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SHARON WARDPENNSYLVANIA BUDGET AND POLICY CENTER
EPLC 2008 EDUCATION FINANCE CONFERENCE
NOVEMBER 20, 2008
The Coming Storm:Education Funding in a Weakened
Economy
Who We Are
The Pennsylvania Budget and Policy Center (PBPC) is a statewide, non-partisan policy research project.
PBPC provides budget and fiscal analysis and public education in support of policies that improve the economic and social well-being of low and middle income Pennsylvanians.
www.pennbpc.org
Pennsylvania Budget All Funds
State General Fund Spending 2007-2008
Paying for State Services
PA Ranks 30th in Expenditures
…and Ranks 32nd in State Taxes
Taxes Are Stable Over Time
Property Taxes Trail the US Average
Local Share is Higher
2008-09 Budget Highlights
General Fund Budget: $ 28,264,430 4.0% increase $1.1 billion
General Fund Revenue: $28,784,200 Growth 3.1% $856 million
Education Funding Total $10.1 billion Basic Ed: $274 million increase: 5.5%
Education Adequacy Gap: $600 Million
The Economic Outlook is Grim
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As the National Economy Weakens So Does the Economy in Pennsylvania
Pennsylvania United States
Source. Keystone Research Center analysis of Center for Workforce Information and Analysis data.
Monthly Unemployment rate (%) in Pennsylvania and United States 1979 to 2008
Unemployment will rise for several years even as the recession ends
Most recent year2007 2008 2009 2010 2008 2009 2010 2011
Unemployment rate (%) 4.4 5.2 5.9 6.7 5.6 6.8 8.0 9.2Employment rate (%) 61.7 61.4 61.1 60.8 61.1 60.5 59.8 59.2Change in real median household income (p.p.a) $48,437 -1.9 -1.9 -1.9 - - - -Povert rate (%) 10.4 10.9 11.5 12.1 12.0 13.6 15.3 16.9
Projected Recession
Mild to Moderate Severe
Table 2. Project Impact of Recession on Labor-Market Outcomes in Pennsylvania 2008-2011
Source. Keystone Research Center
States Already in crisis
STATE BUDGET TROUBLES WORSENBy Elizabeth C. McNichol and Iris Lav November 12, 2008
State Actions to Balance the Budget
Budget cuts have been proposed or enacted:
SCHIP and adult health–17 statesMedicaid: medical services, home care,
rehabilitative services—15 statesK-12 and early education—16 statesHigher education—21 statesState workforce reductions—10 states
State General Fund Revenue 2008-2009
State Revenue Slowed Early in 2008
Potential Revenue Shortfall
FISCAL YEAR 2008-09
If current recession is same depth and duration of 2001 recession: $1.5 billion
Annualized revenue shortfall 7.1%: $ 2.1 billion
Pennsylvania Response
2008-09 budget was changed Increase 3.9% down from 4.2% Real 1.3% reductions in many departments
Rendell October 30th response $311 millions in reductions for 08-09 4.25% for many departments, hiring freeze $40 million cut in Motor License Fund
November 19 update Governor estimates $1 billion to $2 billion deficit New cuts announced December 6
Deficit Scenarios
(in $ thousands)Best Medium Worst
FUNDING NEEDSBeginning Deficit (from 2008-09) - (474,000) (474,000) No fiscal stimulus until 2009-10Funding needs 30,342,700 30,342,700 30,342,700 $450M for Educ., $700 Medicaid, $408M else (3%) TOTAL FUNDING NEEDS 30,342,700 30,816,700 30,816,700
AVAILABLE REVENUEFiscal Stimulus 700,000 400,000 200,000
Base GF revenues 28,047,312 27,230,400 26,685,792 2009-10 revenue growth from 08-09 3.0% 0.0% -2.0%
TOTAL REVENUE PRIOR TO TAX CHANGES 28,747,312 27,630,400 26,885,792
(1,595,388) (3,186,300) (3,930,908) Rounded millions (1,600) (3,190) (3,930)
2009-10 Funding Scenarios
Balancing the 2008-09 Budget
Use the Rainy Day Fund: $750 million
Federal fiscal relief House bill: $426 million Senate bill: $923 million
Tightening up the budget: $500 million? Cost savings
Paying for Public Investments
Revenue options Suspend the phase out of the Capital Stock and
Franchise Tax: $125 million Taxation of foreign corporations : $400 million first
year Add a natural gas severance tax: $200 million Raise the Personal Income Tax
3.07%: second lowest top rate in the country Raises .10 % raises $350 million
The Future…..
Fight the cuts?Grow the pie?
Pennsylvania Budget and Policy Center412 North Third St.
Harrisburg, PA 17101717-255-7156
www.pennbpc.org