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STATE SEES CREDIT RATING DOWNGRADE AMID ONGOING BUDGET UNCERTAINTY
Less than a week after the House approved a proposal to close the $2.2 billion budget gap by relying heavily on one-time transfers from special funds that proponents claimed to have surpluses, the Senate voted 43-7 to non-concur in the House amendments to HB 453. While the non-concurrence sets up the potential for creation of a conference committee, the House did not bring HB 453 up for a vote to send it to conference when it was in session the week of Sept. 25. Media reports indicate that discussions among House and Senate leadership and Governor Wolf are continuing, but no consensus has been reported among the House proposal, a prior proposal approved by the Senate that included a natural gas severance tax and other revenues, or any new ideas. The House is schedule to return to session on Oct. 2, and the Senate, previously set to return Oct. 16, has now indicated it will be in session the week of Oct. 2 as well.
In the meantime, credit rating agency Standard & Poors (S&P) announced on Sept. 20 that they are downgrading Pennsylvania's credit rating for the second time in three years, to A-plus, citing the commonwealth's chronic structural imbalance, a history of late budget adoption and their opinion that this pattern could continue.
Relatedly, following Gov. Wolf's Sept. 15 announcement that he was delaying $1.7 billion in payments to Medicaid insurers and school districts under expectations that revenues in the state's General Fund would dip below zero, Revenue Department reports show that these payments have since been made. The Governor also initially set an Oct. 1 date for legislative action in order to fend off any major short term harm such as cuts in payments or delays in state services, but the status of discussions among his office and legislative leaders in the past week seems to have allayed that concern. Similarly, state treasurer Joe Torsella, having indicated at the end of August that he would no longer loan money to the state's General Fund without a balanced budget in place, more recently has said he would again provide short-term loans once a plan exists to provide revenues to balance the state budget.
Counties continue to advocate for a timely resolution to the FY 2017-2018 budget that fully funds county line items, recalling the impacts of the FY 2015-2016 state budget impasse and their inability to weather future funding delays or cuts. At the same time, counties oppose reallocating funds from dedicated county programs as a means of balancing the state budget, noting that apparent fund surpluses are illusory; existing fund balances are allocated and delivery of those programs and projects would be disrupted or lost. Information will continue to be posted on CCAP's
Budget News and Updates web page
as available.
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HOUSE PANEL DISCUSSES ASSESSMENT REFORM
On Sept. 28, the House Finance Committee held a hearing in Monroe County to gather input on assessment reform and on HB 1408, legislation to cap post-reassessment tax bills for individual taxpayers. CCAP and its affiliate Assessors Association of Pennsylvania (AAP) testimony is available at www.pacounties.org by clicking Legislative Testimony on the Legislative Action Center page.
Deb Crawford, chief assessor for Tioga County, provided the Committee with an overview of the assessment system, for which counties are responsible. She also explained the training required for assessors, as well as the assessment and appeals processes. CCAP Director of Government Relations Lisa Schaefer noted that although the primary task of assessment administration is fairness and equity, they are not easily achieved under current law and systems, and counties recognize the need for reform. CCAP and AAP are actively involved in the Local Government Commission's Assessment Reform Task Force, which is seeking to implement changes recommended by legislative reports in recent years. Schaefer also talked about the impact of tax exemptions on local government tax bases and the pending referendum on a constitutional amendment related to the homestead exclusion. On HB 1408, Rep. Jack Rader's (R-Monroe) legislation which would cap the property tax increase of an individual school property taxpayer to no more than ten percent following a reassessment, CCAP indicated concerns that the bill would violate the uniformity clause and could defeat the equity purpose of the reassessment.
Phil Klotz, executive director of the Local Government Commission, also provided an update on the progress of the Task Force over the past year, including development of a self-evaluation tool and contracting standards for counties, and legislation to improve collection of various data related to the assessment system.
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SENATE COMMITTEE MOVES FIRST CHANCE TRUST FUND BILL FORWARD
The Senate Judiciary Committee recently reported SB 790, introduced by Sen. Vincent Hughes (D-Philadelphia), which would create scholarships and provide grants to evidence-based programs that benefit youth who are at risk of entering the justice system, including children with a parent in prison. Referred to as the First Chance Trust Fund, the proposal would be the first of its kind in the country. It would target regions that have statistically higher high school dropout rates and risks of incarceration and, as amended by the committee, would also include areas with high crime rates. The Fund would be administered by the Pennsylvania Commission on Crime and Delinquency and would be funded by private, tax-deductible donations along with a one percent surcharge on vendors that have a contract in place with the Department of Corrections exceeding $5 million. Other commonwealth agencies would also have the option to include such a provision in their contracts. The language had been previously included in Fiscal Code amendments the Senate offered to HB 453 during earlier budget-related discussions .
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CONGRESS OPENS WORK ON FEDERAL TAX REFORM
Congressional and White House leaders have unveiled their long-awaited federal tax reform proposal, "Unified Framework for Fixing Our Broken Tax Code." While many details have yet to be revealed, contrary to earlier expectations the proposal will preserve the tax-exempt status of municipal bonds, which are the primary investment tool used to finance public capital improvements and public infrastructure projects. Were their tax-exempt status to be removed, it would cause local governments to pay millions, if not billions, more in interest on their debt service.
However, the proposal does propose elimination of federal deductibility of state and local taxes (SALT). The SALT deduction has been part of the federal tax code since 1913, and allows taxpayers to deduct the amount they pay in state and local taxes from their federal tax burden. Eliminating the deduction effectively creates double taxation, with taxpayers paying federal taxes on income put toward state and local taxes. A loss of the deduction would also put pressure on local governments to lower local tax rates to offset the increased burden.
Congressional committees will now work to craft legislation to flesh out the framework. Additional information about the impacts to counties as the process moves forward can be found on NACo's website, www.naco.org.
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ATTORNEY GENERAL TAKES STEPS ON OPIOID EPIDEMIC
On Sept. 18, Pennsylvania Attorney General Josh Shapiro joined 36 other states to send a letter to the health insurance industry to urge it to reconsider coverage policies and encourage providers to prioritize non-opioid pain management options over opioid prescriptions for the treatment of chronic, non-cancer pain. At the same time, Shapiro also announced a major expansion of investigations of manufacturers and distributors of prescription opioids that now involve 41 state Attorneys General. These states have agreed to work together to investigate the marketing, distribution and sale of opioids, and to take coordinated legal action as appropriate.
In a related measure, Gov. Tom Wolf announced an expanded effort to combat the heroin and opioid epidemic by increasing the availability of drug take-back boxes to include 65 new boxes at State Police barracks throughout the commonwealth. This brings the total of take-back boxes in the state to more than 700, with more than 300,000 pounds of drugs destroyed. More information about the Prescription Drug Take Back Program can be found at http://www.ddap.pa.gov.
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ASSESSORS CERTIFICATION ACT AMENDED
Legislation introduced by Rep. Kate Harper (R-Montgomery) to clarify and strengthen the training and certification requirements for assessors and certain personnel working for mass appraisal revaluation companies was recently approved by the House of Representatives by a 149-48 vote.
House Bill 1594 would clarify that revaluation company personnel with whom a county contracts to complete a county-wide reassessment must be certified as Certified Pennsylvania Evaluators (CPEs) - the same designation that must be obtained by county assessors who are responsible for valuing property for real estate tax purposes. The clarifications will assure that anyone who is valuing property understands Pennsylvania's unique and complex assessment laws and the effects of the Constitutional uniformity clause in the assessment process. The bill is a product of the Local Government Commission's Assessment Reform Task Force, in which CCAP and its affiliate Assessors Association of Pennsylvania are actively involved.
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JUVENILE DETENTION, JUSTICE PROVIDERS RECOGNIZED
Two legislative resolutions have recognized the public and private service providers and their contribution to juvenile justice system reform efforts by declaring the week of Sept. 24 to Sept. 30 as Juvenile Detention Centers and Alternative Programs week in Pennsylvania. The resolutions, offered by former CCAP members Sen. Andrew Dinniman (D-Chester) and Rep. Jerry Knowles (R-Schuylkill) as SR 204 and HR 518 and adopted in their respective chambers, acknowledged the services provided by youth care workers to protect communities and assist youth, such as secure detention, secure treatment, group homes and community-based programs. The resolution also noted the resources that CCAP affiliate Juvenile Detention Centers and Alternative Programs (JDCAP) offers to providers to support services to youth and communities.
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