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Governor, legislature look to fill $282 million gap in state budget
PA Chamber works to keep vendor discount for PA business After receiving only $660 million of an anticipated $850 million in federal funds, the administration and legislature are back to the drawing board hardly more than a month after finalizing the state budget. The budget was crafted around the assumption of $850 million in federal FMAP funds, and while the entire amount was in question at one point, Congress recently passed the measure, sending $660 million to Pennsylvania for Medicaid programs. That leaves a $190 million shortfall, plus an additional $90 million in funds that were lost or are needed because of the FMAP cut. During original budget negotiations, Gov. Rendell pledged to freeze line items to cover any shortfall if these federal funds were not received. While he has the sole discretion to do so, his plan relies on a pledge from the legislature to pass a severance tax on the natural gas industry by October 1. The plan Gov. Rendell recently unveiled to legislators includes $102 million in cuts to state programs and $110 million in cuts to local or county programs, $67 million of which come from state education dollars to local districts. Debate exists over the remainder of the cuts, with the governor claiming that large portions cannot be touched because of federal or other mandates. Some members of the legislature argue that certain portions can be cut, but the governor chooses not to consider them – largely in the area of education funding. Gov. Rendell does propose reducing the state basic education subsidy from $250 million to $200 million, but since Pennsylvania will be receiving $380 million in federal funds from the same law that delivered the FMAP dollars, some members of the legislature argue that greater cuts to the education subsidy should be made. The governor’s plan also assumes $70 million in the first six months of 2011 from an extraction tax on natural gas. This, too, is in question as the formal tax plan has not yet been drafted, so an amount or distribution of that tax revenue can’t explicitly be anticipated. Gov. Rendell has renewed calls for ending the vendor discount allowance – a program by which Pennsylvania companies are compensated for essentially serving as the state’s tax collector. While it’s doubtful that proposal has any potential in the legislature, the PA Chamber will work to ensure that plan remains off the table. ### Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state’s largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of Business. |
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