Finishing out the 2019-20 legislative session, Pennsylvania’s General Assembly passed an $11 billion supplemental budget bill before it adjourned in November, ensuring funding for the state through June 2021. The budget was signed shortly thereafter by Governor Wolf. During the uncertainty of the COVID-19 crisis earlier in the year, the legislature had passed a partial budget funding operations for five months. Last month’s supplemental budget agreement funds the state’s remaining 7 months, bringing the fiscal year budget total to $35.5 billion.
During a time when the state’s economy is still reeling from the effects of business closures, high unemployment, and other economic impacts of the COVID-19 pandemic, lawmakers argued that it was essential for the state to tighten its belt and avoid tax increases and borrowing. As a result, the budget uses $500 million in funds from reserves and special accounts, $2 billion in federal Medicaid funds, and $1.3 billion in federal CARES Act money to fill budget holes and avoid layoffs for state government employees.
Critics pointed out that the $1.3 billion remaining CARES Act funds was intended to address COVID-19-related expenses, including grants for hospitals and small businesses, not to backfill budget gaps. However, supporters countered that the CARES funding was needed to cover the salaries of state workers who directly support COVID-19-related programs, including those in public health and safety at the Department of Corrections, State Police, and the Department of Health. The alternatives would be layoffs or tax increases to fund these programs.
Though tax increases and deficit spending were off the table this fall, lawmakers will certainly face a challenge by next June’s 2021-22 budget deadline, especially if the state’s economic recovery is less than stellar and additional federal aid isn’t forthcoming. Because this year’s supplemental budget relied heavily on one-time spending, special accounts, and federal funds, it will be difficult to cover gaps in funding next year without program cuts or new taxes. NFIB will watch closely in 2021 as discussions shift to the state budget in the context of managing Pennsylvania’s economic recovery.