuts are within the Department of Public Welfare:

• Total cuts: $54 million or 0.6% of the agency’s 2009-10 budget
• Despite increasing demand for state- and county-administered services: a 1% cut in operations
• Mental health services: $7.3 million (1%)
• County child welfare services: $10 million (1%)
• Mental retardation base services: $1.56 million
• Medical Assistance: $7.3 million in cuts to inpatient and outpatient services, trauma centers and critical access hospitals
• Human Services Development Fund: $4 million (13.6%)

Many education programs reduced, including:

• Pre-K Counts: $475,000 (1%)
• Head Start Supplemental: $784,000 (2%)
• Education Assistance Tutoring: $3.8 million (6%)
• Adult and Family Literacy: $177,000 (1%)
• Teacher Professional Development: $2.3 million (9%)

State prison budgets cut $15 million, or 1%.

The Children’s Health Insurance Program is cut $1 million, or 1%, from $97 million to $96 million.

Environmental Conservation and Protection programs continue to be cut:

• $5 million cut from DCNR and DEP general fund budgets
• State parks cut 1%
• State forests cut 1.5%
• Pest and disease control programs reduced 6% to 28%

Many programs whose funding was hard fought in the 2009-10 budget negotiations see further cuts and, in some cases, elimination:

• Grants to the Arts were cut $1 million, or 9%, to $10 million
• Funding for the state’s various commissions and councils receive across the board 1% cuts
• Tourism programs hit: tourism promotion cut by 28%, zoo promotion eliminated
• Agricultural research and promotion eliminated, state support for agricultural events cut by 10%
• “Non-preferred” appropriations to private colleges, museums, and health facilities are cut by 50% or more

As the national economy claws its way toward recovery, tax revenues in Pennsylvania and other states are likely to take longer to recover. Keeping an eye on spending is important, but the Commonwealth needs to take a balanced approach to resolving the problem. Cuts alone are not the answer. The state has other options that could help fill the growing funding gap, including closing corporate tax loopholes, enacting a severance tax on natural gas, or joining the other 49 states in the union that levy an excise tax on smokeless tobacco. These measures would raise needed revenues, protect our health and environment, and increase tax fairness.