rswift@timesshamrock.com
HARRISBURG - Gov. Tom Corbett is proposing a delicate balancing act with the state budget by buttressing it with money taken from a half-dozen special funds created through the decades.
The practice, known as "fund-raiding," has been done by previous governors facing state tax revenue shortfalls and under legal mandates to balance the taxpayer-supported General Fund.
But Corbett is turning to this strategy even more as Pennsylvania struggles with tight finances for a fourth year in a row.
The $27.1 billion General Fund is the repository for the main state taxes - the personal income tax, corporate income tax and sales tax. It's the money used to fund public schools and welfare programs like medical assistance.
Orbiting the General Fund are numerous special state funds, some better known to the public than others, that draw revenue from lesser state taxes and other sources. They support everything from Lottery benefits for senior citizens to conservation programs subsidized by royalties paid from gas and oil drilling on state forest land and efforts to preserve farmland from development. All told, Pennsylvania's spending next year will reach $63 billion when special funds and federal money going to the state are included.
The governor's budget proposes these transfers:
- $20.5 million generated by a share of the state cigarette tax from the Ag Conservation Easement Fund to the General Fund. The fund would get replacement revenue from another environmental fund.
- $38.6 million generated by a share of the realty transfer tax from the Keystone, Recreation, Park and Conservation Easement Fund to the General Fund. The Keystone Fund would be left with no money if the shift is approved by lawmakers.
- An additional $71.6 million from the Lottery Fund to support long-term care programs under the General Fund.
- A $69 million transfer from the Oil and Gas Lease Fund to support the Department of Conservation and Natural Resources.
- $6.5 million generated by the Gross Receipts Tax from the Alternative Fuels Incentive Grant Fund to the General Fund.
- Use $161 million from the Tobacco Settlement Fund for nursing home care through the medical assistance program under the General Fund.
- In a reverse switch, tap the slots-funded Race Horse Development Fund to support four agriculture-related programs currently under the General Fund to the tune of $72.3 million. These are agricultural research at Pennsylvania State University, two University of Pennsylvania programs for veterinarians and infectious disease research and state payments to county fairs.
Not surprisingly, groups representing sections of the horse-racing industry criticized this proposal as harming efforts to help horse trainers, owners and breeders.
The Pennsylvania Equine Coalition said the move would leave less money for prizes.
The Keystone fund was created in 1993 after a statewide voter referendum. The idea was to develop a permanent fund that would grow with the real estate market by dedicating a portion of the tax revenue on real estate transactions. Keystone has helped pay for projects to protect Susquehanna River riverfront in Wyoming County, develop the Pine Creek Trail in the northern tier and build and improve municipal parks, libraries and recreation facilities.
The proposal to eliminate Keystone funding comes as a surprise, said Andrew Loza, director of the Pennsylvania Land Trust Association. He said the loss of state dollars would have a ripple effect on local investment in parks and trails.
State Budget Secretary Charles Zogby is blunt about the challenges in trying to balance the General Fund. The state has the same amount of revenue coming in as five years ago but the cost of mandated programs for welfare, corrections, debt services and public pensions has increased $3 billion in that period, said Zogby.
Former Gov. Ed Rendell also tapped the oil and gas fund, race horse fund and tobacco settlement fund to support the General Fund, especially after the recession hit in 2008. Governors have long eyed the lottery fund to support programs for the elderly.
Special fund transfers enable Corbett to propose a General Fund that is $22.5 million less than the current year.
"One of the things that transfers allow you to do is keep the total budget amount lower," said Barry Ciccocioppo, spokesman for the Democratic House Appropriations Committee.