Completed 2020-21 State Budget Funds Vital Services with No Tax Increase

Senate Approves Final Fiscal Year 2020-21 Budget

The Senate approved final 2020-21 state budget that funded vital services without raising taxes or fees. The spending plan was a follow-up to the interim budget passed in May amidst fiscal uncertainty caused by the pandemic.

Overcoming the severe impact of the COVID-19 pandemic on Pennsylvania’s economy, the final $35.5 billion FY 2020-21 budget is balanced without the need for tax or fee increases or debt using a combination of current state revenues and resources and federal stimulus funding.

While the interim spending plan approved in May provided five months of funding for most state services and programs, it made a full-year financial commitment for education at all levels and for a variety of food security programs. Funding for basic education, special education, early education and higher education is maintained in the final spending plan at the same level as 2019-20.

Spending in the final Fiscal Year 2020-21 state budget includes General Fund appropriations of $32.1 billion and an additional $3.4 billion in federal stimulus funds ($2.1 billion Federal Medical Assistance Percentage, FMAP, and $1.3 billion federal CARES funds).

After adjusting for supplemental spending that should have been in FY 2019-20, overall state spending in the final FY 2020-21 budget — including federal stimulus funds — is down more than $760 million (2.1 percent) from FY 2019-20.

The final budget includes $200 million to provide school property tax relief to replace the revenues those districts lost by the closure of Pennsylvania’s casinos during the pandemic shutdown.

Details of the Final Fiscal Year 2020-21 Budget

Passage of Senate Bill 1350 finalizes the state spending plan for Fiscal Year 2020-21 that was initiated with the enactment of a five-month interim budget (Act 1A – House Bill 2387) on May 29. 

Overcoming the severe impact of the COVID-19 pandemic on Pennsylvania’s economy, the final $35.5 billion FY 2020-21 budget is balanced without tax or fee increases or debt by using a combination of current state revenues and resources and federal stimulus funding.

Had the Senate moved forward with a full-year budget in May or June — without knowing the full impact of this virus on our economy — we risked creating an extraordinary budget deficit that could result in reduced services and higher taxes for years to come.

Passing a lean, responsible, short-term budget in May gave the General Assembly the flexibility to meet the needs of our communities, schools and citizens as we developed a better forecast of our anticipated revenues and the long-term impacts of the pandemic on our state and local economies.

While the interim spending plan provided five months of funding for most state services and programs, it made a full-year financial commitment for education at all levels and for a variety of food security programs. Funding for basic education, special education, early education and higher education is maintained in the final spending plan at the same level as Fiscal Year 2019-20.

Spending in the final Fiscal Year 2020-21 state budget includes General Fund appropriations of $32.1 billion and an additional $3.4 billion in federal stimulus funds ($2.1 billion Federal Medical Assistance Percentage, FMAP, and $1.3 billion federal CARES funds).

After adjusting for supplemental spending that should have been in FY 2019-20, overall state spending, including spending from federal stimulus funds, in the final FY 2020-21 budget is down more than $760 million (2.1 percent) from FY 2019-20.

The final budget represents a 9.8 percent decrease across operating appropriations from the Governor’s initial request from February 2020.

While overall spending is down, the budget provides a $125 million increase – to $170 million – for the Highway Safety Improvement Fund, which is supported by the Commonwealth’s Motor License Fund.

The final budget includes $200 million to provide school property tax relief to replace the revenues those districts lost by the closure of Pennsylvania’s casinos during the pandemic shutdown.

The final budget includes $531 million in transfers of excess, unallocated money from various special funds to the General Fund. These transfers will not impact services or cause program disruptions. Among these transfers is $100 million from the Rainy Day Fund — leaving a balance of $243 million — and $185 million from the Workers’ Compensation Security Fund.

The delay in enacting a complete budget for FY 2020-21 provided tangible benefits to the Commonwealth as there has been a dramatic uptick in anticipated state revenues since May as projections by the Administration have increased by $2 billion since May.

The Commonwealth also benefited from new federal guidance on the CARES funding that now permits the use of the $1.3 billion for public health and safety purposes. The budget also requires that CARES funds allocated in May that are unspent and unencumbered be returned and redistributed to the state Department of Corrections.

In addition, Federal Medical Assistance Percentage funds are now anticipated to be available for the full fiscal year.

While passage of Senate Bill 1350 completes the FY 2020-21 budget, the primary focus of Senate Republicans continues to be on rebuilding Pennsylvania in the wake of this deadly virus and the resulting statewide closure of our economy.