That’s A Wrap – Sort Of…

by Buchanan Ingersoll & Rooney PC

Let freedom ring! There has been lots of drama in Harrisburg this week as the legislature and the governor wrangle over the final days of the fiscal year. In truth, the budget saga is not quite over yet, but both the House and the Senate have adjourned, at least for the holiday weekend, giving us all a chance to catch a deep breath and perhaps enjoy a moment or two celebrating the privilege of living in a democracy.

Of course, every privilege comes with responsibility. There is still unfinished business that will pick right up again next week, when the Senate reconvenes on Tuesday. The budget bill remains unsigned by the governor. In a move late Wednesday, a pension bill was moved from the House Human Services Committee – perhaps as an indication to the governor that there is a willingness to move on his stated priority.

Last night, the House passed H.B. 278, amending the Fiscal Code. This bill, sponsored by Rep. Matt Baker (R-Bradford), started out as a five-page bill to set reimbursement rates for inpatient and outpatient services provided by critical access hospitals, and it ended up a 112-page handbook for implementation of the 2014-2015 state budget.

H.B. 278’s maneuvering through the General Assembly has been anything but easy. The bill, containing its critical access provisions, had been stuck in the Senate Public Health and Welfare Committee since last October. When a vehicle (a bill that is far enough along in the process that amending it is more efficient than introducing a new bill) was needed to enact the provisions of the Fiscal Code necessary for the new fiscal year’s budget, H.B. 278 took center stage. It was amended in the Senate to contain the upper chamber’s version of what was necessary to move into the new fiscal year and sent back to the House. The House, however, not sharing the Senate’s vision in its entirety, amended the bill and sent it back to the Senate, where it will need one more (and hopefully last) concurrence vote, which will presumably will get tied up with a big red bow on Tuesday.

In the meantime, here are some Fiscal Code highlights:

  • Authorizes the lease of state lands for the extraction of natural gas, a proposed revenue raiser in Gov. Corbett’s budget;
  • Requires the Department of Environmental Protection to use funds to promulgate separate conventional and unconventional oil and gas regulations;
  • Allows the Liquor Control Board to reduce the license fee for bars and taverns that apply for a license under the Local Option Small Games of Chance Act, in order to increase applications for these licenses, and subsequently yield additional revenue for the state;
  • Provides for the establishment of a rural regional community college. The college will be located in a multi-county rural area that is underserved by comprehensive community college education and work force development;
  • Drives out the basic education funding subsidy and the special education funding subsidy;  and finally
  • Suspends transfers to Budget Stabilization Reserve Fund. The Fund, also known as the Rainy Day Fund, holds a reserved amount of money that would be used in order to continue typical operations of the Commonwealth. Typically, money is transferred through line-item budget appropriations or designating portions of budget surpluses. However, now all transfers to the Rainy Day Fund will be suspended.

While we are at it, there are some additional highlights worth mentioning as we (almost) close out “budget month.”

  • No new business taxes. In a tight, tight fiscal year, businesses were sparred any tax increases – including the often-discussed severance tax on the Marcellus Shale industry.
  • Education funding is on the increase.  The current budget document replaces the $100 million Accountability Block Grant program with a $200 million Ready-to-Learn Block Grant program, which gives the schools spending flexibility on their allocations. There is $20 million more for special education, $10 million more for preschool and $10 million for school construction and renovation projects. The basic education subsidy remained flat-funded.
  • For the third year in a row, funding for the state system universities remained flat-funded, which could translate into tuition increases. Stay-tuned – the State System of Higher Education board meets next week.
  • There will be no state worker furloughs this year; some will get a two-percent mid-year raise.
  • The State Store system remains intact, as privatization efforts are once again thwarted.

Also of interest this week:

Philadelphia Cigarette Tax

The House approved legislation this week to allow Philadelphia to increase its cigarette tax to be used to assist with the struggling financial situation of its schools. In a rare, bi-partisan vote, H.B. 1177 was approved 119-80 to authorize the city to increase the tax by $2 per pack, which is expected to raise $83 million for the ailing school district.

The Senate approved the bill earlier this week by a vote of 38-12; it was amended in the House, so it will need to go back to the upper chamber for concurrence. Among the provisions of the bill that earned it Republican support is a charter appeal process to the Philadelphia School Reform Commission. The right of appeal added to H.B. 1177 is identical to the right of appeal for charter school applications in every other school district.

Gov. Corbett wasted little time before showing his support for the bill. In a statement issued late Wednesday, he called on the Senate to approve the legislation to provide the school district with “much-needed relief.” You might recall that earlier in the week, the governor was working to earn the Philadelphia House Democrats’ support for public pension reform in exchange for the cigarette tax.

Shortly before the cigarette tax bill passed the House, the pension reform bill was moved out of House Human Services Committee to the House floor. However, Chairman Gene DiGirolamo, (R-Bucks) denied the move was part of any deal.

Capital Budget Bill Goes to Governor

Among the least controversial moves of the week, the Capital Budget bill, H.B. 2355, was passed on concurrence in the House on Wednesday. The bill authorized $725 million for transportation and economic development projects as part of the Redevelopment Assistance Capital Program, or RACP, which funds projects that cannot get funding from other state programs. Usually these projects have a regional or multi-jurisdictional impact and include projects that have a cultural, historical, recreational or civic significance.

Once the Senate signs the bill, it will be on the Governor’s desk for signature.

Roll Call Please…

Who voted for what?  Find out by following these links:

H.B. 278 (Fiscal Code)

Senate—Final Passage:

House—Concurrence in Senate amendments

H.B. 1177 (Cigarette Tax)

Senate—Final passage:

House—Concurrence in Senate amendments

In Case You Missed It:

Inquirer: Corbett: All options ‘on the table’ in budget battle:

Patriot News: PA budget theatre may extend to next week:

WHYY: Pension vote delayed until fall while Corbett reviews the budget:

AP: After battle, House OK’s Philly cigarette tax:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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