PA Budget

image for Budget Issue 2017

PSBA Special Report:  Gov. Wolf’s 2017-18 State Budget Proposal

 Today Gov. Tom Wolf delivered his state budget address to the General Assembly, outlining a different approach for addressing Pennsylvania’s $3 billion deficit. The $32.3 billion proposal is an increase of $571 million (1.8%) over the prior year. It includes over $2 billion in cuts and savings and avoids any new taxes. In his budget address, the governor emphasized the need to keep education as a top priority, along with efforts to fight the opioid epidemic.

For education, the new spending plan proposes an increase of $200 million, with increases in the basic subsidy and special education line items as well as early childhood programs. PSBA is pleased with the increased investment in education, noting that “The fiscal challenges of the state are real and projected revenue is falling short, which makes this proposal so significant. Education is the key to keeping Pennsylvania competitive, and this funding will continue moving the state forward in the right direction.”

The governor made mention of implementing early retirement incentives, but did not provide any details. He did not recommend changes for reform of the pension systems for state and public school employees, reform to the funding system for charter schools, or property tax reform.

The 2017-18 budget proposal calls for raising the minimum wage from $7.25 to $12 per hour, and tying it to inflation. The proposal states that the increase would “support local businesses, create new jobs and boost state revenue by roughly $95 million annually.”

Funding for basic education under the governor’s plan includes:

  • Basic Education Subsidy – The governor is proposing a $100 million (1.7%) increase to $5.99 billion. This increase will be distributed through the Basic Education Funding Formula enacted under Act 35 of 2016.
  • Special Education – The budget provides an increase of $25 million (2.3%) to $1.12 billion, with the increase distributed through the Special Education Funding Formula.
  • Ready to Learn Block Grant – The budget contains level funding of $250 million for the program.
  • Career and Technical Education – The line item is level funded at $62 million. Funding for Career and Technical Education Equipment Grants remains level at $3 million.
  • Pupil Transportation – Funding for pupil transportation is cut by $50 million (9.11%) for a total of $499 million. See more in this report for the governor’s recommendations to update the state reimbursement formula and to call on school districts to competitively bid transportation contracts.
  • Authority Rentals and Sinking Fund Requirements – The funding that is used for reimbursement to schools for approved construction projects (PlanCon) is funded at $29.7 million.
  • Early Childhood Education – The governor is proposing a $75 million increase in early childhood education to enroll more than 8,400 additional children in Pennsylvania Pre-K Counts and the Head Start Supplemental Assistance Program.
  • School Employees’ Retirement – The budget provides for an additional $240 million (11.63%) increase to $2.3 billion for pensions.
  • School Employees’ Social Security: The budget includes an increase of $37.4 million (7.60%) for a program total of $529.5 million.
  • Assessment – Funding for state and federal testing programs, including the Keystone Exams and PSSAs, is level funded at $58 million.
  • Teacher Professional Development – The budget provides level funding at $6.45 million.

The governor’s 2017-18 budget proposal also recommends:

  • Updating the Pupil Transportation Formula – The proposal calls the existing reimbursement formula for pupil transportation outdated. Additionally, the complexity of the calculation makes it difficult for districts to predict year-to-year funding allocations. Updating and simplifying the funding formula will incentivize efficiency in fleet management and better reflect actual costs, including fuel prices, district geography, vehicle utilization, and transportation of special education students, while saving taxpayers $50 million.
  • Pupil Transportation Contracts – In addition to modernizing the funding formula, school districts will be encouraged to competitively bid pupil transportation contracts. Roughly 80% of pupil transportation in the commonwealth is provided through contracted services. The budget proposal notes that a competitive procurement process will further drive down costs and reflects a continued commitment to transparency and accountability.
  • School Breakfast Programs – The budget includes $2 million in state funds to leverage and maximize up to $20 million in federal funding to enhance current school breakfast programs. Competitive grants will prioritize efforts to encourage schools to adopt alternative breakfast delivery models, including “Breakfast After the Bell” (elementary school) and “Grab ‘n’ Go” (middle and high school) breakfast in the classroom. Funds will be targeted to those schools with student populations with more than 60% of children receiving subsidized meals.
  • School Improvement Efforts – The 2017-18 Budget proposes an additional $2 million in state funding, leveraging $1 million in federal funds, for school improvement efforts at three districts serving 15 persistently low-achieving schools. The funds will be used to conduct diagnostic audits to determine specific district and school needs, develop improvement plans, and prepare for implementation of those plans in the following school year. These districts will have three years to demonstrate improved performance. For those that fail to do so, the Department of Education will assess next steps, which could include placing the school under state control or closing the school.
  • Consolidating PSERS and SERS investment offices – While the systems will remain separate, a combined investment office will be charged with reducing investment management fees, suggested to save $3 billion by 2050.
  • Tax Credits – The amount available for various tax credit programs authorized in the state will be reduced by $100 million by converting our current array of tax credit incentives into a block grant to focus these initiatives on those credits that have demonstrated the greatest return in new business investment, educational access and community development.