House Approves Sweeping State Budget Reforms, Spending Control Measures Legislation to bring transparency to the budget process heads to Senate
HARRISBURG – Once again, standing up for taxpayers, the House this week approved historic legislation to change budget-making in Harrisburg by bringing integrity, transparency and spending limits to the state budget and budget process, according to the House Republican leadership team.

“Over the past three years, the budget and its funding have been a major concern for the Commonwealth and main topic of debate in the General Assembly,” Majority Leader Dave Reed (R-Indiana) said. “The governor has been using loopholes in the constitutional provision for a balanced budget, and we’re closing them.”

“In unprecedented fashion, we have seen three budgets become enacted without a governor’s signature, and that same governor using loose interpretations of the Constitution and laws to spend taxpayer dollars without statutory authority,” Speaker of the House Mike Turzai (R-Allegheny) said. “The secret and unauthorized spending specifically created a multi-billion dollar deficit and it’s time to stop these reckless actions.”

The package of six bills – House Bills 1940, 1941, 1942, 1943, 1944 and 1945 – requires transparency through an official estimate of how much money the state will have, more information about the balances in taxpayer-supported special funds used to provide grants and subsidies, and the creation of monetary reserves during revenue shortfalls.

“These bills represent progress in our fight to bring more accountability and transparency to state government. These reforms will help to rein in excessive government spending and create more accountability with taxpayer dollars. The proposals we have sent to the Senate represent commonsense reform that will move Pennsylvania’s budget process in a more transparent direction,” said Committee Chairman Stan Saylor (R-York).

“State government should exist to serve the needs of Pennsylvanians, not to burden them with out-of-control spending and higher taxes,” added Majority Policy Committee Chair Kerry Benninghoff (R-Centre/Mifflin). “No different than how each of us must handle our own household budgets, reforms like a mandated cap on spending ensures state government never spends more than we can afford.”

A proposed state constitutional amendment to limit state spending, House Bill 110, would impose a cap based on recent increases in the Consumer Price Index and state population growth. A constitutional amendment must be approved in two consecutive legislative sessions and then by the state’s voters.

“The bottom line is our state government should be spending within its means, and that’s really what the Taxpayer Protection Act is all about,” Caucus Administrator Kurt A. Masser (R-Columbia/Montour/Northumberland) said. “Our taxpayers should be the first thing we consider when crafting our budgets and the legislation in this bill package protects them by controlling spending and more.”

Earlier this year, legislation requiring performance-based budgeting was enacted to provide the General Assembly with information needed about the outcomes of state programs. This information will help legislators decide which programs to fund and which to shut down.
“These budget reforms are a great start to fundamentally changing the process to be more transparent, and they ensure that both taxpayers and the programs they fund are protected,” Majority Whip Bryan Cutler (R-Lancaster) said.

The leaders noted, that together, these bills to base budgets on performance, institute spending caps and reform the budget process are a needed shakeup of the status quo, which clearly has not been working for the past three years.

“The changes our proposed budget reforms would bring are commonsense concepts that Pennsylvanians have incorporated on a smaller scales in their own homes,” Republican Caucus Chair Marcy Toepel (R-Montgomery) explained. “We all know how irresponsible it is to maintain spending levels when a family member loses his or her job, but spending has continued at the state level even when revenues weren’t there. It’s time to apply the principles we all use at home here in Harrisburg.”

The budget process reform bills highlight openness and transparency; they will close loopholes to ensure balanced budgets, place limits on the executive branch’s use of lapsed or unspent funds, and improve transparency. These bills require the budget secretary to put funds in reserve to bring the budget into balance in the event of revenue shortfalls, limit the budget secretary’s authority to use lapsed funds for new or expanded programs, and provide more information to support requests for supplemental appropriations.

“People throughout Pennsylvania demand us to be effective stewards of their hard-working tax dollars and to ensure that government – especially the budget process – be as efficient as possible. This package of bills – which puts the taxpayers first – seeks to reform a dysfunctional budget process that has plagued our state for far too long,” Caucus Secretary Donna Oberlander (R-Clarion/Armstrong/Forest) said.

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The state budgeting reform legislation:

House Bill 1940 (Rep. Reed): Closing the loophole allowing an out-of-balance budget to become law. House Bill 1940 would require the official revenue estimate be signed at the time the General Appropriation Act is enacted, regardless of whether the bill is signed, becomes law without the governor’s signature, or through a veto override. Further, if the amount appropriated exceeds the official revenue estimate, this proposal would require the Secretary of the Budget to place amounts in budgetary reserve in order to bring the budget into balance.

Why it’s necessary: An annual official revenue estimate, signed by the governor, is necessary to determine whether the state budget is balanced. The revenue estimate sets the total amount of funds that may be expended in a fiscal year, at the time the General Appropriation Act is signed. To bring the budget into balance with the revenue estimate, the governor is required to use a line-item veto. Unknown until 2016 and 2017, this leaves a loophole in instances where the General Appropriation Act becomes law without the governor’s signature.

House Bill 1941 (Rep. Saylor): Limiting lapsed funds. To manage the Commonwealth’s budget in a more transparent and accountable manner, this legislation would set a reasonable time limit on budgetary waivers before the unused funds lapse and return to the State Treasury. Further, this bill would prohibit using waived funds for the creation of a new or expanded program or initiative.

Why it’s necessary: Under current law, the Secretary of the Budget has blanket authority to “waive” the provisions relating to unused agency funding, allowing them to lapse indefinitely for future use.

House Bill 1942 (Rep. Dunbar): Ensuring a balanced budget amid revenue shortfalls. To avoid creating a deficit, beginning in December of a fiscal year, the Secretary of the Budget would be required to estimate the amount that revenues for the fiscal year will fall short of the official estimate, and be required to place the amount in budgetary reserve. The official estimate would be revised each month, and the amounts in budget reserve would be adjusted accordingly.

Why it’s necessary: As the 2016-17 fiscal year progressed, revenue collections lagged below the official revenue estimate, yet the administration continued to spend to basically the full appropriation, thus ending the fiscal year more than $1.5 billion in deficit.

House Bill 1943
(Rep. Nelson): Making special funds transparent, open and accountable. To improve oversight over the special funds, this legislation would require quarterly reports to be issued by the administration on the amount committed and awarded from special funds that are used to provide grants and subsidies.

Why it’s necessary: While the development of PennWATCH and the State Treasurer’s public transparency portal have made progress in ensuring access to the Commonwealth’s financial data, detailed information relating to programs funded from special funds is not readily accessible, and in fact, often withheld.

House Bill 1944 (Rep. Delozier): Making the cost of mandates transparent. This would require annual reports to show the cost of state and federal mandates by the administration, including funds used as federal matching funds, and which are entitlements. This legislation would also require the governor to present legislative language in the annual budget proposal process, which is intended to address the fact that substantial portions of the governor’s February 2017 budget proposal were never presented to the Legislature in legislative form.

Why it’s necessary: One of the challenges to a thorough review of the state budget is the lack of information relating to mandated costs and the governor’s budget proposals.

House Bill 1945 (Rep. Brown): Requiring identification of cost-savings for supplemental appropriation requests. This bill would require the administration to submit a statement of the need for supplemental appropriation and recommendations for cost-savings or other reforms which address the cause of the need of the supplemental appropriation.

Why it’s necessary: Each year as part of the budget process, the governor requests supplemental appropriations for the current fiscal year. These requests typically reflect payments that legally have to be paid, but the need for these requests can vary, including growth in the need for an entitlement program or an unexpected increased in personnel costs.

House Bill 110 (Rep. Warner): The Taxpayer Protection Act. This Joint Resolution would amend the Constitution to establish spending caps on taxpayer dollars. The legislation must be passed twice by the General Assembly in consecutive legislative sessions, and then approved by a voter referendum.

Spending of state taxpayer dollars would be limited to the spending during the immediate prior fiscal year adjusted by the sum of:
•    The average percentage change in the Consumer Price Index (CPI) over the three preceding years and
•    The average percentage change in population over the three preceding years.

This spending limit may be increased only with a three-fourths vote of the General Assembly.

Act 48 of 2017: Performance-Based Budgeting Act – Establishes performance-based budget recommendations and reviews by the Independent Fiscal Office and an independent board to enhance and improve budget development and decision making associated with the annual budget process. The reviews will look at state agencies and make recommendations to make operations and programs more transparent, effective and efficient.

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