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Number 21
October 16, 2015

www.pacounties.org

LEGISLATIVE BULLETIN

An e-newsletter of the County Commissioners

Association of Pennsylvania

Serving Counties Since 1886

In This Issue

Counties Working to Survive Impasse

Budget Impasse Continues After Vote on Tax Proposal

Media Reporting on Quiet Crisis

Counties Discuss Transportation Challenges

Senate Approves County Pension Law Fix

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COUNTIES WORKING TO SURVIVE IMPASSE

As the budget stalemate passed another milestone on Oct. 9, exceeding the 101-day delay from 2009, CCAP issued a media release with three simple points. First, in the face of a mounting fiscal crisis, counties are doing all they can to maintain vital public services, especially for those most vulnerable; second, the budget impasse needs to be resolved promptly; and third, no matter when it is resolved, the most important need is for the budget to be sufficient to meet local services demands, with the state restoring its obligations to local services funding.

Counties have already deployed a variety of strategies to mitigate the impacts of the impasse, which CCAP is documenting on its FY 2015-2016 Budget Impasse page of www.pacounties.org. For instance, some counties have stopped payments to the providers with whom they contract until state funds are available for FY 2015-2016, while others are planning for cuts or decreases in programs to help sustain cash flow. Some are opening lines of credit or using revenue anticipation notes to maintain services, or using county property tax dollars to support programs typically funded with state dollars. Other adjustments, such as reductions in staff pay, furloughs or layoffs, hiring freezes, or curtailing travel and non-critical purchases, are also under consideration. Because every county is unique in its financial circumstances, some counties have already reached a point of catastrophic fiscal and administrative difficulties, while for others that time is fast approaching.

While counties need prompt resolution of the impasse to work their way out of the fiscal and administrative crisis it is causing, the solution must include sufficient funding for local human services needs. Balancing the budget cannot rely on cuts to these critical lines. Counties have already borne more than a dozen years of cuts and stagnant funding in critical human services funding.

Specifically, counties are asking that the proposed rebalancing of children and youth funding be taken off the table. The proposal, which would shift appropriation of $172 million in FY 2015-2016 child welfare funds to FY 2016-2017, is not a simple change in accounting methodology. Instead, it violates Act 30 and would prevent the Department of Human Services from being able to allocate a full year of funding for county child welfare services. Without predictable funding levels, counties will find it extremely difficult to contract for services, to budget, and ultimately to serve children and families.

Instead, as a priority for 2015, counties seek restoration of the 10 percent reduction to the seven line items in the Human Services Block Grant, which affect services in all 67 counties. County human services are part of the core functions of state government and are necessary to maintain the health, well-being and economic viability of our families and our communities. This restoration is critical to address the historic pattern of underfunding across human services line items. Without appropriate funding from the state and federal government, counties are required to either curtail vital services for the commonwealth's most vulnerable citizens or increase local property taxes for residents and businesses.

Counties are dedicated to their important role in human services delivery, and remain committed, despite the impasse, to providing county residents with the services they need. However, any strategies they use to do so come with a cost that will have longer term impacts, and counties seek a prompt resolution that is adequate to meet program costs.

BUDGET IMPASSE CONTINUES AFTER VOTE ON TAX PROPOSAL

Following Gov. Wolf's veto of legislation to provide a stopgap budget for FY 2015-2016, House Majority Leader Dave Reed (R-Indiana) and Senate Majority Leader Jake Corman (R-Centre) announced their intention to hold a vote on the House floor on Oct. 7 on the governor's tax proposals. Gov. Wolf, in a press conference on Oct. 5, emphasized his position that the state's budget needs to be balanced to prevent even more serious cuts in the future. Without new revenue, he said, most of the $2.3 billion structural deficit he identified for FY 2016-2017 would have to come from education or human services, and would likely also lead to property tax increases and further credit downgrades.

The governor offered a modified version of his original tax proposal for the House's consideration, which was contained in amendment A03468 to HB 283. By comparison, in March the governor called for a five percent severance tax on natural gas, plus 4.7 cents per Mcf, with the current impact fee coming off the top, capped at $225 million. Amendment A03468 instead would have left the current Act 13 impact fee in place exactly as is, and added a 3.5 percent severance tax on top, plus 4.7 cents per Mcf, and offered additional language to guarantee leaseholders a minimum 12.5 percent royalty payment. All revenues from the severance tax, according to the amendment, would have been designated for education.

In addition, amendment A03468 would have increased the personal income tax (PIT) rate from 3.07 percent to 3.57 percent, rather than the 3.7 percent in the governor's original proposal, to provide expanded school property tax relief to seniors, people with disabilities, and veterans, while increasing the income level to qualify for tax forgiveness from the PIT. The amendment did not include an increase in the sales tax, nor an expansion of the base on which the sales tax is levied, as contained in Gov. Wolf's original budget proposal.

Amendment A03468 failed on the House floor by a vote of 73-127; all Republican legislators voted against the amendment, while all but nine Democratic legislations voted in favor of the amendment. Republican legislative leaders have pointed to the vote as an indication of the lack of support for a broad-based tax increase in the General Assembly and said that other potential sources of revenue, such as privatizing the state's liquor system, should be considered first. Gov. Wolf has indicated that the vote demonstrates recognition that the budget deficit is a problem and represents a strong commitment to fix it. He has also told the media that he does not intend to back down from his insistence that the budget include measures that address the state's long-term deficit.

Since the vote on A03468, legislative leaders from both chambers and both parties are reportedly meeting to see whether they can find common ground on a legislative budget proposal. Media reports have also speculated that Internet gaming may be part of future discussions as a way to generate revenue, although no new budget proposals had been offered as the Bulletin went to press.

MEDIA REPORTING ON QUIET CRISIS

In addition to CCAP's continuing documentation of the effects of the impasse, more and more media outlets are also now focusing on the situations in their local communities. An up-to-date list of local media reports can be found on CCAP's FY 2015-2016 Budget Impasse page. Also, a link to a comprehensive report of the impacts on county budgets released Oct. 7 by Keystone Crossroads, a special ongoing collaboration by four public newsrooms, is available on the page as well.

COUNTIES DISCUSS TRANSPORTATION CHALLENGES

On Oct. 7, Beaver County commissioner Joe Spanik and Lawrence County commissioner Steve Craig shared their thoughts on resource challenges and innovative changes to local transportation systems in a Pittsburgh hearing convened by the Senate Transportation Committee.

Spanik and Craig both discussed how important an effective transportation system is to the commonwealth for the efficient and safe movement of goods and people, and to provide economic stability and growth. Spanik, who serves as chair of CCAP's Community and Economic Development policy committee, noted that the state's enactments of Act 13 of 2012 and Act 89 of 2013 have provided local governments with much needed funding for transportation planning and upgrades, and that a dedicated federal funding source for transportation is also critical. He also shared that Beaver County is participating in the next round of Act 89's local bridge bundling initiative, which will save time and money by using common design and engineering to restore or replace a number of the county's bridges.

Craig focused his comments on the Southwestern Pennsylvania Commission, a ten-county forum for collaboration, planning, and decision-making which he chairs, and the Commission's role in developing the long-range transportation plan and the comprehensive economic development strategy for the region. He concurred with the challenges presented by the instability related to the federal transportation funding structure and the region's ability to develop a long-term plan. However, Craig also said the region has seen the positive effects of Act 89, including increased liquid fuels funding to local governments, the new multimodal transportation fund and the rapid bridge replacement program.

Their written testimony is posted to the CCAP Testimony and Advocacy web page. The entire hearing agenda, list of presenters, and video from the hearing is posted to the Senate Transportation Committee website.

SENATE APPROVES COUNTY PENSION LAW FIX

The Senate voted unanimously on Oct. 14 to approve HB 239, sponsored by Rep. Keith Greiner (R-Lancaster), to clarify language in the County Pension Law to allow counties to grant a limited cost-of-living adjustment (COLA) keyed to just the most recent year. The vague language of current law, which obligates counties at least once every three years to examine whether to grant a COLA, has led to interpretation that any COLA must be retroactive to the last time a COLA was granted. For most counties, the COLA is infrequently granted, and so going back to the last COLA and compounding forward can yield an unsupportable increase in the benefit. The limited COLA under HB 239 would instead allow a county with fund capacity to grant adjustments to monthly benefits without them being excessive or imperiling the solvency of the fund. House Bill 239 now returns to the House for a concurrence vote on Senate amendments.

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