Rendell Acknowledges $1- $2 Billion Budget Deficit, Hints At Using Marcellus Shale Revenue
Gov. Rendell acknowledged this week for the first time the state could face a budget deficit of $1- $2 billion in the current fiscal year if the economy does not improve. He also said the state could tap some of the $190 million the Department of Conservation and Natural Resources received recently from leasing Marcellus Shale natural gas drilling rights to balance the budget.
Budget Secretary Mary Soderberg told the House Appropriations Committee the Governor has ordered another round of budget cuts on top of the $311 million in budget cuts already made this yearto help limit the flow of red ink.
This is not the first time the Rendell Administration and the General Assembly are considering the use of monies earmarked for environmental programs to balance the budget.
In the 2008-09 budget just passed in July, $15 million was taken from the Recycling Fund to help balance the general fund budget. The Recycling Fund is furtherthreatened by the fact the $2/ton fee on waste disposed in Pennsylvania deposited to the Fund will generate noticeably fewer dollars in the future because the amount of waste coming to Pennsylvania for disposal is declining, according to Department of Environmental Protection.
In the 2007-08 and 2008-09 budgets, $50 million (at least $25 million each year) was diverted from the Environmental Stewardship Fund,which had funded new watershed restoration, abandoned mine reclamation and other programs every year since 1999, to pay the debt service on the Growing Greener II bond issue. Up to $60 million a year can be (but is not required to be) used from this Fund to pay debt service.
However, payment of debt service for the Growing Greener II bond issue and other Growing Greener Programs funded through the Environmental Stewardship fund are also threatened by the same decline in waste disposed in Pennsylvania as the Recycling Fund.
A separate$4.25/ton fee on waste disposed in Pennsylvania is deposited in the Environmental Stewardship Fund, which will also generate fewer dollars in the next two years, according to Department of Environmental Protection projections.
In the 2007-08 budget, environmental groups narrowly defeated an attempt to take $40 million from the Keystone Recreation, Parks and Conservation Fund to support the Hazardous Sites Cleanup Program, in spite of the fact the proposal was agreed to by Gov. Rendell and Senate leaders.
In 2006 and 2007 a total of $50 million was again taken from the Environmental Stewardship Fund to finance the Hazardous Sites Cleanup Program and not returned.
In the proposed 2006-07 budget, Gov. Rendell proposed a one-time diversion of $63 million from the Keystone Recreation, Parks and Conservation Fund to help balance the budget. In the end, the diversion ended up being $52.7 million.
In 2005, legislation implementing the Growing Greener II bond issue directed a portion of the $625 million approved by voters to brownfields redevelopment at the Department of Community and Economic Development, a sales tax holiday for energy efficient applicants (pending passage of separate legislation), a historic preservation grant program (pending passage of separate legislation), to fund an alternative fuels program and to a new $90 million county-level Growing Greener Program.
Next year, however, the $625 million Growing Greener II bond issue funds will start to run out leaving all these programs without funding, including a major portion of the farmland preservation program, watershed restoration efforts, abandoned mine reclamation, recreation grants, State Park and State Forest improvements and oil and gas well plugging projects.
The Department of Conservation and Natural Resources had been counting on a majority of the $190 million it received from selling the Marcellus Shale natural gas drilling rights to make up for some of the funding it lost when Growing Greener II funds run out.
The Rendell Administration and the General Assembly did approve a $650 million program to promote renewable energy and energy conservation this past July. In addition, attempts by Gov. Rendell over the years to sell additional fees on residual waste, toxic substances reported through the federal Toxic Release Inventory Program, fees on electric use and municipal and hazardous waste to generate more environmental funding have not succeeded with Democrats or Republicans in the General Assembly.
Each year since 2003 there has been an overall cut in the budgets for the Department of Environmental Protection and the Department of Agriculture, although the budgets for the Department of Conservation and Natural Resources and the Fish and Boat and Game Commissions have increased.
For example in the 2002-03 budget, DEP received a total of $728.2 million and in the most recent 2008-09 budget it received about $694 million. The biggest cut at DEP made byGov. Rendell and the General Assembly was in the annual Act 339 wastewater plant operating funds. More than $324 million were cut and absorbed back into the General Fund from this one program alone over the last six years.
In 2002 the largest single diversion of environmental funds occurred, taking $100 million from the Underground Storage Tank Indemnification Fund which provides pollution cleanup insurance for owners of underground storage tanks. The funds were used to balance the budget that year, with a promise to pay the monies back over 10 years. Payments have been made each year since, but normally not the full amount and not without significant lobbying by those who would be without insurance coverage if there were not adequate funds to pay for claims.
In the last seven years more than $600 million in environmental funds have been diverted to balance the budget or to rob Peter to pay Paul for other environmental programs.
There are several large pots of money, besides environmental funds, available to help deal with the deficit for this year and next, including the $700 million in the Rainy Day Fund and the $700 million in the MCARE Fund that was supposed to pay the malpractice insurance for doctors, if the program is reauthorized.
The formal mid-fiscal year budget review required by law will be held on December 9 shedding further light on upcoming budget issues.
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