PRESS MEMO: On the PA House GOP Budget Plan to Raid Special Funds

MEMO

To: Editorial Page Editors, Editorial Board Members, Columnists, and Other Interested Parties

From: Marc Stier, Director, Pennsylvania Budget and Policy Center

Date: September 5, 2017

Re: On the PA House GOP Budget Plan to Raid Special Funds


The budget plan released today by a group of Republican House members fails in the most important task before our state today: to resolve the long-term structural imbalance between expenditures and revenues. Even if every fund transfer proposed by the Republican back-benchers today were Constitutional and legal, and even if they had no impact on the commitments made by the General Assembly to provide funding for public purposes, this one-time transfer will provide almost no recurring revenues to support the state’s on-going commitments. Even if this proposal made sense, it leaves us facing a deep deficit next year — one that would grow deeper every subsequent year.

However, the plan released today is also dishonest. It claims that it will not reduce state expenditures on programs created by the General Assembly. As far as we can tell from the sketchy details offered, that is simply untrue. The Republicans have called the state’s special funds a “shadow budget.” What they offer today is really a shadow budget cut that may well total hundreds of millions of dollars. Many, if not most, of the fund transfers they propose are larger than both beginning or ending balances of the funds in question, which means that their plan cuts spending that the General Assembly has previously approved. But, rather than openly debate these programs, the group of Republican House members have called for cutting them without acknowledging that this is, in fact, their plan.

In addition, in some cases, the plan transfers monies that have been received by these special funds by bond issues. We believe that this is illegal.

We will have more details about the specific problems in the Republican proposal later. Here we just want to point to some examples of the disparities between what the Republicans claim about their plan and the truth of the matter:

  • The proposal raids $30 million from the PA Infrastructure Bank. This will lead to a reduction in loans for qualified transportation projects of at least $17.5 million.
  • The proposal raids $25 million from the Small Business First Fund, which provides loans to small businesses to help them comply with environmental regulations or adjust to defense cutback. The balance plus new revenues from principal and interest repayments only totals $19 million. This transfer will basically end this state program.
  • The proposal raids $75 million from the Recycling Fund, which funds “recycling and planning grants, market and waste minimization studies, and public information and education activities” and also finances the cleanup of illegally deposited waste on state forest. This will lead to at least a $25 million reduction in state spending for these purposes.
  • The proposal raids $357 million from the Public Transportation Trust Fund, which receives revenue from Turnpike tolls and other sources and provides dedicated operating and capital funding for public transit. This will necessarily require about a $100 million reduction in expenditures from the Fund.
  • The proposal raids $50 million from the Hazardous Site Clean Up Fund, which finances cleanup and restoration of abandoned hazardous waste sides. This will require a reduction of $11 million in spending this year.
  • The proposal raids $100 million from Keystone Recreation Park and Conservation Fund that comes from dedicated bonds as well as tax revenues, which funds acquisitions, improvements and expansions of commonwealth and community parks, recreation facilities, historic sites, zoos, public libraries, nature preserves and wildlife habitats. This will eliminate the $95 million in spending from this fund this year.
  • The proposal raids $25 million from the Banking Fund, which receives funds from fees, assessments, charges and penalties collected or recovered from persons, firms, corporations or associations under the supervision of the Department of Banking Securities. While here the Republicans may have found a real surplus, there is a reason for it: to have funds available in case a of seizure or liquidation of a financial institution, association or credit union. It is good government to maintain this surplus.
  • The proposal raids $120 million from the Multimodal Transportation Fund, which receives revenue from Turnpike tolls, motor vehicle fees, and the Oil Company Franchise Tax in order to fund passenger rail, rail freight, ports and waterways, aviation, bicycle and pedestrian facilities, roads and bridge. This would eliminate $90 million in state spending.

There are other examples of budget cuts masquerading as the transfer of surplus funds, which we will detail soon. In addition to the shadow budget cuts found in these “fund transfers,” the Republican proposal includes two other hidden budget cuts. The first is the $189 million the Governor has put in reserve until the budget is funded. This is spending that was part of the budget many of these Republicans voted for in July. They thus propose converting a temporary action by the Governor into a permanent budget cut. The second is the roughly doubling of savings expected from lapsed funds. In many cases, funds that could not been spent in a budget year are spent in the next year for purposes designated by the General Assembly.