CORRECTED: Argues for preservation of public safety, public health in light of no new taxes or fees

Gov. Tom Corbett’s Budget Secretary, Charles Zogby, said Monday at the Pennsylvania Press Club the “day of reckoning” had come for the state’s fiscal situation.

Though he refused to comment on specific agency cuts, Mr. Zogby outlined a broad picture of what Mr. Corbett’s budget proposal will look like when it is released next Tuesday. Arguing the commonwealth is out of resources for programs and initiatives outside the core mission of government, Mr. Zogby emphasized public health and public safety as priorities.

“The day of reckoning has arrived,” said Mr. Zogby. “No more reliance on federal stimulus funds, no more gimmicks, no more use of one-time sources. Instead we’re focused on the core missions of government and making the difficult choices to live within our means.”

Mr. Zogby highlighted several accounting gimmicks utilized by past administrations to make the budget balance when spending has outstripped expenditures, including the $2.6 billion in federal stimulus dollars used in the 2009-2010 and 2010-2011 budgets.

“The state budget currently relies on approximately $2.6 billion in federal stimulus funds from the American Recovery and Reinvestment Act of 2009 (ARRA) to bring it into balance,” said Mr. Zogby. “That’s $2.6 billion in funds that now support medical assistance programs, basic and higher education, corrections and a variety of human services initiatives. They will not be available for this coming fiscal year.”

Among the nearly $750 million in one-time fund transfers Mr. Zogby referred to include funds taken from the Oil and Gas Lease Fund, the Fund for Revitalization and Economic Development, the Emergency Medical  Services Operations Fund, the Small Business First Fund, the Low-Level Nuclear Waste Fund, the Local Government Capital Project Loan Fund, the Highway Beautification Fund and the Rainy Day Fund.

“That’s a funding gimmick,” he said. “The money’s there one year; it’s not there the next but the program and the program costs remain. That’s a one-timer that does nothing more than patch a hole that has to be filled the following year.”

One-time fund transfers were advocated by former Gov. Ed Rendell to close the budget gap in the last fiscal session.

When pointing out the accounting gimmicks used by state government to push expenditures into the future, Mr. Zogby did not point to bond issues or the addition of new debt – or rule it out for the current administration – but said there were some expenditures the state could not avoid.

“We’ve kicked the can down the road long enough,” Mr. Zogby said. “A certain amount of expenditure growth cannot be avoided. Our debt services obligations have to be paid; our prison system must be operated in a safe and secure manner. Monies that were put into medical assistance and other vital programs have to be made up. All these events and fiscal realities conspire to make the 2011-12 budget the year that we get our fiscal house in order.

Included in the $26 billion of federal stimulus dollars was $175 million to maintain Pennsylvania’s prison system. Like many other states, Pennsylvania has an aging population which conspires to put an additional strain on medical payments the state issues in Medicaid.

Asked about the adultBasic program, which ends today after Mr. Corbett cut its funding, Mr. Zogby offered no hope for those protesting the move.

“You have a program that was funded with sources of revenue that no longer exist and can no longer sustain it,” he said.

Even with the gap between expenditures and spending, leading to a $4 billion projected deficit next year, Mr. Zogby disagreed a tax base expansion would occur, in light of Mr. Corbett’s pledge to not increase taxes or fees as governor.

“The problem that faces state government [is] not a revenue problem,” he said. “We’re not in a deficit situation because Pennsylvania taxpayers sent too little to Harrisburg. We have a spending problem.”

Speaking on education reform in the state, Mr. Zogby indicated support for S.B. 1, a hotly contested bill which would allow low-income students in failing schools to take their education dollars elsewhere. The program would cost $50 million to launch in the first year, though the funds would come from the existing education budget. Over three years, it would expand to all low-income students in the commonwealth, regardless of school district. It was jointly introduced by state Sen. Anthony Williams (D – Philadelphia) and state Sen. Jeffrey Piccola (R – Dauphin).

“There’s a lot of money in the education system already,” said Mr. Zogby. “Even with next year’s budget and taking the ARRA funds out of the picture. The governor’s talked about enabling students trapped in failing schools to take their education dollars and make the choice of another school with those monies. By my math, at least, it doesn’t require any additional money – the funds are already there.”

But Mr. Zogby kept tight-lipped on what kind of spending cuts the commonwealth could expect, deferring to Mr. Corbett’s budget address next Tuesday.

“The goal is to put together a reasonable and responsible plan to balance the budget,” said Mr. Zogby. “I don’t think there’s any spending cut target we sought to reach. We looked at every possible line item that we could, trying to balance state government functions and responsibilities….a big part of which will include spending cuts.”

This story initially reported the cost of S.B. 1 to be $500 million in the first year.  It will cost $50 million, according to Senate estimates.