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Corbett Admin Warns of Cost Hikes and Fewer Federal Dollars

The Corbett administration warns that government programs cannot count on the state to replace declining federal dollars.

By Eric Boehm | PA Independent

HARRISBURG – An annual set of budgetary guidelines issued by the Corbett Administration to all state agencies and departments this month spells out the fiscal challenges facing Pennsylvania and warns that government programs cannot count on the state to replace declining federal dollars.

Though the 2012-13 fiscal year is less than two months old, the recently published administrative circular is already looking ahead to expected cost increases in next year’s budget, forcing many parts of state government to tighten their belts even further. The document warns that budget planning for 2013-14 should be predicated on the fact that Pennsylvania’s economy is still in a period of recovery from the “Great Recession.”

 

Gov. Tom Corbett signed the current budget less than two months ago, but the administration is already looking ahead to 2013-14.

“Continued increases in pension obligations and other cost drivers, such asMedical Assistance, prison costs and debt service obligations, are projected to consume an even greater share of the commonwealth’s budget next year,” the guide warns.

Pension costs are projected to climb by about $600 million next year, from $1.6 billion in the current budget to more than $2.2 billion. That’s part of an expected $1.7 billion increase in mandatory spending for 2013-14 on pensions, debt service, welfare payments and corrections costs, according to projections from the state’sIndependent Fiscal Office, which is similar to the federal Congressional Budget Office.

In public comments, Gov. Tom Corbett has likened those automatic cost-drivers to a “Pac-Man” eating an ever-larger portion of the state budget and squeezing out discretionary spending.

Due to those mandatory increases, the administration is telling agencies not to assume funding increases for the 2013-14 fiscal year, and advising them to evaluate current programs and recommend changes to reduce costs and increase efficiency.

The Department of Revenue is developing revenue estimates for the 2013-14 budget year.

Nathan Benefield, director of research for the Commonwealth Foundation, a free market think tank here, said the budget guidelines were an acknowledgement of a “four-alarm fire” in the state budget.

“It’s an acknowledgement that those costs are going to result in either an increase in taxes or better prioritizing of spending,” Benefield said.

When it comes to Medicaid, in particular, the state should be pushing for more flexibility from the federal government to implement funding reforms before the program drives Pennsylvania into bankruptcy, he said.

Sharon Ward, executive director of Pennsylvania Budget and Policy Center, a liberal think tank here, said the tone set by the budget guide was no surprise.

“This administration has a track record of proposing budgets that are more fiscally conservative than necessary, then coming back later to find the money is really there,” Ward said.

She said the expected increases in Medicaid costs could be lessened if the economy picks up, and warned against giving away potential revenue in the form of tax credits, a policy the Corbett Administration has pursued on several fronts.

Despite some positive signs in the first half of the year, the state economy seems to have stumbled during the summer, as unemployment in Pennsylvania climbed from 7.4 percent in May to 7.9 percent in July.

In January, the Independent Fiscal Office  projected 1.6 percent growth in the state’s economy during 2012 and 2.4 percent in 2013.

It estimated unemployment in Pennsylvania would remain above 7 percent into 2014.

The Corbett Administration budget circular tells key agency and department heads that Corbett’s first two budgets were intended to rein in spending and streamline governmental operations, but the next step “focuses our limited resources on the future and builds a brighter tomorrow.”

All state agencies are told to submit 2013-14 funding requests at levels that do not exceed their current budgets.

The budget rider also addresses expected decreases in federal dollars for some parts of the state budget.

Agencies that lose federal funding should not request additional state aid to make up the difference, but instead should “adjust program operations and priorities” to reflect the new, lower level of funding, the guide states.

Benefield said that policy made sense because excess money to be used in those instances doesn’t exist, but Ward argued the administration should not use a blanket approach to determining what areas get funding to offset federal cuts.

Robert Sentner August 28, 2012 at 11:52 AM
Pension reform and stop with the unfunded mandates please.
Amend August 28, 2012 at 12:58 PM
Pension reform may be part of the equation, but at 2.2 billion the DOC represents about 12.5% of the total state budget. Since 1980, Pa's state prison population has risen 500% even tho crime rates and the state population has remained relatively stable. As a state, we now incarcerate approx. 50,000. That doesn't include county and local inmates. Ask yourself how that can be and why it's acceptable. We should be looking at prison reform before taking money from hard working public sector employees.
Crestor Januvia August 28, 2012 at 02:52 PM
It's acceptable because of all the bums constantly committing crimes. Don't want to go to jail? Don't commit a crime.... that's tough for some of our fine state resident. Hard working public sector employees? Everybody else works hard too, but we don't get gold plated pensions. Why should everybody in the state continue to pay for benefits we don't get. The world has changed, but never for these lazy union bums who continue to get paid off by the Democratic party.
Amend August 28, 2012 at 03:08 PM
@Crestor- explain how incarceration increased 500% while the state's crime rates and population remained almost the same. The state's approach towards crime and incarceration is penny wise yet pound foolish, but your more focused on taking benefits from employees simply because you don't enjoy them yourself. That smacks of ignorance and bias. We can bloat the prison system all we want cuz it feels good to lock up human beings, but it's lazy police, fireman and teachers who are the problem.
Crestor Januvia August 28, 2012 at 03:13 PM
Again.... people supported on the public dole should not enjoy benefits far in excess of the public who supports them. That's just common sense to anybody but a liberal. How about you tell me why it's up 500% ? Did it increase during Rendells administration? Maybe we decided to lock up habitual criminals for longer periods of time. Federal sentencing guidelines also bring longer and deserved terms. For you it's all about the public employees and criminals. Let's make sure we focus on them. Me? I'll focus on 15% unemployment.
Amend August 28, 2012 at 03:45 PM
@Crestor- are you implying unemployment is currently 15%? last I read, the state's was hovering around 8%; which is about what the national average is. Further, you attempt to reduce the dialog to a contest. I support the idea that people who work hard should enjoy the rewards of their efforts. I believe our structure of government, and how it treats it's employeees should be the seen as a model of civility, not one of slave labor. The reason you don't have those benefits in the private sector is because you demonized unions and have no collected bargaining. Competition in the workforce,, which causes workers to give up benefits out of fear, keeps you where you are. That, and a lack of desire to organize your coworkers towards your common good. Collectivism isn't your enemy.
Amend August 28, 2012 at 03:52 PM
..and anyone not questioning why incarceration rates shouldn't complain about wasteful spending. If crime rates have remained steady yet incarceration rates have exploded, something is amiss. That's just math. It has nothing to do with being soft on crime. A true conservatuve would question that anomaly; as it stands out as a red flag that a paradigm is failing. A true conservative would be concerned that citizens weren't being served properly due to that anomaly, and that something should be changed; nevermind the humanistic notions of removing people's freedoms.
John Fox August 29, 2012 at 06:41 PM
I think the reason incarceration rates are up, yet crime rates stay consistent has to do with the fact that you stay in jail for longer then just a few days. Someone who is in jail for 20 years contributes to the incarceration rate for 20 years, but the crime rate for only one of them... just saying

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