Dear  

In late December, the state Supreme Court issued its long-awaited decision on challenges to Act 13 of 2012. The act provides for an unconventional gas well fee and its administration, distribution, and allowable uses, regulates permitting for gas wells, regulates environmental matters relative to gas wells, reenacts relevant parts of the Oil and Gas Act, and provides for matters relating to municipal zoning and land use.

The court, on a 4-2 vote, declared significant portions of Act 13 to be unconstitutional, focusing primarily on provisions which provided statewide criteria for zoning and land use related to unconventional gas drilling. In the majority opinion, written by Chief Justice Ronald Castille, the court questioned whether the General Assembly can pass laws inconsistent with the constitutional mandate to protect the environment. In addition, the court sent back to the Commonwealth Court for review and disposition challenges to provisions that would have prevented doctors from telling patients about health impacts related to shale gas drilling, and a constitutional challenge that the law benefits a single industry.

On Dec. 18, Budget Secretary Charles Zogby presented the FY 2013-2014 mid-year budget briefing, offering an overview of the current budget year and projections for the FY 2014-2015 budget proposal.

The secretary noted that while the state's FY 2013-2014 budget relies on more than $20 billion in federal funding, the commonwealth got through the 16-day federal government shutdown relatively well. With a two-year federal budget agreement now in place, the prospect for another shutdown appears to be greatly reduced.

However, the commonwealth is looking at a potential reduction of $180 million in the commonwealth's April 2014 payment of the Tobacco Master Settlement Agreement owing to an arbitration decision that prior funds had been spent outside the parameters of the settlement. Because state spending for FY 2013-2014 was predicated on receipt of those funds, the state had to act quickly to minimize the potential damage, and some fund expenditures were frozen as a result.

Looking ahead to FY 2014-2015, the Secretary said that the Governor has challenged the state agencies to provide requests for funding that are level with the current year, albeit recognizing that with personnel cost increases of eight percent, level funding in reality amounts to an eight percent programmatic cut. He also indicated the Governor will not propose replacing any reduced federal funds with General Fund dollars. Other challenges for FY 2014-2015 include continued growth in pension costs ($500 million for school employees and $110 for state employees), managing spending growth in health and welfare, a reduced federal FMAP reimbursement of more than $300 million, and corrections costs.

Zogby said that the administration is looking for efficiencies to help deal with what amounts to a projected billion dollar gap, as well as any and all options to generate savings and to bring in revenue, short of tax increases. The Governor also believes in pension reform as a tool in achieving balance in 2014-2015. After several years of turning budgets upside down to look for savings, though, Zogby acknowledged there is only so far the state can go without cutting into the bone, and they will try to avoid cuts if they can, especially in education and supports for the physically and mentally disabled and senior citizens.

The state Department of Revenue has announced that the commonwealth collected about $40 million, or 1.6 percent less, in General Fund revenue than expected in the month of December, but fiscal year-to-date collections total $12.3 billion, which is $2.6 million above estimate.

Both the 2014 annual adjustment to the bid limit thresholds and telephonic quote thresholds under the municipal codes, as well as the 2014 judicial salaries against which district attorney salaries are set, were published in the December 14, 2013, issue of the Pennsylvania Bulletin.

Acts 86 and 89 of 2011 increased the bid threshold and telephonic quote threshold under the County Code and Second Class County Code to $18,500 and $10,000, respectively, with an annual adjustment for inflation. The state Department of Labor and Industry advised that the consumer price index percentage change for the prior 12-month period is 1.2 percent, and so indicated that effective Jan. 1, 2014, the new bid and telephonic quote thresholds are $19,100 and $10,300, respectively.