The state revenue package that narrowly passed the House Wednesday night uses roughly half the amount of special fund transfers as were listed in the GOP’s original budget plan introduced last week.
The change follows criticism throughout the week from state agencies and local governments, including sharp criticism over proposed withdrawals from the 911 Fund.
The fiscal package that passed 103 to 91 Wednesday night — House Bill 453 — contains a number of changes from the original Republican plan rolled out last week as the “Taxpayer’s Budget.”
Most notably, the final version pulls $625 million from special purpose funds to fill gaps in the general fund, according to the fiscal note from Wednesday’s bill. This compares to the $1.26 billion in transfers proposed in the original plan.
The change follows pushback over the GOP’s pledge that the transfers represented long-standing surpluses within the funds, and would not impinge on the operations the special funds are intended to support. To the contrary, state agencies submitted that scraping from such funds belied a misunderstanding of how fund balances work and were, in one case, illegal.
A letter sent Tuesday from the Pennsylvania Emergency Management Agency to House members stated that the planned $40 million transfer from the state’s 911 Fund was simply “against state law.”
PEMA also flatly stated that “the assumption that excess funds exist in the 911 Fund is false.” As of Wednesday night, the $40 million transfer from the 911 fund is no longer in the GOP’s revenue plan.
The state’s 911 Fund, like most of the funds at issue in the budget debate, receives income from a state tax or fee source. This money is then put into a quasi-independent fund that is controlled by a designated agency or committee to finance a specific initiative.
In the case of the 911 Fund, money is received from the $1.65 monthly per-device fee collected by communications carriers. A committee of PEMA executives, and county and municipal elected officials, appropriates the funds to assist with local 911 call system improvements.
The PEMA letter was sent after the 911 Fund’s advisory committee discovered that the budget plan would “have a direct impact on public safety” as it was written.
In their letter to the House, PEMA first noted that Act 12 of 2015, which creates the phone system funding, explicitly states that “money in the fund shall be used only for reasonably necessary costs that enhance, operate or maintain a 911 system in this commonwealth in accordance with the statewide 911 plan established by the agency.”
Further, PEMA said the state’s local 911 agencies ran a collective deficit of $22.8 million last year — spending that amount more on maintaining and upgrading their systems than what the state reimbursed.
The fact that the 911 Fund shows a positive balance on its monthly treasurer’s reports does not indicate a pool of money that is simply sitting there to be used, PEMA said.
Act 12 requires the majority of revenue collected in a quarter to be immediately distributed to local agencies based on a funding formula. A new pot of money is coming in as this allotment flows out, allowing the fund to maintain a positive balance on any given report, but they aren’t the same dollars month-to-month.
The fact that local quarterly commitments aren’t shown as grant earmarks “may give the false impression that excess cash exists,” PEMA wrote, whereas in reality the fund is much more volatile.
HB 453, as passed Wednesday night, appears to have reduced or eliminated several of the fund withdrawals originally proposed last week, including the 911 Fund item.
PEMA spokeswoman Ruth Miller said Wednesday that the agency had received one legislative inquiry since the letter was sent. House GOP Appropriations Committee representatives did not return inquiries as of press time.
The new revenue plan relies more heavily on gaming expansion and a transfer of tobacco settlement rights in order to meet the roughly $2.2 billion in additional funds needed to fill last year’s deficit and meet this year’s spending plan.
The House has ticketed its plan as a more taxpayer-friendly option to meeting the state’s needs as opposed to the Senate revenue bill from July, which would create a severance tax on natural gas drillers as well as a gross receipts tax on energy consumers.
The House and Senate will need to reconcile their plans as fast as possible, given that the state’s general fund is rapidly nearing the red because of the lack of a revenue bill. Gov. Tom Wolf, who has pushed for a stronger gas severance tax, has said the state will need to start delaying payments or limiting operations Friday in order to make ends meet.