Senate Appropriations Committee Report
(all tables and graphics can be viewed online)
July General Fund Revenues Increase on Tax Filing Extensions
The Department of Revenue has not yet released its monthly distribution of the Official General Fund Revenue Estimate. Therefore, July 2020 revenue collections can be compared only to last year’s revenues and not to a monthly estimate.
Because of the COVID-19 emergency, many annual and estimated personal income tax payments that would have normally been received in April, May and June of 2020 were extended until July 15. In addition, the Department of Revenue previously announced that taxpayers would not have to make accelerated sales tax (AST) prepayments in March, April, May or June. This step was taken to provide relief to business taxpayers during the COVID-19 pandemic. However, businesses that must make AST prepayments were required to resume AST prepayments by July 20, 2020, which was the July due date for monthly filers with a prepayment obligation. Furthermore, Pennsylvania corporate taxpayers who had annual corporate net income tax (CNIT) returns and payments due in April, May, June or July of 2020 now have until August 14, 2020, to file their returns and make their final payments. For these reasons, July 2020 General Fund revenues are much higher than normal.
Total General Fund revenue for July 2020 was $4.1 billion. Revenue collections, including non-tax revenues, were $1.77 billion, or 76.2%, more than July 2019, which is attributable to tax payments being shifted from Fiscal Year 2019-20 into Fiscal Year 2020-21. The Independent Fiscal Office (IFO) estimates that $1.91 billion of General Fund revenues will be shifted from FY 2019-20 into FY 2020-21 because of extended tax filing deadlines and measures such as the temporary suspension of the AST prepayment. With General Fund tax revenues being $1.79 billion higher than July 2019 and with annual CNIT returns and payments due in August, it appears that the IFO’s analysis is on target to meet expectations.
However, it is important to note that despite meeting expectations, FY 2020-21 General Fund revenues are expected to be $2.4 billion lower than they were projected to be in February prior to the effects of the COVID-19 pandemic.
Fiscal Year 2020-21 vs. Fiscal Year 2019-20:
Motor License Fund:
Historical State Budget Spending by Funding Category
Federal funding plays an important role in supporting programs across the Commonwealth’s budget, especially during the current COVID-19 pandemic with the significant amount of federal stimulus funding that has been made available. However, even before federal stimulus funding was made available to combat the effects of the pandemic, federal funding was becoming a significantly larger share of the Commonwealth’s budget. As detailed on the chart below, over the last several decades, federal funding as a share of the overall budget increased from 22% in FY 1990-91 to 35% in FY 2018-19, driven by increases in the departments of Human Services and Education. While additional federal support is important to many programs, the Commonwealth must be cognizant that increased federal funding often comes with strings attached about how the funding can be used, essentially limiting the amount of control the state ultimately has over its own budget.
PASSHE Redesign Integration Plans
With several of the Pennsylvania State System of Higher Education (PASSHE) member universities facing long-standing enrollment and financial challenges compounded by the COVID-19 emergency disaster, the legislature on June 24 approved House Bill 2171 (Act 50 of 2020) to provide PASSHE’s Board of Governors with authority to redesign its member universities having less than 10,000 students.
The law provides that PASSHE may create, expand, consolidate, transfer or affiliate an institution upon conducting a thorough financial review, planning and implementation process with oversight from the Appropriations and Education Committees of the Senate and House of Representatives, along with public comment.
On July 16, the Board of Governors moved forward to begin its redesign efforts by authorizing the chancellor, through a resolution, to conduct a financial review of three integration plans. The integration plans are as follows:
California University and Clarion University – To stand up a low-cost, high-quality, fully online undergraduate degree and degree-completion program currently not available in Pennsylvania.
Edinboro University and Slippery Rock University – To strengthen and broaden academic opportunities by aligning the two universities’ educational programs into one, reducing costs and coordinating enrollment strategies.
Lock Haven University and Mansfield University – To develop non-degree and stackable credentials to meet workforce development needs in high-demand occupations through partnerships with regional employers.
The chancellor’s financial review of the integration plans will explore the impacts of a unified leadership team, a single staff and faculty, a single academic program, a unified budget, a unified enrollment management strategy and a single line of reporting to the Board of Governors.
Upon completion of the financial review, the law provides for the chancellor to make a report and provide recommendations to the Board of Governors and develop a proposed implementation plan.
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