Reader questions about budget

Questions from a PolicyBlog Reader:

Q: What is this $1.6 billion dollar fund referenced in the Post-Gazette? It appears to be slots money which, I thought, was to be used for property tax relief. A nd what are these 220 projects? Is this the “WAM” money? Were the ‘economic development’ items taken out of the budget? And why is Sen Orie giving away this money?

This is different from the WAM money (but used in pretty much the same way). When they passed the gambling law in 2004 (Act 71) they actually created several pots of money – about 39% of “gross terminal revenue” (gambling losses) would go to property tax relief, about 5% goes to this fund for “economic development” projects. Gambling money also goes to horse racing and there is a pot for local governments.

The projects have to be approved by the legislature, as they are multi-year pledges. They will use that 5% gambling tax (estimated to be about $100 million per year) when all the slots licensees are up and running – thus the $1.6 billion would take over a decade of funds. My understanding is that only a few of the projects (Penguins Arena, Philadelphia Convention Center) would absorb almost all of this fund.

Q: Your analysis 4.81% [Now 5.3%] was good. It was a little unclear what the 4.4% calculation was and perhaps you could explain that.

A: Each year when they pass the budget, they include “supplemental appropriations” as part of the previous year’s spending. This end-of-the-year addition raises the threshold and makes the budget increase look smaller than it really is. Last July, the budget they passed was $26.1 billion. The budget they are considering this year includes about $200 million counted for last year – which would make the 06-07 budget $26.3 billion. The $27.5 billion agreed-to 2007-08 budget would be 4.5% above this.

However, we compare the intitial (enacted) budget to initial budget (or final spending to final spending at the end of the year), because they pass supplemental appropriations each year (and we expect they will at the end of 07-08). Thus we are comparing $27.5 billion to $26.1 billion – a 5.3% increase.