Budget Issues Affecting Nonprofits

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State

Federal

3/5/08 US House and Senate Budget Committees release mark-ups of the FY 2009 Budget Resolution, and debated competing proposals over the past two days. Both House and Senate proposals would extend expired tax incentives including the IRA charitable rollover, reform the estate tax, and increase domestic discretionary spending. Analysis is available from the Congressional Budget Office http://www.cbo.gov/; the US Senate Budget Committee Majority(D) http://budget.senate.gov/democratic/  and Minority(R) http://budget.senate.gov/republican/; the U.S. House Budget Committee Majority(D) http://budget.house.gov/  and Minority(R) http://budget.house.gov/republicans/.  Please note that all Committee meetings are available LIVE on the Internet Video or Audio; and the Center for Budget and Policy Priorities http://www.cbpp.org/1-15-08sfp.htm. 

5/24/07 The US Senate passed the Conference Report for the $2.9 trillion Federal budget plan for FY2008. The FY2008 Budget Resolution includes $23 billion in Federal spending increases over the President’s budget proposal including increases in health and education. The Resolution is expected to result in a surplus in five years by not extending many of the President expiring tax cuts. The budget Resolution is a guideline for Federal spending over the next 5 years. It serves as an outline of spending priorities for the appropriators to follow. The Budget Resolution passed in the Senate by a vote of 52-40, with 8 not voting. Senator Arlen Specter voted against the budget, while Senator Robert Casey Jr. voted for it. On May 17 the House passed the Conference Report for the FY2008 Budget by a vote of 214-209 with 10 not voting. For the text of the Conference Report from the House Rules committee go to http://www.rules.house.gov/110/text/110_sconres21cr.pdf. 

3/28/07  JTC issues recommendations on the President’s FY2008 budget proposal. On March 26, 2007, the Joint Committee on Taxation issued (JCS-2-07) a Description Of Revenue Provisions Contained In The President's Fiscal Year 2008 Budget Proposal. This report provides fiscal analysis of every provision in the President’s FY2008 budget proposal including comments on permanently extending certain charitable giving incentives like the IRA rollover provision and the modified enhanced charitable deduction for contributions of food inventory. For a copy of the Joint Committee on Taxation Report go to http://www.house.gov/jct/s-2-07.pdf. 

On Friday, March 23 the Senate Approved its version of the President’s FY2008 budget. The House takes up the budget next. For updated information about the Federal budget go to http://ombwatch.org/budget. 

2/21/07 President Signs Continuing Resolution for FY2007 Budget. On February 15, the President signed the $463.5 billion continuing resolution (H.J. Res. 20) Public Law No: 110-005. The Resolution passed the Senate without amendment by a vote of 81-15 on February 14, four and a half months after the legal deadline. H.J. Res. 20 provides funding for most federal agencies and programs through September 30 (the end of FY2007). The resolution will fund several government agencies at FY2006 levels, with minor adjustments. The IRS operating budget for FY2007 will be cut by $10.4 billion from FY2006 levels. According to the White House Office of Management and Budget, no earmarks previously offered for FY2007 will be honored by federal agencies unless contained in this statute. For a summary of the CR, go to http://appropriations.house.gov/pdf/CRSummary.pdf. 

For analysis of the CR according to House Budget Committee Republicans go to http://budget.house.gov/republicans/press/2007/cr-fy2007.pdf. 

For (H.J.Res. 20) go to: http://capwiz.com/pano/issues/bills/?bill=9399776. 

President’s FY2008 Federal Budget Proposal. On February 5, 2007, the President sent his $2.6 trillion Federal FY2008 budget to Congress. The President’s budget calls for substantial reductions in a range of domestic discretionary programs in key domestic priority areas such as healthcare, education and environment.

In order to maintain the war in Iraq and Afghanistan, and make permanent $2 trillion in tax cuts enacted in 2001 and 2003, the President has chosen to balance the budget by 2012, by reducing domestic discretionary spending. While proposed cuts are only $13 billion in FY2008, by FY2012 they swell to $34 billion or a 7.6% reduction over FY2007 funding levels adjusted for inflation or $114 billion over 5 years. For a detailed analysis of the Bush FY2008 budget go to http://www.cbpp.org/2-8-07bud.htm. 

For a comprehensive analysis of the President’s budget by the House Budget Committee staff, visit: http://budget.house.gov/analyses/07CBO_baseline_report_1_24.pdf. 

For an overview of the Federal budget process go to http://www.cbpp.org/3-7-03bud.htm. 

President’s FY2008 Budget Makes Charitable Giving Tax Incentives Permanent. In the General Explanations of the Administration’s FY 2008 Revenue Proposals. The proposals include making permanent some of the charitable giving incentives from the Pension Protection Act of 2006, that are set to expire at the end of this year. Proposals include permanently extending tax-free withdrawals from IRAs for charitable contributions (p. 28); permanently extending the enhanced charitable deduction for contributions of food inventory (p. 30); permanently extending the enhanced deduction for corporate contributions of computer equipment for educational purposes (p. 32); permanently extending increased limits on contributions of partial interests in real property for conservation purposes (p. 33); permanently extending the basis adjustment to stock of S corporations contributing appreciated property (p.35); and other provisions. For a copy of the Administration’s proposal go to http://www.treas.gov/offices/tax-policy/library/bluebk07.pdf. 

The PA FY2007-08 PA Budget General Fund is $27.3 Billion, (plus $17.5 Billion in Federal Funds for a total PA operating budget of $59.1 Billion)

The PA FY2006-07 PA Budget General Fund is $26.1 Billion

Governor’s Budget Office 

Budget reports

PA FY 2007-08 Budget Fact sheet

Governor’s Budget Office presentation on FY2006-07 Budget

3/7/08 Budget hearings on Pennsylvania’s $61.3 billion FY2008-09 budget ($28.3 billion general fund budget) wrapped-up this week. The General Assembly is Constitutionally required to pass a balanced budget before July 1. For the Governor’s FY2008-09 Budget and financial reports go to http://www.budget.state.pa.us/budget/cwp/view.asp?a=3&q=167632.  For details on how the State budget process works go to http://www.budget.state.pa.us/budget/lib/budget/budgetprocess/budgetprocess.pdf.  The Pennsylvania Senate and House of Representatives are currently in recess, and are scheduled to reconvene at 1:00 pm on Monday March 10, 2008.

7/18/07 Governor Approves State’s $27.5 Billion Budget for Fiscal Year 2008. After 17 days beyond their constitutional authority, state lawmakers finally passed the $27.16 billion Budget for Fiscal Year 2008, and on Tuesday, July 17, the Gov. Ed Rendell approved it as Act No. 8A. This $27.16 billion budget represents a modest 3.2 percent growth rate, or a 4.4 percent increase ($27.48 billion) if you include the Governor’s $317.7 million for a separate Public Transportation Trust Fund. The budget includes $9.4 billion for Pre-K-12 and related programs, $75 million for the EITC (a $16 million increase), $41 million to help communities fight drugs and related crime, and $1.4 million to fight child predators. All of this was passed with no new taxes, $150 million of the state’s $650 million surplus deposited into the Rainy Day Fund, and $300 million carried forward for FY2008-09.

7/16/07 State Budget Expected to Pass This Week. After a 16-day State Budget stalemate, the State House and Senate announced this morning that that they have reached a budget deal. The proposed $27.2 billion FY2008 budget, as approved by the joint House-Senate committee will increase total state general fund spending by 3.2 percent, or 4.4 percent if we include the $300 million separate mass transit funding. Regardless, this budget requires no new broad-based tax or fee increases.

The bill increases funding for education by 5.8 percent to $10.5 billion; expands the pre-kindergarten grant program by $75 million, and expands the laptops in high schools program by $70 million. In Public welfare, the budget will increases spending by 3.7 percent to $9.7 billion, and services for the mentally retarded will increase by $78.5 million. Additionally, the Department of Corrections which will see an increase of 13 percent to $1.6 billion, and payments on general obligation debt will increase by $22 million.

Even with a surplus this year, the legislature still managed to keep spending in check for FY2008, demonstrating that fiscal responsibility is possible without adopting mandatory TABOR type spending caps.

Unfortunately, the premature announcement of last week’s budget deal, the furlough of 25,000 State workers and their immediate return, followed by a flurry of legislative activity on everything but the State Budget, left voters and lobbyists alike, scratching their heads. In every annual budget there are both winners and losers. It’s still too early to predict how charities will fare in this budget. What is certain though is that after 5 months of discussion and 16 days beyond its Constitutional authority, the General Assembly as an institution lost some credibility this year.

The latest version of HB1286.  (PN2346)

7/3/07 State Budget Negotiations Go Into Extra Innings; Transportation Funding Causes Impasse. For the third day in a row, State lawmakers fail to pass the State budget for Fiscal Year 2007–08, by the Constitutionally required June 30 deadline. Lawmakers are confident that missing the deadline will not cause significant problems, but 78,000 State workers and those who rely on receiving a paycheck are not so confident. At issue is how to fund mass transit, highways, and the Governor’s education plan. With the July 4th holiday falling mid-week, budget passage is not expected before Thursday, July 5.

During an unusual Saturday evening session (June 30), the House voted not to concur on the Senate amendments, which forced SB1286 back to Committee for further negotiations. Since January only thirty-one bills have passed the State legislature of over 3141 bills introduced. On Saturday night, the State legislature sent another 17 bills to the Governor, several were for bridge namings, but none was the state budget bill.

The key issues still being debated include where funding for highways and mass transit will come from, and how much of the Governor’s education plan will actually be funded.

The House of Representatives adopted the Governor’s proposed $27.3 billion spending plan on May 25, and on June 20th the Senate passed its version of the spending plan, reducing or eliminating funding for initiatives in health care, child nutrition, child care, education, and workforce development.

The Governor budget proposed in February balanced through an increase in the state’s sales tax rate from 6 cents to 7 cents, with $1.2 billion in revenue allocated to general fund spending ($820 million) and property tax relief ($420 million.) The sales tax increase (from 6% to 7%) is likely a dead issue this year.

While Pennsylvania will end FY2006 with a $409 to $500 million surplus, (as it has the last two years). additional funding will be necessary to fund the Governor’s proposed health care, education, and transportation initiatives. Workforce development programs will be scaled back or eliminated.

Detailed analysis on the State budget is posted at http://www.pennbpc.org/budgetwatch/budgetwatch4.php.

6/19/07 PA State Budget Stalemate Broken As Deadline Approaches; Senate Appropriations Committee unanimously reported HB1286 (PN1983) out of Committee as amended. The bill is now placed on the Senate Calendar for Wednesday June 20. If enacted, this bill would become Pennsylvania’s annual general appropriations act for FY2007/08. The proposed spending plan would reduce the Governor's proposed General Fund budget by nearly $260 million. All Special Fund appropriations are funded at the levels requested by the Governor. The bill with the Armstrong amendment (A1709) represent a 2.7% increase in last year's budget, still below the level of inflation. Prospects for a government shutdown are now less likely.

6/13/07 Senate Appropriations Committee Cuts Budget Bill and Moves Bill Forward. On Wednesday June 13, the Senate Appropriations Committee amended the State budget bill and reported the amended bill out of Committee by a vote of 17 to 9. These amendments cut an additional $329 million from the Governor’s proposed $27.3 billion spending package. Senate Democrats expressed concerns over the $123 million cuts to economic development grant programs (which included $49 million for the Opportunity Grant Program, $22.5 million for infrastructure development and $29 million for community conservation and employment). Other cuts include $15 million from job training programs and $7.5 million for promoting Pennsylvania businesses in the global economy. Ultimately the desire to prevent future tax increases proved paramount. The Legislature returns to session on June 18 and will take–up the budget immediately. The State Constitution requires the General Assembly to pass a balanced budget by June 30. For analysis on the State budget go to http://www.pennbpc.org.

5/30/07 State Budget Moves Forward: 15 Scheduled Session Days Remain. On May 23, the State House of Representatives Passed the Democrat proposed FY2008 State Budget bill HB1286 (PN1543) along straight party lines (102-97). House leaders bypassed the 245 amendments (as agreed) and moved the bill forward to the Republican-Controlled Senate where the real horse-trading will take place.

HB1286 is based on the Governor’s Budget proposal of $27.3 billion (7.3% increase over 2007) to fund the operations of State government for the next fiscal year. The Republican Caucus alternative is a proposed $26.8 billion (2% increase over 2007- below the inflation rate). The Republican proposal basically a scaled-back version of the Governor’s budget, but for two key areas- safety and security.

Both sides claim they can balance the budget without a tax increase, but the Governor favors a 1% sales tax increase to offset property tax relief. The State Constitution requires the General Assembly to pass the budget bill by June 30. HB1286 was referred to the Senate Appropriations Committee on May 29, and will dominate the legislative agenda for the next 30 days.

HB1286: http://capwiz.com/pano/issues/bills/?bill=9828096. 

The PA House will reconvene at 1:00 pm on June 4, 2007. For the PA House Legislative Calendar for Monday June 4 go to http://www.legis.state.pa.us/WU01/LI/SC/HC/0/RC/CAL.HTM. 

The PA Senate will reconvene at 1:00 pm on June 4, 2007 For the PA Senate Legislative Calendar for Monday June 4 go to http://www.legis.state.pa.us/WU01/LI/SC/SC/0/RC/CAL.HTM.

3/14/07 State Budget Hearings for FY 2007-08 Conclude This Week. The final budget hearings of the House Appropriations Committee are scheduled for today and March 15. Today and tomorrow, individual lawmakers will have the opportunity to present their priorities regarding how to spend the proposed $59.1 billion state budget for FY2007-08. 

The final Committee hearings include:
Wednesday, March 14 9 AM Judiciary 10 AM University of Pennsylvania
Thursday, March 15 9 AM Member Presentations

To watch next week's hearings live go to the House Access Center at http://www.pahouse.com/AccessCenter/

2/21/07 Administration’s Proposal for PA FY2007-08 Budget. If passed, Rendell’s budget would leave 5300 Pennsylvania students without state grants next year and subsequently lead to cuts in other related programs. The proposed budget would freeze aid at $386.2 million a year.

Overview of the Governor’s FY2007-08 Budget.

For analysis on the State budget go to http://www.pennbpc.org/