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Week in Review – Pensions, federal health-care law cloud state’s fiscal horizon

By   /   November 16, 2012  /   No Comments

By PA Independent Staff

HARRISBURG — Pensions, Obamacare and allegations of voter fraud highlight the week that was in the Keystone State.

Forecast shows pensions single-handedly driving budget out of balance

KEYSTONE STATE: Pennsylvania can expect modest economic growth over the next five years, but it will be surpassed by a surge in state pension costs that begin this year.

An annual economic and budgetary projection from the state’s Independent Fiscal Office, a state equivalent of the Congressional Budget Office, forecasts 0.8 percent revenue growth this year and 3 percent annual growth for the state’s revenues in the next five years. Pension costs are projected to climb by 46 percent in this year’s budget, and 42 percent in next year’s plan.

“The increase in pension contributions is estimated to be about $500 million per year for the next several years,” said Mark Ryan, deputy director of the IFO.

According to the report, those costs will consume 9.6 percent of the state budget by 2017 – up from 4.2 percent of the budget this year.

In comparison to the skyrocketing pension costs, non-pension budgetary expenses are anticipated to climb by only 2.5 percent over the next five years – meaning they would be sustained by the expected 3 percent annual growth in tax revenues if pension costs were not a factor.

Those low growth rates are the “new normal,” said Ryan, and are due to modest growth of the labor market, declining revenues from sales taxes, demographic trends and the lack of any expected booms in housing or the stock market.

By fiscal year 2017-18, pension costs will drive the state toward spending $753 million more than it takes in, according to the IFO report.

States get more time to implement ACA requirement

The federal government changed the timeline for states to decide how to implement a health insurance exchange, part of the Patient Protection and Affordable Care Act.

The deadline for deciding was Friday, Nov. 16. But Thursday, Secretary of Health and Human Services Kathleen Sebelius announced states now have until Dec. 14.

It’s good news for Pennsylvania, where the Insurance Department is still waiting to hear more information from the federal government before deciding.

In Pennsylvania, there’s still no word on if the state will run the exchange by itself or enter a partnership with the federal government. States also have the option of allowing the federal government to run an exchange.

Meanwhile, there’s also no word on if Pennsylvania will expand its Medicaid program to newly eligible residents come 2014.

States do not have a deadline for accepting the expansion. But federal funds will cover the full cost from 2014 through 2016, with support declining to 90 percent for 2019 and beyond.

Pennsylvania’s Independent Fiscal Office cites a study from health policy researchers at the Kaiser Family Foundation that says the expansion would cost Pennsylvania anywhere from $1.1 billion to $2 billion from 2014 through 2019, based on how many residents enroll.

Philly Dem calls for voter fraud investigation

Outgoing Rep. Babette Josephs, D-Philadelphia, wrote a letter to the state Attorney General Linda Kelly and U.S. Attorney General Eric Holder this week requesting an investigation into voting irregularities in the past election.

She’s asking the agencies to look into the Secretary of the Commonwealth of Pennsylvania Carol Aichele, and each of the state’s 67 counties election boards.

Josephs said the Department of State, and counties, failed to educate voters. On Nov. 6 and since then, reports from across the state surfaced with tales of registered voters not showing up in poll books, malfunctioning machines and the spread of false information in regard to the voter ID and polling place locations.

“Some of these individuals had been voting at that same polling place for years and years,” she wrote. “Suddenly their names were not in the book. We would like to know whether that circumstance was the fault of the Department of State or of the county board of elections.”

Corbett gets the “Sandy bump”

A new poll from Quinnipiac University shows Gov. Tom Corbett with a positive approval rating for the first time since March.

Corbett’s approval rating in the poll is 40 percent among registered voters, with 38 percent of those voters disapproving.

Gov. Tom Corbett gives a news conference during Hurricane Sandy last month.

The governor has struggled with low approval ratings for most of the year, but pollster Tim Malloy said he won points with both Democrats and Republicans for his handling of Hurricane Sandy, which struck Pennsylvania in late October, causing flooding and widespread power outages that left 1.3 million Pennsylvania homes without electricity.

“We would call this a Sandy bump,” Malloy said. “People like the way he handled everything recently during the hurricane.”

As his numbers have fluctuated throughout the year, Corbett has been consistent in saying that he will not govern based on poll numbers and approval ratings.

Lottery privatization moving forward with target in 2013

The state Department of Revenue is moving forward with plans to privatize the state lottery.

The department is now accepting applications from private firms to run the lottery, and a contract could be executed during the first few months of 2013, according to state officials. As part of the process, firms must show they will be able to increase the revenue from the state lottery, which funds programs and services for older Pennsylvanians.

The Pennsylvania Lottery recorded record sales of more than $1 billion in fiscal 2011-12.

Opponents of privatization have pointed to as a reason to keep the operations within state government.

“All Pennsylvania Lottery profits go back into programs for older Pennsylvanians, not into the pockets of corporate shareholders,” said House Minority Leader Frank Dermody, D-Allegheny. “Why mess with a proven record of success?”

The department believes privatization will increase the lottery’s revenues to keep up with growing demand for services targeted at senior citizens as the state’s population grows. The administration can move forward without legislative approval, so opposition from Democrats in the General Assembly will likely fall on deaf ears.

No changes in House, Senate leadership heading into new session

After a status quo election last week, members of the state General Assembly voted for status quo within their own ranks this week.

Speaker of the House Sam Smith, R-Jefferson, was re-elected to a second term, while Majority Leader Mike Turzai, R-Allegheny, and Minority Leader Frank Dermody, D-Allegheny, both won second terms in their respective posts.

Republicans will hold a 111-92 majority in the state House when the new session begins in January after a few final races were settled this week.

In the state Senate, President Pro Tempore Joe Scarnati, R-Jefferson, was nominated to another term as the highest ranking member of the chamber.  His nomination will get a January vote. But with a 27-23 Republican majority, he is expected to win.

Senate Majority Leader Dominic Pileggi, R-Chester, and Minority Leader Jay Costa, D-Allegheny, were also re-elected by their respective caucuses.

The new session will be the second consecutive one in which no members from Philadelphia — the state’s largest city — will occupy any of the six highest ranking leadership positions in the General Assembly.