As expected, Governor Wolf’s 2017-18 budget proposal, which he announced on February 7, 2017, included several initiatives aimed at addressing a projected $3 billion revenue shortfall.
Here are the major takeaways from the Governor’s plan:
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Health and Human Services Consolidation
The Governor’s plan outlined the merger of several health-related departments into a unified HHS Department. The mergers include the Aging, Drug and Alcohol, Health, and Human Services departments. Wolf said the consolidation will allow the State to better serve residents by streamlining shared services.
If passed, the proposal would boost the 2017-18 HHS budget by about 6 percent to $12.9 billion. That includes a $26.2 million allocation to move PA residents with intellectual disabilities and autism from waiting lists into service programs.
The plan also directs an extra $34 million to fund behavioral health and substance abuse services, bringing its total funding to $878 million. This increase is in line with Wolf’s focus on addressing the State’s current heroin and opioid addiction issues.
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Department of Criminal Justice
The Governor is also proposing there be a Department of Criminal Justice combining the Department of Corrections with Probation and Parole to again increase management and fiscal efficiencies. Furthermore, the approach signals a belief in the benefit of a unified and comprehensive approach to the mission of criminal justice.
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State Workforce Reduction
The proposed budget will cut 3,442 positions from the State workforce. Much of that pruning is expected to come from incentivized early retirement options, agency consolidations, the merger of information technology and human resources operations across the Commonwealth, and the elimination of dozens of unfilled positions. Agencies will also be encouraged to be strategic and limit hires to essential positions.
Wolf’s early retirement offer is intended to not only help shrink the size of Government but to also address the issue of an aging workforce. The initiative will be tailored for workers under the Governor’s jurisdiction who are eligible to retire within five years. Hundreds of State employees may qualify for the option.
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Education Funding Boost
The plan proposes a $100 million increase in basic education funding, along with an additional $25 million for special education. Additionally, it includes an $8.9 million increase in funding for universities in the PA State System of Higher Education. If passed, total State spending on education could reach $9 billion-a record high. However, independent institutions of higher education (neither State-owned, State-related, nor community colleges) that receive Institutional Assistance Grants will now be expected to provide matching funds for grant contributions received.
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Tax Expansions
While Wolf’s plan avoided broad tax increases, it proposed $1 billion in tax expansions, with the biggest chunk coming from a new 6 percent sales tax levied on computer-based services. This expansion of the State sales tax is expected to boost State coffers by $330.3 million.
The Governor also renewed his proposal for a natural gas severance tax to boost revenue, citing an estimated $293.8 million funding stream for the FY2017-18 budget.
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Transportation Funding
Wolf’s plan calls for a marginal increase, from $8.33 billion to $8.71 billion, on transportation spending. Interestingly, it earmarks about $15 million for “highway systems technology and innovation” starting in 2018/19 so the intent is to lay the groundwork for future allocations. Public discussions around this have been minimal, but indications may imply that Pennsylvania is committed to work towards being a leader in smart infrastructure and automated technologies.
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Economic Development Grants
As part of the Governor’s focus on “Jobs That Pay,” Wolf included $11 million for Smart Cities grants. These funds, if approved, would be used to develop a network of corridors to make transit easier between neighborhoods and major centers of employment and health care.
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What didn’t make it? - Gaming, Liquor, and Pensions
Noticeably, Wolf’s budget proposal didn’t signal any major funding shifts on these hot issues. These important, pressing, and in the case of State Pension Reform, even urgent, items were omitted almost completely from both the Governor’s address and budget summaries. These topics, especially State pensions, make up the large elephants in the room and, to be certain, as budget talks commence, these topics will still be the main sources of dialog and debate. All are all pieces of a very complex puzzle that is our Commonwealth budget. Ultimately, the unfunded pension liability, further liquor privatization reforms and the potential of iGaming will be discussed as further and alternative considerations in this year’s fiscal budget.
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