It’s official.  In a flurry of action this week, the Senate Transportation Committee held a final confirmation hearing for Acting PennDOT Secretary Yassmin Gramian.  Ms. Gramian was nominated by Governor Tom Wolf in January to fill the vacancy left by former Secretary Leslie Richards when she left to take over the CEO post at the Southeastern Pennsylvania Transportation Authority (SEPTA).  Ms. Gramian officially will be able to drop the “Acting” tag and will now become the second women to be the Secretary of the Pennsylvania Department of Transportation after the full Senate unanimously confirmed her nomination late Wednesday night.  Congratulations, Secretary Gramian.

Something is better than nothing.  The highlight of the week was the General Assembly’s final passage of the state FY 2020-21 General Fund budget.  Well…sort of.  The state did put the final touches on House Bill 2387 which represents a short-term budget that will authorize state spending until November 2020.  It will be at that time when the General Assembly will need to reopen the budget and figure out how to deal with the estimated $4 billion shortfall due to the impacts of COVID-19.  The short-term budget is expected to get Governor Wolf’s approval and bases state spending over the next 6 months on last year’s budget spending plan.  While this seems to buy legislators some time in hopes that the economy rebounds and revenues pour in, many expect a very difficult situation looming by year end.  The state budget was expected to have a shortfall of nearly $1 billion before the coronavirus pandemic hit the nation.  Now with the shortfall projections at staggering levels, many are bracing for severe spending cuts or an increase in General Fund taxes to bridge the gap.

As part of the budget and specific to the highway construction program is the annual authorization of the Motor License Fund and State Police operations spending levels.  The short-term budget enacted this week sets both of these levels at the same as they were last year, but the annual appropriation from the Motor License Fund to the State Police was still reduced by the 4% level to $705 million for FY2020-21.  This is a “win” for the industry at a time when legislators are looking for any sources of funds they can find to curb the budget gap outlined above.

Conflicting numbers.  On Tuesday, the state Independent Fiscal Office (IFO) provided its revised “Initial Revenue Estimate Report” which was the first glance at some hard numbers from the agency.  You can view the report by going here.

The IFO provides revenue projections for use in the state budget process along with impartial and timely analysis of fiscal, economic, and budgetary issues to assist Commonwealth residents and the General Assembly in their evaluation of policy decisions.

The IFO’s projections are close to what has been universally accepted as the expected General Fund deficit for FY2020-21.  The IFO’s estimate, released Tuesday, placed that figure at $3.9 billion.  They did, however, also release projections on the state’s Motor License Fund (MLF) which are drastically different than the estimates being used by both the PA Department of Revenue and PA Department of Transportation.

The IFO analyzed April collections into the MLF and stated, “Based on actual revenue collections through April 2020 and projections for the remainder of the fiscal year, the revised estimate for FY 2019-20 is $2.8 billion, a decline of 1.9 percent from the prior year and $79 million below the IFO’s official estimate.  The IFO also went on to say that for the upcoming fiscal year, “The MLF is projected to increase at a rate of 0.5 percent ($14 million) for FY 2020-21. 

Our analysis of the report would suggest that if you assume the $79 million impact will extend for another fiscal year, then the total impact to the MLF would only be in the $200 million range.  This is a far different outlook than the $800 million hole that PennDOT estimated and testified to during a Senate Transportation Committee hearing two weeks ago. 

There is some truth to the notion that it’s anybody’s guess what the impacts COVID will have on the state’s fiscal picture.  APC will remain on top of these number and obtain more analysis to report in future editions of This Week in the Capitol.