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Number 25
December 11, 2015

www.pacounties.org

LEGISLATIVE BULLETIN

An e-newsletter of the County Commissioners

Association of Pennsylvania

Serving Counties Since 1886

In This Issue

State Budget Bills(s) Advance

Counties Weighing Options in Six-Month Impasse

President Signs Transportation Funding Law

Center for Rural PA Releases Second Report on Heroin Epidemic

IFO Presents Five-Year Budget Outlook

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STATE BUDGET BILLS(S) ADVANCE

While several budget-related bills have been moving in the General Assembly in recent weeks, there is as of the publication of this Bulletin no resolution to the FY 2015-2016 budget impasse, now into its sixth month.

If anything, the process of getting a final budget to the Governor's desk has become even more complex, with the Senate and House approving different budget legislation early in the week of Dec. 7. The previous weekend, a deal on a $30.8 billion framework was announced by legislative leaders that included $350 million in new basic education funding as well as movement on state and school employee pension reform and reform of the state's liquor system. The Senate began the process of amending the framework budget into SB 1073 on Dec. 6, with the amended bill reported from the Senate Appropriations Committee by a 25-1 vote. The full Senate approved the bill the following day on a 43-7 vote, sending it to the House for its review.

However, the House Republican caucus at the same time indicated it did not believe it had the votes for the revenues needed to approve the framework budget and instead moved forward with a separate $30.2 billion budget proposal, amended into HB 1460 on Dec. 7 by a party line vote of the House Appropriations Committee, with Republicans in favor and Democrats against. The House sent the bill to the Senate on Dec. 8 on a vote of 115-86.

The House language in HB 1460 was short-lived, though, as the Senate quickly moved to amend the bill with the framework language from SB 1073 and sent it back to the House, leaving the House facing two budget bills with the same framework language.

The Senate and House both include rebalancing for child welfare funds (implemented by language in the Fiscal Code and Public Welfare Code, amended by the Senate into HB 1327 and HB 1322, respectively). By failing to directly appropriate fourth quarter funding, rebalancing violates children and youth statutory requirements and prevents counties from being able to plan for a full year of funding even as they deal with increased caseloads from the recent changes to child protection laws. The Fiscal Code bill attempts to address the issue by creating a special process for Department of Human Services certification of the funds.

On the positive side, the Senate proposals include the first year of a restoration of the 10 percent reduction to the seven line items in the Human Services Block Grant ($28 million for FY 2015-2016), a CCAP priority and consistent with the Governor's March proposal. The House version provided flat funding for the lines in the Human Services Block Grant.

In the meantime, the Senate is also preparing for a final vote on the other bills in the framework, including the previously mentioned Welfare Code and Fiscal Code bills. The latter contains language allowing counties, municipalities, school districts and nonprofit organizations to request reimbursement from the state for interest charges incurred as a result of the budget impasse, which was another of counties' top asks as part of the final FY 2015-2016 budget agreement.

The Fiscal Code language also creates a natural gas infrastructure development fund to grow the market by expanding end-user access, with grants available to local governments as well as hospitals, businesses and economic development organizations. While the CCAP membership supports the concept, there had been active consideration of a proposal to take the share of Act 13 impact fees dedicated statewide to local at-risk bridges - more than $20 million - to fund these grants, which counties vigorously opposed (as a priority for 2015, counties seek to preserve the current impact fee distribution structure to local governments and oppose the commonwealth reallocating any Act 13 funds for other commonwealth purposes). Instead, HB 1327 earmarks $12 million for the infrastructure development fund from dollars allocated for grants for high performance buildings under the Alternative Energy Investment Act.

Additional information is provided on CCAP's Budget News and Updates web page as it becomes available.

COUNTIES WEIGHING OPTIONS IN SIX-MONTH IMPASSE

With many counties already at or quickly nearing fiscal crisis, the County Commissioners Association of Pennsylvania (CCAP) is continuing to research legal options related to this or potential future impasses, pursuant to a motion approved by county commissioners and council members on Nov. 23 at their fall conference in Hershey. Specifically, the Association is exploring requiring the release of commonwealth and federal funds for essential services provided by counties, in the same manner that the state has used funds collected over the last five months for its own services. At the same time, counties also authorized CCAP to investigate the legal ramifications to counties and county officials of ceasing to remit funds collected at the county level on the state's behalf during an impasse, and allowing those funds to be used for essential local services.

After more than five months without a state budget, Pennsylvania's counties continue to bear the brunt of cash flow and service demand needs. Many have incurred direct costs such as interest on borrowed funds, interest and fees on payment delays, and foregone interest earnings on funds drawn from reserves. These costs are now recognized in Fiscal Code amendments pending in HB 1327 that would provide for some state reimbursement of interest costs associated with the impasse. CCAP is documenting the strategies being used to mitigate the impacts of the impasse on its FY 2015-2016 Budget Impasse page of www.pacounties.org.

PRESIDENT SIGNS TRANSPORTATION FUNDING LAW

On Dec. 4, President Obama signed into law a $305 billion, five-year federal transportation bill. The law, the Fixing America's Surface Transportation (FAST) Act, was enacted hours before the most recent short-term highway reauthorization expired, and is the first long-term federal transportation spending package since 2005. Counties have been advocating for many years for long-term surface transportation legislation and the FAST Act recognizes the critical role local governments play in transportation by making more funding available for locally owned infrastructure.

The FAST Act will be funded through gas tax revenues and $70 billion from other areas of the federal budget, including changes to customs fees, passport rules, and tapping dividends from the Federal Reserve. While the law does not include reforms to address the structural transportation funding problems, the FAST Act guarantees five years of funding for state and local governments after more than 30 temporary funding patches, with approximately $205 billion in spending on highways and $48 billion on transit projects over the next five years.

For local governments, the Act increases the amount of funding available for locally-owned infrastructure through increased funding for the Surface Transportation Program, making $116 billion available for county-owned highway bridges. This more than repairs the 30 percent decrease in funding that had occurred under MAP-21. In addition, the FAST Act protects the set-aside funding for off-system, or locally owned, bridges with more than $776 million available annually.

For additional information on the FAST Act, visit the National Association of Counties' (NACo) Transportation web page.

CENTER FOR RURAL PA RELEASES SECOND REPORT ON HEROIN EPIDEMIC

The Center for Rural Pennsylvania has released its second report on the commonwealth's heroin epidemic, examining the treatment and recovery aspect of heroin addiction following a second series of public hearings in July and August 2015 throughout the state. Several county staff shared their experiences and raised the need for additional resources at those hearings, held in Latrobe, Scranton and York.

The report offers recommendations on 11 issues raised by the testifiers, including the need to educate individuals about the dangers of drug addiction, providing a seamless transition from incarceration for individuals with addiction, restoring funding to counties for addiction treatment and recovery services, and expanding use of overdose rescue medicines. It also notes where additional evaluation, research and legislative action may be necessary.

Testimony from the Center for Rural Pennsylvania's hearings and both of the Center's reports on heroin are available on the Center for Rural PA's website.

IFO PRESENTS FIVE-YEAR BUDGET OUTLOOK

On Dec. 9, the Independent Fiscal Office (IFO) released its five-year economic and budget outlook, evaluating the demographic, economic, revenue and expenditure trends that will impact the commonwealth's fiscal situation over the next five years. Due to the current budget impasse, the analysis assumes flat spending for the current fiscal year except for mandatory increases, and the report will be reissued after the FY 2015-2016 budget has been enacted. Based on the current assumptions, the IFO report predicts the state will face a shortfall of $1.1 billion for FY 2015-2016, and $2.4 billion for FY 2016-2017.

According to the IFO, the imbalance is created by factors such as increased pension contributions and economic growth constrained over the next decade by contraction of the working age population. The IFO also noted an expected 32 percent increase through 2025 in individuals ages 65 and older, causing restrained growth in tax revenues and increased state expenditures associated with long-term care. The analysis further predicts that under current laws and policies, state expenditures will outpace revenues through FY 2020-2021, with tax base expansion being insufficient to maintain the level of real services provided in each fiscal year.

The report in its entirety is available for download on the IFO's website at www.ifo.state.pa.us.

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