Saturday, November 21, 2020
Late Friday evening, the General Assembly approved the final parts of the 2020-21 state budget. This action, which completed work started with the partial budget approved in June, brings the fiscal year’s total budget to approximately $35.5 billion. The spending plan, which was approved by margins of (104-97) and (31-18) in the House and Senate respectively, reflects about a 2 percent reduction in spending from the previous fiscal year.
While many budget lines were either leveled funded or yielded some cuts to offset the economic declines associated with COVID-19, some areas did see instances of higher spending. Much of this was due to mandatory increases (ex: Medicaid, debt service, etc.) or the allocation of federal funds.
Lawmakers faced a historic $5 billion deficit this year due to the pandemic response and slowed tax revenues. In lieu of new or increased taxes or massive cuts, this budget was balanced by using $1.3 billion in remaining federal CARES Act dollars to offset state costs; nearly $500 million in special fund transfers; $2 billion in enhanced Federal Medical Assistance Percentages (FMAP); and some state Rainy Day Fund dollars.
Governor Wolf supports this budget stating it, “protects against furloughs and deep cuts to critical programs.” He is expected to sign the budget and its accompanying vehicles in the coming days.
Despite the legislature’s movement on the budget, it did not come without detractors. A significant portion Democrats and smaller group of Republicans criticized the use of federal CARES Act funds to support state operations. They argued the funds should be used to support small businesses and for grants for many frontline workers and institutions struggling during the pandemic.
Although legislators advocated for these grants and loans, they will have to wait until a second federal stimulus package is negotiated in D.C. Many anticipate this will occur in some form under the incoming Biden Administration.
Local governments may now borrow money during an emergency or extended tax deadline -- a measure put in place to protect local governments from defaulting on operational obligations. Also, any unused CARES Act funds previously designated to counties through the block grant program will now be redirected to the Department of Corrections to support its budget costs.
Other changes in the fiscal code included amendments to the way the state assesses its Alternative Energy Portfolio Standards (AEPS). The bill now prohibits Tier II alternative energy providers located outside Pennsylvania from receiving Tier II credits toward the Commonwealth’s compliance with AEPS. How this will impact utilities is still to be seen.
Additionally, past applicants for medical marijuana dispensaries received some new opportunities under a new rule that directs revoked or surrendered dispensary permits be given to the next best qualified applicant within the same region. Similar language was included in Act 23 of 2020 (Fiscal Code from the partial approved in May) for medical marijuana grower-processor licensees.
Aside from the fund transfers that also occurred in the fiscal code, there was also a unique provision added that would prevent flags other than the state flag and the United States flag from flying or being displayed in the Capitol. This was an obvious move to prevent Lt. Gov. John Fetterman from hanging an array of flags from his office’s balcony. Judging from his recent social media posts and responses, Fetterman has no intentions in complying.
Finally, one area of interest to offer close attention will be transportation. While not directly impacted in this budget, it was a topic of interest. PennDOT is noting its funds are slated to run out December 1, which prompted a request to borrow $600 million to continue project work. Lawmakers did not grant the request in the budget, so this is certainly an issue that will require attention in the coming months.
Overall, this budget package keeps state government moving during these very uncertain times -- and it does so without the strife many feared. That said, it also lays out a scenario for an incredibly difficult financial situation in the coming year. So, when it comes to the state’s fiscal future, stay tuned.