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MEMO: Factchecking Spending During the Budget Impasse

March 03, 2016

SUBJECT: Factchecking Spending During the Budget Impasse
TO: Interested Parties
FROM: Secretary Randy Albright
DATE: March 3, 2016

The operation of government during the impasse is a complicated, but necessary process.

The Wolf Administration was required to continue operations under guidelines set out by the Pennsylvania Constitution, federal law, and state law. Most importantly, the Administration was also required to continue operations for critical functions that impact the health, safety and protection of Pennsylvanians.

Below is a detailed explanation of the continued operations during the impasse and how we are working to be open and transparent about how the Administration is making payments.

Status of Appropriations Reports

The Treasury Department’s Status of Appropriation report provides departments with the amount remaining in an appropriation. It starts with the legislated appropriation amount, adds expendable revenue, deducts expenditures, and makes adjustments as recorded by the agency, finally arriving at an ending balance available for use by the department.

However, the Status of Appropriations report does not provide an accurate picture of how much has been expended during the impasse without a direct appropriation in a General Appropriations Act. This report, which is very important for other reasons, is a much broader picture of commonwealth finances, including:

  • Many different funds, such as the Motor License Fund and the State Stores Fund, in addition to the General Fund;
  • Revenues from many different sources, such as augmentations and federal funds, in addition to direct appropriations; and
  • Funds appropriated over many different years, in addition to the current year.

This is further demonstrated by the total appropriation and augmentation amounts in the same Status of Appropriations report for the first half of 2015-16. While payments totaled $24.7 billion, the appropriation amount of $59.8 billion and another $27.1 billion in augmentations, are far more than what is appropriated in a General Appropriations Act.

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Unappropriated Augmentations

As mentioned, the commonwealth expends some items without annual appropriation, as continuing appropriations or through augmentations (fees, etc.). For example, the legislature raised the fee for a duplicate birth certificate from $10 to $20. This change provided a funding stream to Child Advocacy Centers (CACs), which now no longer require an annual appropriation in the General Appropriations Act. However, those funds still must be disbursed by the Treasury to the CACs.

Lapses

As part of the compromise budget, the administration agreed to lapse $200 million in prior year funds back to the General Fund to help balance the budget. This is common. Typically, there between $100 and $200 million in lapsed funds that are returned to the General Fund each year.

The Patriot News said, “In most years, the state reclaims between about $100 million and $200 million to fill gaps elsewhere in the budget. In fiscal year 2012-13, for example, the budget included $189 million in these so-called lapses. Last year [the final year of the Corbett Administration], however, the final budget included $417 million.”

This occurred because the Corbett Administration went back and deliberately restricted the spending authority of agencies after the budget passed even further so they could carry more money forward. This deliberate gimmick, coupled with raiding one-time funds, meant that they did “not raise taxes.”

However, this practice papered over the problem, and now the bills have come due.

General Fund Detail through December 31, 2015

The $24.7 billion in payments made from the General Fund from July 1, 2015 until December 31, 2015, can be broken down as follows:

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Audits of Commonwealth Expenditures

During the impasse, the administration, through the office of the budget and the comptroller, worked closely with the treasury department to ensure that all payments made were required and appropriate, as in the normal course of business. The Wolf Administration continued operations for all critical functions that impact the health, safety and protection of Pennsylvanians, or was required under Federal Law, state court decisions or the Pennsylvania Constitution. Despite the challenging situation created when the legislature refused to support a compromise budget, the administration made and accounted for all appropriate payments in the commonwealth’s accounting system, which legislative Appropriations Committees have access to.

Pre-audit activities are performed by the Office of the Budget, Comptroller Operations staff and also by the Treasury Department (the latter, an Independent Agency with a Statewide elected agency head) on a daily basis as transactions occur.

Post-audit activities are conducted by three audit organizations. First, several of the larger Commonwealth agencies have their own audit units. Secondly, each of the six Comptrollers Offices in the Office of the Budget has an audit staff. Finally, the Fiscal Code provides that the Department of the Auditor General (an Independent Agency with a statewide elected agency head) shall make all audits of transactions after their occurrence, which may be necessary, in the connection with the administration of the financial affairs of the government of the Commonwealth of Pennsylvania.

In addition to the pre-audit and post- audit activities conducted by the six Comptrollers Offices, the Bureau of Audits in the Office of the Budget also conducts performance audits on selected agency programs, or on activities or issues that impact all Comptrollers Offices.

Additionally, the commonwealth annually issues a comprehensive annual financial report (CAFR), a set of government financial statements that complies with accounting requirements prescribed by the Governmental Accounting Standards Board (GASB) and provides information about the financial condition of the commonwealth. It is prepared primarily by accounting staff in the Office of Comptroller Operations and audited by independent auditors, currently Clifton Larson Allen, using GASB requirements.

Access to Information

Detailed information, on both expenditures and revenues, is available to the legislature and has been available to the legislature throughout the impasse. The legislature, through their Appropriations Committees, has electronic access to the Commonwealth’s internal accounting system so that they can see all expenditures posted during the impasse. Additionally, this administration has been more than open and transparent, both when it comes to independently providing information and in responding to direct requests by the Chairmen of the Appropriations Committees.

Despite the challenging situation created when the legislature refused to support a compromise budget, the administration is required to continue critical health and safety operations, as well as critical operations required by the constitution and federal and state law. The administration is working to be open and transparent about making payments, accounting for all appropriate payments in the commonwealth’s accounting system, which legislative Appropriations Committees can access.

The Wolf Administration and the legislature must collaborate to solve our fiscal crisis. That starts with working together to provide the most clear and accurate information to the public about the dire situation we are in and keep Pennsylvania from going over the fiscal cliff.

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