PENNSYLVANIA HOME OF THE “BLUE-LINE” SPECIAL

In the June Scorecard we predicted that July would come and go without the state having adopted a budget for the fiscal year starting July 1, 2009. Under the state constitution, a balanced budget must be in place by June 30th for the state to have the authority to spend out of the state general fund.

And as we have reported for some time, the main stumbling block to adopting a budget is the basic education funding subsidy, the amount of money the state provides to offset the local property tax, to run the public schools. Democratic Governor Ed Rendell is adamant. He wants to give the public schools an additional $1.3 billion. The Republican Senate has been every bit as steadfast in its refusal to raise taxes in order to balance the budget with an education subsidy at that level.

Pennsylvania still does not have an actual budget, so July 17th was the last payday for state workers. So Rendell set up a plan for banks to offer loans to state employees to counteract missed paydays, as budget negotiations went into overtime. The announced arrangements with 10 banks and credit unions provided funds to 69,000 state workers who missed paychecks. One option from the Pennsylvania State Employees Credit Union gave eligible state employees a line of credit from which they can draw up to $1,000 on what would be their payday. There will be no interest on that loan until 60 days past the budget signing, when that rate will rise to 3.9 percent. Other options include one from Citizens Bank that would grant applicants credit cards and checks to use on a loan of up to $15,000 with no interest for six months.

Among the bills Pa. is delinquent on is a second round of state subsidy payments to school districts. They’ve already had $424 million in state subsidy payments delayed, and it looks like Pennsylvania’s school districts are going to have to start fall classes without a second round of subsidy payments totaling $876 million. With school districts left having to do without $1.3 billion of subsidy payments, many school officials are digging into reserves, borrowing money and holding off spending as they closely watch their cash flow to make sure they can meet payroll and other expenses.

Also, last year’s WAMs have been delayed in the hopes of pressuring members of the Assembly to make a deal. Many legislative leaders in both parties say Gov. Ed Rendell reneged on promised program funding during the just-ended fiscal year. Rendell denies that charge, saying the promised funding for specific projects – estimated to be from tens of millions of dollars to more than $100 million – was deferred due to cash-flow concerns driven by the delayed state budget. The governor said the funds would be released once a new state budget was passed.

But most tragic of all, PHEAA disbursements are up in the air until higher education funding is settled. The Pennsylvania State University has sent out tuition bills, with other schools likely on a similar fiscal timeline. With the House Democrats isolating $1.3 billion in higher education funding from the general budget, it is unclear how much of that bill students will have to pay out of pocket. “That’s an issue for the schools,” said Keith New, spokesman for the Pennsylvania Higher Education Assistance Agency (PHEAA). “We can’t disperse the funds until the funds are released.” And with no budget compromise in sight, it looks like there could be a hold-up in PHEAA’s plan to release funds in late August. New didn’t say when PHEAA would send out notices about potential differences in their awards due to changes in the agency’s funding. He did, however, encourage students to check the status of their scholarship online. PHEAA notified applicants in May of their projected financial aid based on the $407 million the agency received last year, which was dispersed to 165,000 students. With their college funding in limbo, most students and parents will start school with a huge financial cloud over their heads. Way to go Pa. government.

Because the budget stalemate continued past the banks’ willingness to be pay-day lenders for the state workforce, Rendell made SB 850 a blue-line special. Due to the lack of progress, Gov. Rendell asked the House to approve Senate Bill 850 – a measure he then used his line-item veto power to decimate so it pays only for bare-bones state operating costs. He vetoed all but about 75 lines of the 700-line budget to keep the pressure on the Legislature. Rendell, by asking the House Democratic leadership to pass the $27.3 billion Senate Bill 850, created a Pennsylvania “blue-line,” special. Rendell then line-item vetoed down to an $11 billion state spending plan that would allow the state to cut checks to most of its employees for their regular and back pay.

Rendell de-funded the legislature in the stopgap budget by slashing the entire $288.2 million in legislative appropriations. But don’t worry Scorecard fans, the four legislative caucuses have about $225 million in their reserve accounts to continue paying staff and resume checks to themselves.

BONUSGATE
Bonusgate pretrial motions were filed and decided while we were on hiatus. Although, pretrial motions were filed for the 12 people tied to the House Democratic Caucus and charged as part of the investigation into an alleged scheme to pay bonuses to caucus staffers for political campaign work, the most interesting motions were filed by lead defendant, former Rep. Mike Veon, who has adopted a “selective-prosecution” strategy.

With this strategy, a defendant is in effect admitting they committed the acts alleged, but they are being singled out, because everyone is doing it, but others are not being charged because of favoritism. To establish his defense, Veon’s lawyers subpoenaed, House Minority Whip Mike Turzai, Bradford Woods, Rep. Mario Civera, Rep. Rick Geist, Rep. Merle Philips, Rep. Nicholas Micozzie, Rep. Dick Hess, Rep. Paul Clymer, Rep. Bill Adolph, and our very own Sen. David Argall.

The judge hearing the case, Dauphin County Common Pleas Judge Richard A. Lewis, made several rulings, including that one of those 12 people – former Beaver County state Rep. Sean Ramaley – would get a separate trial from the others and that it would start on Sept. 21, while the other defendants would go on trial on Jan. 19, 2010. The Judge also ruled the Bonusgate prosecutions are not politically motivated. He said the defendants who raised the argument that they were targeted for political reasons “cannot point to any specific evidence that they were singled out for prosecution based on a constitutionally impermissible reason.” “The bald assertion of discriminatory intent is wholly insufficient to overcome the presumption of prosecutorial propriety where probable cause exists to believe violations of our criminal law have occurred,” wrote Lewis in a five-page opinion.
(BTW – Bonusgate legal fees are up to $8.2 million. In these times of tight funds, it’s not exactly a just way to treat taxpayers. Former House members and staffers have been charged with using the bonuses to illegally reward staffers for campaign work, but as the investigation of potentially illegal uses of taxpayer dollars continues, so do the costs to taxpayers.)

FORMER PA. SEN. VINCE FUMO

Also while we were on hiatus, former Sen. Fumo was sentenced to 55 months in prison for 137 felonies, or roughly 12 days per felony. Fumo was also ordered to pay close to $2 million in restitution and fines; however, he made off with almost $3.5 million. He must report to prison by August 31, 2009. On March 16, Fumo was convicted of all 137 criminal counts, those counts included charges of conspiracy, fraud, obstruction of justice and tax violations stemming from schemes that defrauded the state Senate and others of more than $3.5 million and allowed him to live a lavish lifestyle as one of the most powerful political leaders in Philadelphia, if not the state.

In his sentencing of Fumo, U.S. District Judge Ronald Buckwalter disregarded both the request of federal prosecutors that Fumo be sentenced to 15 years in prison and a probation report that recommended a 20-year sentence. Outrage over what prosecutors and others said was too lenient a sentence has come in many forms during the last week – but none like the protest staged by political activist Gene Stilp at the state Capitol. The Philadelphia Inquirer reports Stilp surrounded himself with 30 vacuums – from wet-dry vacs to canister models – and stood behind a podium with a sign on it that read, “Judge Buckwalter: Your Fumo sentence sucks.”

However, former Sen. Fumo has had to forfeit his state pension, according to officials with the State Employees’ Retirement System (SERS) who recently notified Fumo that his $100,500 annual pension was forfeited as a result of his July 14 sentencing on public corruption charges. Fumo will still get back all the money he has contributed to the system over his four decades of public services – which will likely be a lump sum retirement check of no more than five figures. Former Sen. Fumo will also lose his state Senate health insurance benefits. That’s because the state Senate is stripping the Philadelphia Democrat of his lifetime state-paid health insurance benefits.

MISCELLANEOUS

GIVING REDDY KILOWATT A NOSE-JOB

To ameliorate the huge rate increases due to hit utility customers starting January, 2010, the legislature enacted ACT 129, which requires utilities to help their customers conserve electricity. Using the logic that Pa.’s legislature is famous for, the utilities will be able to charge their customers even more than the de-regulated wind-fall they are to receive, to “help” their customers. For example PPL will charge its customers roughly an additional $250 million dollars over the next four years, mostly to encourage greater use of compact fluorescent bulbs.
PA. PRISON POPULATION INCREASES 40% IN 9 YEARS

While Pennsylvania’s general population stagnated over the past nine years, our prison population swelled by nearly 40 percent, prompting state officials to take an old prison out of mothballs, haul modular units into prison yards across the state, farm inmates out to county jails and develop plans for four new prisons. Although the Legislature allocated funds for four prisons at a cost of $200 million each, in last year’s capital budget, there’s been little discussion of the prison population explosion, what caused it, or the spike in the state’s corrections budget, which increased from $1.2 billion to an estimated $1.8 billion – in that 9 year period.

For those who have cynically observed that “soon we‘ll be spending as much to lock people up as we are spending on higher education”, that time is now. In last year’s budget, Pennsylvania taxpayers anted up $1.66 billion for the state prisons, compared to $1.59 billion for higher education. Mandatory minimum sentences, limits on parole, more prison time for drug and nonviolent offenders – largely are responsible for the prison population spike with no accompanying decline in crime.

TOWNS COULD HAVE TO PAY FOR STATE POLICE SERVICES

The state House of Representatives State Government Committee on Wednesday voted to report to the House floor legislation that would impose a fee on certain municipalities for patrol services provided by the Pennsylvania State Police. The legislation would set per capita fees for municipal residents of $52 the first year, $104 the second year and $156 the third and all subsequent years if the municipality currently receives full-time State Police patrol services and meets any of the following criteria: the municipality does not provide its own local full-time patrol services; the municipality does not participate in a regional police force for local full-time patrol services or the municipality does not contract with another municipality for local full-time patrol services. The bill also stipulates that if a municipality that currently provides local full-time patrol services and subsequently eliminates the services – after the effective date of the bill – the municipality shall be assessed at the annual per capita rate of $156. The bill would generate about $450 million annually to help pay for state police operations, new state police cadets, equipment, cooperative police pacts, and to maintain Pennsylvania’s highways and bridges.

KEYSTONE OPPORTUNITY ZONES HAVEN’T CREATED JOBS

A report says Opportunity Zones haven’t created jobs or investment. Pennsylvania needs stronger regulations for a state program creating tax-free economic development zones in order to better track job growth and capital investments. That report, examining the impact of the Keystone Opportunity Zone Program, was released at a hearing of the Legislative Budget and Finance Committee along with three others on the educational improvement tax credit, the research and development tax credit and the state’s after-school programs. The KOZ program was designed to assist distressed communities with revitalization. Throughout the state, 12 KOZ areas have been created, where officials hoped to see increased job growth and investments. But according to the report, figures for jobs and capital investments are often self-reported or only include projected figures.
The total cost of the program also is not known and cannot be accurately estimated. Of the data that is available, three-fourths of participants did not report any job creation activity.

COMING ATTRACTIONS

- New push on for tolling Interstate 80, the Pennsylvania Turnpike Commission is renewing its push for permission to toll Interstate 80 to generate more revenues for the state’s transportation infrastructure. “Next year is going to be armageddon for transportation,” more than $1 billion Pennsylvania received from the federal stimulus bill will run out next year and the state Motor Vehicle Fund – the main source of highway money – lost $176 million in the past year because of investment losses and lower gas tax collections.

- More political corruption indictments