Week Ending Jan. 1, 2016

Jan 04, 2016

Wolf Line-Item Vetoes Budget Proposal  

Using his veto authority, Gov. Tom Wolf struck parts of a Republican-approved $30.3 billion budget (House Bill 1460) while directing emergency funding for key services.

“I’m vetoing the Republican plan to cut $95 million from education, and I’m also vetoing other items that they don’t pay for,” said Wolf. “I’m calling on our legislators to get back to Harrisburg – back to the work they left unfinished last week. At the same time, I’m allowing emergency funding for our schools to get out. I’m also letting funding go out to our human service agencies and to our counties. But this is on an emergency basis only."

Wolf limited emergency funding to a half-year appropriation for basic education funding, state corrections institutions, and medical assistance capitation. In total, the governor released more than $23.3 billion in funding. For the most part, general government operations for state departments escaped Wolf’s veto. State correctional institutions, basic education, community colleges, medical assistance as well as lines pertaining to House and Senate operations had their lines reduced. Funding for the State System of Higher Education remained almost intact along with PHEAA grants.

To view the general fund tracking run, click here.

Both the House and Senate are in recess until called back by the Speaker of the House or President Pro Tempore, respectively.

Wolf delivers his 2016-2017 budget address on Tuesday, Feb. 2.


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Treasury Plans to Expedite Payments 

The Pennsylvania Treasury has received payment requests from the governor’s Office of the Budget for about 16,400 delayed payments totaling nearly $3.3 billion to school districts, counties, and human service organizations. Treasury is also working with the Office of the Budget to process the remaining delayed payments, and expects the entire backlog will be sent out within about two weeks.

Normally, once Treasury receives a payment request it requires about 10 business days to conduct a mandated legal and accuracy review, process the payment, and send it electronically or by mail. To expedite delivery, Treasury has worked with the Office of the Budget during the state budget impasse to identify and preaudit thousands of payments.

Instead of the usual 10 business days, preaudited payments will be delivered by next week. They include education payments (basic education, Head Start, public libraries, and special education); public welfare payments (child care, homeless assistance, and some health services); veterans’ payments; and critical lease and utility payments.

Treasury anticipated receiving payment requests for the remainder of delayed payments from the Office of the Budget last week. The entire backlog of payments should be sent within two weeks of Treasury receiving payment requests.


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Welfare Code Bill Signed into Law 

Legislation sponsored by state Rep. Aaron Kaufer (R-Luzerne) to close a gap in the state’s welfare laws that has allowed some individuals to receive public assistance from multiple states was signed into law by Gov. Tom Wolf on Dec. 28.

House Bill 1322, now Act 92 of 2015, requires applicants to disclose states in which they have previously received welfare benefits. The Pennsylvania Department of Human Services (DHS) may not authorize general assistance for the applicant until it receives verification that his or her benefits will be stopped in the other states.

This legislation also repeals the current Gross Receipts Tax (GRT) on medical assistance managed care organizations (MCOs), which the federal government has deemed is in violation of the broad-based tax requirement for federal matching funds. The GRT is replaced with an MCO assessment effective July 1, 2016. The assessment is expanded to all MCOs, specifically medical assistance MCOs, Act 68 MCOs, and all CHIP plans. The assessment is a fixed, per member, per month assessment of $13.48, effective July 1, 2016, and will be the same fixed rate through fiscal year 2019-2020.

Lastly, Act 92 includes changes to Pennsylvania’s child care benefits structure that will help families work their way out of poverty, as well as a redesign of the Keystone Education Yields Success Program, an academic support program assisting low-income individuals who are seeking additional training or certification to improve their job prospects.


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IRS Pension Compliance Bill Signed into Law 

House Bill 1332, sponsored by Rep. Robert Godshall (R-Montgomery), makes updates to the Public Pension Program administered by the State Employees Retirement System (SERS) and the Public School Employees Retirement System (PSERS) to maintain compliance with IRS rules. The bill, now Act 93 of 2015, was signed into law by Gov. Wolf on Dec. 28.

The changes are as follows:

  • Requires minimum vesting standards for PSERS and SERS, specifying that in the event of termination of the plan or discontinuance of benefit accruals, a member’s account must be fully vested to the extent then funded.
  • Incorporates the IRC’s minimum distribution rules for PSERS and SERS benefit payment plans and the payment of death benefits. Requires plans to begin making required distributions starting April 1 of the calendar year following the calendar year the employee attains the age of 70½ or terminates employment, if later.
  • Provides a limit on annual benefits for PSERS and SERS members not to exceed the limit set in the IRC ($210,000).
  • Prohibits PSERS and SERS members from receiving in-service distributions prior to death, disability, separation from service, or attainment of normal retirement age.
  • Eliminates “pick-up contributions” in SERS, which allows members whose estimated single life annuity exceeds 110 percent of compensation to waive payment of member contributions.
  • Provides for PSERS notice requirements to be fulfilled by publication and electronic means.

Failure to comply with the IRC could result in the loss of tax deferred status for the PSERS and SERS plans and could subject the value of each member’s account and future contributions to federal taxes.


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Two State House Lawmakers Announce They Won’t Seek Re-election 

Republican state Reps. William Adolph (Delaware) and Julie Harhart (Northampton) announced that they will not seek re-election in 2016.

Adolph, a public accountant, was first elected to his seat in 1988. He is currently chair of the House Appropriations Committee, a position he was elected to by his colleagues starting in 2010. Adolph has served as chair of the House Professional Licensure Committee and of the House Environmental Resources and Energy Committee.

Harhart was first elected to the state House in 1994. Her district consists mostly of communities in western Northampton County, but also includes portions of Lehigh County. She is currently majority chair of the House Professional Licensure Committee in addition to other committee posts.

More retirement announcements are expected.  


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Newly Elected Pa. Supreme Court Justices to be Sworn In 

Pennsylvania’s three newly elected justices of the state Supreme Court will be installed at separate special sessions of the court.

Justice-elect Kevin M. Dougherty will be the first to take the oath on Tuesday, Jan. 5, 2016, at 4:00 p.m. at the Constitution Center in Philadelphia.

He will be followed by Justice-elect David N. Wecht on Thursday, Jan. 7, 2016, at 10:30 a.m. at the Duquesne University Union Ballroom in Pittsburgh.

Justice-elect Christine L. Donohue will be sworn in on Friday, Jan. 8, 2016, at 11:00 a.m. at the Duquesne Club in Pittsburgh.

Justices-elect Dougherty and Wecht will be sworn into office by Chief Justice Thomas G. Saylor. Justice-elect Donohue will be sworn into office by Justice Debra Todd.


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GASB Issues Guidance on Investment Pools 

The Governmental Accounting Standards Board (GASB) issued guidance addressing how certain state and local government external investment pools and participants in external investment pools may measure and report their investments in response to changes contained in a U.S. Securities and Exchange Commission (SEC) rule due to take effect in April 2016. References to that rule were previously incorporated in GASB literature.

GASB Statement No. 79, Certain External Investment Pools and Pool Participants, permits qualifying external investment pools to measure pool investments at amortized cost for financial reporting purposes. The statement provides guidance that will allow many pools to continue to qualify for amortized cost accounting.

The statement also establishes additional note disclosure requirements for qualifying pools and for governments that participate in those pools. These required disclosures include information about limitations or restrictions on participant withdrawals.


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