Government Affairs Update	Print Issue
September 7, 2010, Volume 57, No. 02

Penn’s Commonwealth Appropriation for FY 2010-11

The Pennsylvania House (vote of 192-9) and Senate (50-0) approved Penn’s non-preferred Commonwealth appropriation bill (HB 2296) for FY 2010-11. The Governor subsequently signed the bill into law as Act 14A of 2010. The bill provides a total of $30,002,000 in funding to the School of Veterinary Medicine for two line items - $29,754,000 for Veterinary Activities and $248,000 for the Center for Infectious Disease (see chart). This represents essentially level funding over FY 2009-10 when the School received $30.0 million. It should be noted that this budget eliminated direct appropriations for all private state-aided higher education institutions except for Penn. State-owned and state-related public universities, as well as the community colleges, were kept at level funding over last year, a condition of the federal ARRA maintenance of effort requirements for the state.

The House and Senate also approved the $28.05 billion Commonwealth General Fund budget (HB 2279) and Governor Rendell signed the bill into law on July 6.  HB 2279 includes $6,596,000 in funding for Penn’s physician practice plan in the Department of Public Welfare, money used to support the School of Medicine, Cardiovascular Studies and Penn’s Dental Clinics. This amount represents a 3.0 percent decrease below last fiscal year.

HB 2279 also includes funding for Penn’s Museum of Archaeology and Anthropology through a new funding line item in the Department of Community and Economic Development entitled “Cultural Preservation Assistance.” Funding amounts are not yet finalized, but it is estimated that the University Museum will receive approximately $100,000 through this program. The University Museum had previously been funded through Penn’s non-preferred appropriation.

Update on Federal Appropriations

Although the House and Senate budget Committees have made some progress on appropriations legislation for Fiscal Year 2011, the likelihood is that most, or even all, appropriations bills for FY 2011 will not pass the Congress this year. Most observers believe that the only bills which have any chance to pass Congress are bills funding national defense and homeland security programs. It is expected that Congress will pass one or more Continuing Resolutions to fund the government through the November elections.

Such a Continuing Resolution would fund federal programs at the same levels at which they were funded in FY 2010 until Congress can act to pass legislation funding federal agencies. This would mean that proposed increases in funding for NIH, NSF, and other science agencies would be in limbo until Congress passes either individual spending bills (highly unlikely) or an Omnibus Appropriations bill which would contain funding for whatever federal agencies have not been funded through individual appropriations.

At press time, the Senate Appropriations Committee has passed nine appropriations bills. None have come before the full Senate yet for its consideration. Those bills have closely tracked the Administration’s proposals for increased funding for science and research and have proposed a 3.2% increase in funding for NIH and a 7.6% increase in funding for NSF among others. It is expected that funding for the National Endowment of the Humanities will also track the Administration’s recommended reductions in funding for that agency.

The House has so far passed two appropriations bills dealing with military construction and transportation and housing. No other bills have yet passed the House Appropriations Committee.

Both the House and Senate appropriations committees have indicated that they expect to fully fund the Pell Grant program for FY 2011. It is expected that that program will need an additional injection of about $5 billion to ensure grant levels for students for the coming academic year.  However, no source of funding has been identified so the fate of the program remains unclear.

Thus, it is unlikely that Congress will deal with appropriations in a comprehensive manner before the November elections. Both the House and Senate have indicated their intention to call a lame duck session in November. The outcome of the elections will determine what actions Congress takes at that time.

Update on City of Philadelphia Budget

The Philadelphia City Council passed a $3.8 billion operating budget for the City in May of 2010. This budget included new taxes on some tobacco items, an increased trash fee for small commercial property owners and a 9.9 % across-the-board real estate tax increase.

During the budget debate, Mayor Michael Nutter and members of City Council disagreed on the size of the budget surplus, known as the fund balance.  The Mayor wanted a $64.4 million fund balance but City Council only approved $42.5 million. The purpose of the fund is to cover unexpected expenses like the clean-up of large snow storms. It also helps the City with its cash flow while waiting for revenues to flow into the City treasury.  The Government Finance Officers Association recommends a fund balance of 5% of either the projected revenues or expenses of a city. For Philadelphia, that would mean a fund balance of about $190 million. The City’s current fund balance is about 1.7% of its revenue and expenses.

The Mayor recently submitted the City’s Five Year plan to the Pennsylvania Intergovernmental Cooperation Authority (PICA) which includes $47 million in additional cuts over the $44 million already made in the FY 2011 budget. The results of these cuts mean that approximately 339 positions have been eliminated along with rolling closures of fire companies and cancellation of police recruitment classes.

There have been some bright spots, however, in the City’s fiscal picture. The Tax Amnesty program, the City’s first in over two decades, exceeded expectations by bringing $40 million into the City coffers this summer. Also, PICA’s monthly update of City tax revenues for the fourth quarter of FY 2010, showed some growth, albeit slow, in the City’s wage tax collections possibly indicating some job growth. This number, coupled with a very modest decrease in the sales tax revenue, points to the possibility that Philadelphia’s local economy is stabilizing after two years of significant downward pressure.

—Jeffrey Cooper, Vice President
Government and Community Affairs