Pa. state pension cost spike key in next budget
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HARRISBURG -- When Republican Gov. Tom Corbett signed his inaugural budget into law in June 2011, the response from the state's largest teachers union was swift and severe.
Viewing public education as the main victim in last year's leaner $27.14 billion state spending plan, the Pennsylvania State Education Association proclaimed that the deep cuts would jeopardize student progress.
Fast-forward to this year's final budget, and the mostly similar education-funding figures garnered a "thank you" to lawmakers for the limited public-school funds they did restore over Mr. Corbett's February proposal.
"There is a school funding crisis in Pennsylvania," said PSEA president Mike Crossey in a statement. "These appropriations won't solve it, but they are a step in the right direction."
A review of the governor's first two budgets shows that the most dramatic of the changes Mr. Corbett pushed through last year, particularly in education, were not repeated. Often that meant holding dollars to the same level in the new $27.66 billion budget, though a few areas did see boosts in funding.
Still, most state agencies -- with exceptions in criminal justice and welfare -- continue to be funded at lower levels than in 2008.
Over the past two years, the Department of Environmental Protection saw its funding shrink by 14 percent, and the Department of Conservation and Natural Resources had its main allocation slashed by more than one-third.
Both agencies also receive other funds -- from state lands leased for gas drilling and various fees related to environmental permitting -- that have been increased to supplement their appropriation, though Democrats have argued unsuccessfully to restore general support as well.
Pennsylvania's economic development agency lost one-quarter of its state dollars under Mr. Corbett's two budgets, with about $240 million approved last month to aid businesses and struggling communities. That's down from the $327 million approved in former Gov. Ed Rendell's final budget, but about $25 million more than last year.
And while the budgets for corrections and public welfare have grown since 2010, both agencies have done so in a much more limited fashion than past policy would suggest.
Most of the cuts and accompanying spotlight centered on education, which drew loud cries last year over reductions to both higher education and K-12 public schools.
The 50 percent proposed cut for state universities eventually was softened to a 20 percent blow. Those schools were saved from another hit this year when they pledged to keep tuition hikes to a minimum.
In public schools, calculations are more complex: The Corbett administration continues to fight a mathematics battle prompted by the disappearance last year of federal stimulus dollars.
Although the governor's first spending plan increased state funding for basic education -- the main budget line for elementary and secondary schools -- the dropoff of federal money meant schools received about $430 million less than they had the previous year.
The governor's freshman budget also halted reimbursements to school districts for a portion of their charter-school costs, a change that redirected $224 million. He also eliminated another $45 million in other district aid and shaved $150 million from a block grant used to help provide full-day kindergarten.
None of those program eliminations were resurrected this year, though lawmakers boosted the basic education funding by $49 million to help financially distressed schools. Legislators also maintained $100 million for the block grant program, which the governor proposed ending.
When Mr. Corbett and his administration say they are not cutting funding to elementary and secondary education, "he's looking at the basic education line only," said Senate Minority Leader Jay Costa, D-Forest Hills.
"You've got to look at the other lines that support school-district operations," Mr. Costa added. "We still are below where we were."
The administration points to what it says is an increase of $378 million in early, K-12 and higher education dollars, with the bulk of that coming from another increase in payments for retired school employee benefits.
While arguably only $50 million was added back this year out of the nearly $1 billion in stimulus-related and state reductions for public schools and universities, opposition to the budget was not nearly as loud or constant.
Observers say Mr. Corbett's first budget was such a startling departure from past policy that when the changes were maintained, not duplicated for a second cut, it had less of an effect.
"Once you see it, it doesn't have the same shock appeal," said Chris Borick, a political scientist and director of Muhlenberg College's Institute of Public Opinion.
There also was an early push from legislative Republicans to add money back in for education, giving more assurances that restorations were possible, added Mr. Borick: "There's a psychological impact of, 'It could have been worse.' "
Lawmakers also noticed a learning curve among Mr. Corbett and his staff that comes with having one budget completed and some bonds forged with legislators.
A new governor has less than two months after inauguration to present his first budget and a little more than three months after his address to negotiate a final plan.
"He certainly was more familiar with the legislative process part and more familiar with the interaction between some of the legislative parts," said Senate Majority Leader Dominic Pileggi, R-Delaware. "It was a much smoother interaction between the General Assembly and the governor as a result of that increased experience this year."
But there's another challenge awaiting in next year's budget process, with officials already pointing to the looming spike in pension costs as a key issue in that debate.
Pennsylvania's annual pension payments on benefits for public schoolteachers and state employees grew by more than $500 million this year. They're scheduled to increase by another $700 million next year, which will easily eclipse the $300 million projected surplus.
If the state does nothing to adjust the cost of its $30 billion-and-growing unfunded liability on that benefits system, the annual price tag will be more than 10 percent of the state's budget as Mr. Corbett potentially seeks re-election in 2014.
"When you have those kind of increases [and] the economy's not growing that fast, the question is, where does the money come from to pay those pensions?" asked Mr. Corbett during a press conference last week.
There are several bills in the Legislature to tackle the problem, generally by altering how benefits are structured for new state employees.
Some top lawmakers, including Senate Appropriations Chairman Jake Corman, R-Centre, and administration officials have indicated that they may need to consider changes for future benefits of current employees as well.
While renewed efforts to tackle the problem likely won't get under way until the next legislative session convenes in January, there does appear to be agreement in Harrisburg on the urgency required.
"Certainly the House and Senate and the governor agree we need to do something on pensions in the first quarter of next year that should be reflected in next year's budget," Mr. Pileggi said.
First Published July 8, 2012 12:00 am