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House of Representatives
Session of 2021 - 2022 Regular Session


Posted: December 3, 2020 10:33 AM
From: Representative Seth M. Grove and Rep. Dawn W. Keefer, Rep. Timothy J. O'Neal, Rep. Andrew Lewis
To: All House members
Subject: Financial Reform Package
No dollar collected by the state belongs to the government as each dollar collected came from hardworking taxpayers. Due to this fact, elected officials are called to be prudent stewards of taxpayer’s money.
In order to improve how the commonwealth handles taxpayer money, we plan to introduce legislation which would strengthen the following:
  • Rainy Day Fund,
  • General Fund Cash Flow
  • The Commonwealth’s Credit Rating
Additionally, this package will establish a collaborative process to analyze the state’s finances and better asses important financial information to improve the state’s budgeting.
Please join us and co-sponsor this legislation to improve how the commonwealth handles taxpayer money.

Document #1

Description: As Treasurer Torsella has testified, on several occasions, the state must borrow money from its special/restricted funds in order to make payments out of the General Fund.  This money must be paid back by the General Fund with interest.  As a result, despite borrowing from different parts of the state’s budget, the General Fund’s debt obligation increases.

While this may not seem to make much financial sense, the borrowing is currently necessary due to the schedule of payments coming out of the General Fund relative to when the state collects revenue.  However, the borrowing would not be necessary for the commonwealth if the state moved many of its restricted and special funds back into the General Fund.  

In order to improve the cash flow of the General Fund and reduce future borrowing costs this bill, introduced by Representative Grove, would move several special funds back into the General Fund.  Under this legislation, the money would be transferred from a special fund back into the General Fund as a special or designated account.  This would significantly increase the amount of money in the General Fund to cover the fund’s obligations.

The legislation would also safeguard the existing disbursements from the fund and would not impact any current projects paid out of the fund.  Rather it focuses on preventing the need for a short-term cash infusion into the General Fund for future fiscal years. 

Document #2

Introduced as HB51

Description: This legislation, introduced by Representative O'Neal would amend the Commonwealth’s Constitution to require any surplus funds to be deposited into the state’s Rainy-Day Fund.  Deposits into the Rainy-Day Fund would continue until the state has saved an equivalent to 20% of the commonwealth’s total revenue collections.   Any surplus which exceeds the 20% may be appropriated by the General Assembly during the following fiscal year.  

In order for funds from the Rainy-Day fund to be used for state spending, either the state treasurer must loan money to the General Fund or the legislature must approve the expenditure by a 2/3rds vote.   While the amendment allows the state treasurer to loan up to 20% of the Rainy-Day Fund to meet potential cash flow problems within the General Fund, any loan must be repaid during the same fiscal year.

This amendment to the Pennsylvania Constitution would strengthen the Rainy-Day Fund which would raise our credit rating while leaving the state more prepared to handle a future recession.

Document #3

Introduced as HB52

Description: In order to improve how the state budgets taxpayer money this legislation, introduced by Representative Lewis would establish a State Council on Finances which would consist of 12 members.  These members would be the following individuals:
  1. Secretary of Revenue
  2. Budget Secretary
  3. The Auditor General
  4. State Treasurer
  5. Director of the Independent Fiscal office
  6. The Minority Chairman of the Senate Appropriation Committee
  7. The Majority Chairman of the Senate Appropriation Committee
  8. The Minority Chairman of the House Appropriation Committee
  9. The Majority Chairman of the Senate Appropriation Committee
  10. An individual with a background in private or public finance appointed by the governor
  11. An individual with a background in private or public finance appointed by the President Pro-Tempore of the Senate
  12. An individual with a background in private or public finance appointed by the Speaker of the House
The council would be staffed by the employees of the Department of Revenue and within 30 days begin meeting to review the important financial information and trends of the commonwealth.   These meetings shall assess the state’s annual financial report, long-term financial trends and the overall financial condition of the commonwealth.

The council would also assess and review financial information of the commonwealth including revenue projections, pension/OPEB health, and cost drivers in the budget among other information.  Additionally, the report will provide information on revenue volatility and examine potential changes to revenue collections if the commonwealth experienced a moderate or severe recession. 

After reviewing this information, the council would provide a report by April 2020 to the governor and members of the General Assembly on the financial condition of the commonwealth. This report, approved by 2/3rds of the members on the council, would provide elected officials with all relevant information to improve how we handle taxpayer money.  If 2/3rds of the members fail to adopt the report, then all underlying information which went into the report shall be given to the Independent Fiscal Office.  The IFO will then provide a report, with assistance as needed from the Department of Revenue, to members of the General Assembly and the governor by December 2020.  

Document #4

Introduced as HB53

Description: Over the past few decades, the amount of taxpayer money which is spent by the commonwealth through “special funds” has increased at an alarming rate.  Spending in the commonwealth’s special funds between 2000-2018 increased by 237% compared to a 65% increase in general fund spending.  This means, for nearly 20 years, special funds spending increased 3.5 times more than general fund spending.

During the 2017-2018 fiscal year, to put this contrast into context, general fund expenditures were $31.9 billion which constituted 63% of the commonwealth’s operating budget of $84 billion.  From 2000 to the 2017 the increase in general fund expenditures constituted only $12 billion or only a small fraction in the state’s operating budget.

According to the Mercatus Center, the annual growth in special fund expenditures has the impact of obscuring the true cost of the commonwealth’s budget from taxpayers and even lawmakers.  This practice is tantamount to “fiscal evasion”.  As the state’s budget comes from money collected from taxpayers, the commonwealth should not hide its budget nor the growth in spending from the people.

This bill, introduced by Representative Keefer, would amend the Commonwealth’s Constitution to prevent the creation or use of special funds except for the following reasons:
  • Motor License Fund
  • Unemployment Compensation Fund
  • Workers Compensation Fund
  • State Pension system
  • ABLE Accounts
  • TAP Accounts
  • Any fund paid into by a specific industry for a specific industry