Budget and Finance

            *** 1988-89 General Fund Budget -- For the second year in a row, Governor Robert P. Casey succeeded in winning enactment of a "no tax increase" state budget that provided significant
increases in funding for education, environmental initiatives, economic development and an array of other programs.

            The nearly $11 billion ($10,982,218,000) 1988-89 General Fund spending plan, however, wasn't completed until the governor and an obstinate Senate GOP majority -- that previously had
refused to consider the governor's budget recommendations -- reached a mid-October compromise on a supplemental funding measure (SB 1437, Act 55A/1988) that added $302.5 million to a
preliminary budget (SB 1438, Act 5A/1988) approved by Governor Casey on June 29.

            The additional budget action was necessitated when Governor Casey -- in averting a budget crisis at the close of the 1987-88 fiscal year -- had approved portions of a Senate GOP sponsored
spending plan but had "blue line" vetoed appropriations in several areas to force action on a total budget more to his liking.

            In the end, the governor -- pretty much -- got everything he wanted.

            In the area of education, subsidies to local school districts were boosted by $154.2 million over what was allocated in the prior year and a compromise subsidy formula (HB 1013, Act
110/1988) to provide the $2.5 billion in aid to schools was adopted (see Education).

            Additionally, funding for state-owned and state-related colleges and universities and other institutions (see nonpreferred appropriations below) was increased by some 7.5 percent to a total of $858.9 million while state aid for community colleges totaled $113,350,000 -- a 9.9 percent increase over 1987-88.

            In the economic development arena, a total of $63.2 million was appropriated for a continuation of Pennsylvania Economic Revitalization Fund (PERF) programs in 1988-89 including $3 million for a new program sought by Senate Democrats to assist industrial, manufacturing and mining operations with low-cost loans for the purchase of high tech production equipment. The
1988-89 budget also included $31.5 million for the Ben Franklin Partnership, $45 million for housing and redevelopment assistance, $6.5 million for tourist promotion and a new $500,000 appropriation for research and promotion of the state's .hardwoods industry.

            The final budget also contained the governor's request for $2.5 million to pay stipends to dislocated workers who have exhausted unemployment benefits and $1.5 million for an expansion
of the Joint Jobs Initiative program which funds job training for welfare recipients.

            In the area of health and human services, funding for community mental health and mental retardation programs was increased by $31.5 million to $402.6 million while county operated child welfare programs received state funding of $155.7 million -- an increase of $29.6 million over 1987-88.

            Of particular significance for senior citizens in fiscal years 1987-88 and 1988-89 was the budget action of the Casey administration and Democratic legislators to reverse the disturbing trend of the prior Thornburgh administration of using senior citizen state lottery funds for programs previously supported by the General Fund.

            Over the past two years, the actions of the new Democratic governor saved the lottery fund some $45 million by having the General Fund pay for welfare and other programs that were never
intended to be funded by the lottery.

            The 1988-89 budget, meanwhile, included $14.5 million for the Human Services Development Fund which combined with federal funds will result in appropriations to counties of $28.8 million.
State appropriations to subsidize day care programs totaled $31.8 million while state funding for AIDS education was increased four-fold from $500,000 in 1987-88 to $2 million in 1988-89.

            The supplemental budget measure provided an additional $7 million for a total of $15 million in General Fund dollars for the Casey administration's "Pennvest" clean water program which, through the use of an assortment of revenue streams, is expected to generate $2.5 billion for water and sewer system improvements over the next 25 years.

            The final budget compromise provided a total appropriation of $213.7 million for mass transit assistance in fiscal 1988-89 with the lion's share ($149.8 million) earmarked for the Southeastern Pennsylvania Transportation Authority (SEPTA). Port Authority Transit (PAT) in Pittsburgh was to receive an operating grant of $54.1 million. The remainder is split among the 20 smaller systems throughout the state.


            *** Non-Preferred Appropriations -- In addition to $319.6 million that was allocated in the 1988-89 General Fund budget for state-owned universities that are part of the State System of
Higher Education (SSHE), the General Assembly passed a package of 41 so-called "non-preferred" appropriations bills (SBs 1143-1483, Acts l4A-54A) providing some $539.3 million for state-related
colleges and universities as well as health and charitable institutions.

            Most of the "non-preferred" appropriations total, $452.7 million, went to the state-related universities as. follows:
            Penn State, $207,647,000;
            University of Pittsburgh, $112,613,000;
            Temple University, $123,644,00,
            Lincoln University, $8,814,000.

            The largest non-state related higher education appropriation was $35,592,000 for the University of Pennsylvania.

            *** Motor License Fund -- The political debate over passage of a total budget package for fiscal 1988-89 resulted in the late enactment of a $1.5 billion motor license fund budget (HB 2570,
Act 13A/1988) for the fiscal year starting July 1, 1988. With thousands of PennDOT employees facing payless paydays, however, the House voted (185-6) on July 12 to accept Senate amendments to the Motor License Fund measure they had passed and Governor Casey promptly signed the bill into law.

            The largest single expenditure in the motor license fund budget is for highway maintenance. As finally enacted, the measure included $678.2 million for roadway repair, or $25.3 million more than originally proposed by the governor.

            The motor license fund budget is separate from the state's General Fund and is largely financed by fuel taxes and various road user fees.

            *** Low Income Tax Break/Mutual Thrifts Tax Replacement -- Adopted by both chambers was a conference committee report on legislation (HB 1475, Act 106/1988) that -- for the second consecutive year -- expanded "tax forgiveness" provisions of the state income tax for low income Pennsylvanians. Under this program, those whose income falls below a certain level are fully or partially exempted from payment of the state's 2.1 percent personal income tax. The extent of "tax forgiveness" varies depending on an individual's income and the number of dependents he or she supports.

            The new law increased the income threshold for tax exempt status from $4,500 to $6,300 for an individual -- effective with the filing of tax returns for 1988. In 1987, that threshold was boosted from $3,000 to $4,500 -- which represented the first expansion of the income guidelines of the "tax forgiveness" program since its inception in 1974.

            The new law was expected to save low income citizens an estimated $12.4 million.

            House Bill 1475 also provided for a replacement of a tax on savings and loan associations that was ruled unconstitutional by the state Supreme Court in 1987.

            The court had ruled that the so-called mutual thrifts tax illegally included government securities in the income base. The new law exempts such securities from the tax but raises the rate
of the tax to 20 percent for tax years 1987 and 1988 in an effort to recoup revenues lost and/or refunded as a result of the court decision. For fiscal 1988-89, the new tax was expected to generate an additional $86.2 million -- much of which should have been received in April of 1987. The mutual thrift tax rate will decline to 12.5 percent for the 1989 tax year.

            "V" Hydroelectric Tax Break; Tax Exemptions -- Governor Casey vetoed legislation (SB 345) which, among other things, was intended to encourage the development of hydroelectric power
plants in Pennsylvania by providing a tax break for the construction of such facilities.

            Under current law, hydroelectric generating facilities are exempt from the Public Utility Realty Tax (PURTA) for 10 years, but only after they become operational. Senate Bill 345 would
have expanded the exemption to include the period of construction of a hydroelectric plant to 10 years after the plant goes into operation. As a result, the legislation would have added about four years to the current 10 year tax exemption for such facilities.

            The measure also provided for additional exemptions from the state's realty transfer tax. One provision was expected to reduce the transfer tax burden on families and others who enter into a land purchase and construction contract to build a home or other structure. Under Senate Bill 345, the transfer tax (1 percent state; 1 percent local) would have been applied in such contractual agreements only to the value of the land transferred and not to the estimated market value of the property once construction is complete.

            Additionally, family farm partnership interests conveyed among family members as well as transfers between conservancies and governmental jurisdictions would have been exempt from the
transfer tax. Another provision of Senate Bill 345 would have allowed stockbrokers, who elect chapter "s" tax status, to pay state taxes at the rate of the personal income tax rate (2.1%) instead of the corporate net income tax rate (8.5%).

            The governor vetoed Senate Bill 345 October 21, 1988 citing a concern about the measure's potential impact on state revenues.  The Senate voted (40-5) to override the governor's veto, but the veto was sustained when the House failed to muster the necessary two-thirds vote required for an override. The vote to override in the House was 98 to 91.

            *** "Sunny Day" Appropriations -- The General Assembly acted twice in 1988 to approve legislation (SB 1640/Act 69A; HB 1988/Act lA) implementing the governor's recommendations for
appropriations from the state's Sunny Day Fund to help job producing businesses locate or expand their operations in Pennsylvania.

            First established in 1985, the state's Sunny Day Fund provides low interest loans or loan and interest guarantees for economic development projects recommended by the governor.  Funding authorization is subject to a two-thirds vote of approval by both houses of the General Assembly.

            Acts 69A and lA of 1988 provided a total of $70 million in financing for 14 projects expected to create more than 4,200 jobs over the next several years.

            Those projects and the financing approved are as follows:
            -- $5.5 million to Aluglas of Pennsylvania Inc. to locate a manufacturing facility at the former USX National Plant in Allegheny County, expected to create 367 jobs;
            -- $3.75 million to PPG Industries for the acquisition and renovation of the Koppers Co. Technical Center in Monroeville, Allegheny County, expected to create 250 jobs;
            -- $6 million to Glass Adventures Inc. to locate a glass manufacturing facility at Donora, Washington County, creating 500 jobs;
            -- $3.75 million to Allegheny Ludlum Inc. to assist in the acquisition of the USX Vandergrift facility in Westmoreland County, expected to create 300 jobs;
            -- $7.5 million to enable Standard Gravure, a subsidiary of Shea Communications Inc., to locate a printing facility in York County, estimated to create 500 jobs;
            -- $3 million to Epsilon Products Inc. to locate a manufacturing facility in Marcus Hook, Delaware County, creating 200 jobs;
            -- $3.5 million to UNISYS to locate its corporate training facility in the Plymouth area of Montgomery County, expected to create 300 jobs;
            -- $8 million to Swearingen Engineering and Technology, Inc. for the purpose of locating a fanjet aircraft manufacturing plant in Clinton and Lycoming Counties, expected to create 250 jobs;
            -- $8 million to Corning Glass Works, Inc. for the location of additional manufacturing operations at its existing facility in Washington County, expected to create up to 400 new jobs;
            -- $2 million to Allegheny Particleboard Corporation for the purpose of locating a particleboard manufacturing facility in McKean County, expected to create 260 jobs;
            -- $8 million to the Clinton County Industrial Development Corporation for the purpose of assisting Avtek Corporation in the location of an aircraft component manufacturing plant in Clinton
County, expected to create up to 450 new jobs by the third year of production;
            -- $2 million to Microwood, Inc. for the location of a veneer manufacturing facility in Cumberland County, expected to create 275 jobs;
            -- $1.5 million to Lowengart and Company, Inc. to locate additional manufacturing operations at its existing facility in Franklin County, expected to create 180 new jobs; and
           -- $7.5 million to the Scranton Lackawanna Industrial Building Company to assist Grumman Corporation in the location of a new product development and manufacturing facility in Lackawanna County.

Even with these appropriations, the Sunny Day Fund contained a balance of more than $18 million for future projects.

            *** PUC Budget -- Passed was a $27.9 million fiscal 1988-89 budget (HB 2196, Act 8A/1988) for the state Public Utility Commission (PUC). The amount represents a $1.9 million increase over the level of funding in fiscal 1987-88. The PUC budget is funded by an assessment on utilities.

            *** Consumer Advocate's Budget -- The state Consumer Advocate's operating budget for fiscal 1988-89 was set at $2,738,000 by House Bill 2197 which became Act 7A/1988. In the
1987-88 budget year, the Office of Consumer Advocate -- which represents citizens in rate cases before the state Public Utility Commission -- received funding in the amount of $2,622,000. As
with the PUC, the Consumer Advocate's budget is financed by an assessment on utilities.

            *** Workers' Comp Budget -- Approved was a bill (SB 1439, Act 6A/1988) calling for a $15,224,000 appropriation in fiscal 1988-89 to the Department of Labor and Industry for the costs of
administering the state's workers' compensation program. The amount represented a 16.8 percent increase over fiscal 1987-88 funding. Funding for administering the workers' comp program comes from annual assessments on insurers and self-insurers.

            *** Occupational Affairs Budget -- Passed and signed by the governor was a $14.3 million 1988-89 operating budget (HB 2411, Act 9A/1988) for the Bureau of Professional and Occupational
Affairs, the state Board of Medicine, the state Board of Osteopathic Medicine and the state Board of Podiatry. This amount is funded by fees and fines imposed on licensees.

            *** Retirement System Budgets -- Enacted were bills appropriating $6,031,000 for the administration of the State Employees Retirement System (SB 1436, Act 11A/1988) and $12.6
million for the administration of the Public School Employees Retirement System (HB 2413, Act 10A/1988) for 1988-89.  Administrative expenses of both systems are paid for by investment earnings. Senate Bill 1436 included language providing $395,000 for the opening of state employees retirement system field counseling offices to be located near Wilkes-Barre and Pittsburgh.

            *** Fund Transfers -- As part of the General Assembly's final action on a state budget for fiscal 1988-89, measures were passed providing for a $110 million transfer of surplus funds from the State Workmen's Insurance Fund (SWIF) and for a $41.4 million transfer from the Unemployment Compensation (UC) Interest Fund.

            House Bill 2414 (Act 56A/1988) earmarked the transfer of SWIF monies as follows: $25 million for the state's "Rainy Day" Fund, which gives the commonwealth a revenue cushion in times of economic hardship; $25 million for the state's "Sunny Day" Fund, which provides financial assistance to businesses seeking to locate or expand their operations in Pennsylvania, and $60
million for the state's General Fund.

            Senate Bill 1221 (Act 107/1988) transferred $41.4 million from the UC Interest Fund back to the General Fund to make up for funds appropriated by the General Assembly in 1983 and 1984 to pay interest on the state's previous unemployment compensation debt to the federal government.

             *** Capital Budgets -- Enacted were a series of bills proposing a wide range of capital improvement projects throughout the state.

            House Bill 1743 (Act 113/1988) itemized a total of more than $2.4 billion in project authorizations in the following categories: public improvements ($1.6 billion), redevelopment
assistance ($563.6 million), transportation assistance ($226.6 million) and furniture and equipment ($22.7 million).

            House Bill 1744 (Act 114/1988) itemized a total of nearly $2.3 billion in public highway projects.

            House Bill 2035 (Act 102/1988), the so-called "Pennvest" capital budget measure, authorized nearly $5 billion ($4,793,953,000) in water and sewer system improvement projects
throughout the state.

            The General Assembly also enacted additional debt authorization for capital improvement projects. For fiscal 1987-88, the legislature authorized additional debt of $750 million (HB 1570, Act 26/1987). For fiscal 1988-89, additional debt in the amount of $630 million was authorized (SB 1215, Act 111/1988).

            "V" Beer Industry Tax Credit -- Adopted by the General Assembly but vetoed by the governor was a conference committee report on legislation (SB 114) extending and boosting a special state tax credit to the malt or brewed beverage industry in Pennsylvania for five more years.

            Since 1974, Pennsylvania brewers have been entitled to a tax credit for the purchase of plant, machinery or equipment.  Senate Bill 114 would have extended the credit from December 31, 1988 until December 31, 1993 and increased the maximum tax credit from $150,000 to $200,000 annually. Additionally, however, Senate Bill 114 would have restricted the credit to only those brewers with headquarters in Pennsylvania and with an annual production of 300,000 barrels or less.

            The governor, in his veto message, said applying the credit to only those firms with headquarters in Pennsylvania violated the Commerce Clause of the United States Constitution.

            He suggested that if the General Assembly still deems it appropriate to continue the malt beverage tax credit, new legislation could be drafted responding to the question of constitutionality. He added that the new legislation could also be made retroactive to December 31, 1988 so that there would be no gap in coverage of the credit for eligible breweries.

            "V" Ski Resort Tax Savings -- Passing the Senate and the House was a bill (SB 525) that would have exempted the retail sale of snow-making equipment purchased by Pennsylvania ski resorts from the state's six percent sales tax.

            Proponents contended that the bill marked an attempt to give ski operators in Pennsylvania a competitive advantage over ski operators in neighboring states. In his veto message, the governor contended that revenues from the state's sales tax have been gradually eroded over the years by what he called "piecemeal" exemptions. This, he said, would have been the 46th exemption from the state's sales tax since it was first enacted in 1971. He added that while sales tax exemptions for food, clothing and other necessities are in the public interest, he was opposed to special sales tax advantages designed solely to benefit a particular industry.

            * GOP "Tax Expenditure" -- Over the objections of Senate Democrats and a threatened veto by Governor Casey, the Senate Republican majority voted to pass a two-bill package (SBs 1288; 1289) designed to break the fiscal 1988-89 state budget with a more than $100 million tax reduction "giveaway" -- primarily to large corporations.

             Senate Bill 1288 would have reduced the business Capital Stock and Franchise Tax from 9.5 to 8.5 mills.  Senate Bill 1289 would have reduced the utility gross receipts tax from 4.4 to 4.1
percent. The measures would have cost the state an estimated $106.1 million annually in lost revenues, would have jeopardized state budget funding for education and other critical programs, and would have had the effect of building in a future tax increase for the people of Pennsylvania. Both bills died in the Democrat-controlled state House.

            *** 1987-88 Tax Cuts; Hazardous Waste Site Cleanup Funding -- With a $338 million 1986-87 year-end revenue surplus, the General Assembly unanimously approved and the governor signed legislation (SB 443, Act 58/1987) granting an estimated $95 million in tax cuts in fiscal 1987-88.

            Commercial entities were to reap an estimated -$84 million of the total reduction. Under the measure, the Capital Stock and Franchise Tax was cut from 10 to 9 mills retroactive to the beginning of the 1987 calendar year. Additionally, and in an effort to help small businesses in particular, the legislation exempted the first $100,000 of a businesses' valuation from the Capital Stock and Franchise Tax (double the previous $50,000 valuation exemption) and eliminated a previous 80 percent prepayment of the tax. Over a four year phase-in period, a quarterly payment system was to be established similar to that which exists for payment of the Corporate Net Income Tax.

            There was a caveat, however, to the one mill reduction in the Capital Stock and Franchise Tax. The rate was increased from 9 to 9.5 mills in 1988 for the purpose of funding the cleanup of
hazardous waste sites in Pennsylvania. Funds generated by the half-mill surcharge, which was to remain in place through 1991, were to be deposited in the Hazardous Sites Cleanup Fund.

            Other provisions of the measure were designed to provide tax relief to utility consumers and the working poor.

            The state's 4.5 percent utility gross receipts tax, which is paid by all residential and commercial utility customers, was reduced to 4.4 percent for a savings to utility customers of more
than $10 million annually.

            The legislation also enabled more low income families to qualify for the special tax forgiveness provisions of the state income tax.

            *** Retired Police and Firefighter COLA -- Signed into law was a bill (SB 941, Act 147/1988) granting a cost of living adjustment (COLA) in pension benefits for retired municipal
police officers and firefighters in Pennsylvania.

            The COLA, ranging from $300 to $1,800 a year, would apply only to former police officers and firefighters who retired prior to January 1, 1985.

            The pension increase, effective January, 1989, amounts to $25 a month for individuals retired for five to 10 years as of January 1, 1989, $50 per month if the retiree is totally disabled and has been retired less than 10 years, $75 per month for those retired for at least 10 years and $150 per month for those retired at least 20 years.

            An estimated 11,500 police and firefighter retirees are eligible for the COLA which had a first year cost of $9.6 million and which was to be funded from the state tax imposed on foreign casualty insurance premiums.

            *** Retired State and School Employee COLA; "Early Retirement Window" -- Enacted was a pension cost of living adjustment (COLA) for retired school and state employees (SB 1441, Act 112/1988).

            The increase, benefiting members of the public school employees and state employees retirement systems who retired as of July 1, 1987, translated to an average monthly increase of
between 5.3 to 10.8 percent, effective January, 1989.

            The supplement is equal to $2.00 per month for each year of service plus $.50 per month for each year retired.

            Senate Bill 1441 also extended the expiration date of the "early retirement window" for school and state employees from June 30, 1989 to September 30, 1991. For school employees, this
permits members with 30 years of service to retire at any age and receive full benefits. For state employees, it permits members with 30 years of service and who are at least 53 years of age to retire without any benefit penalty.

            *** Transition Expenses -- Signed by the governor was a measure (HB 2412, Act 70A/1988) that provided funding for the transition expenses of newly elected statewide officeholders.
The legislation appropriated $75,000 each to the offices of state Attorney General, state Treasurer and state Auditor General. It also contained an appropriation of $100,000 for a music theatre festival in southeastern Pennsylvania and $50,000 for local drug enforcement and control programs in the city of Chester.

            Governor Casey, meanwhile, vetoed -- as unnecessary another bill (SB 942) that also provided $75,000 each to the Attorney General, Auditor General and state Treasurer for transition expenses. In addition to the transition expenses, Senate Bill 942 would have authorized per diem allowances for the three statewide officeholders -- an action which Governor Casey contended was in conflict with previous law establishing compensation and/or salary limits for the offices of Attorney
General, Auditor General and state Treasurer.

            *** Small Games of Chance -- On a vote of 39-10 in the Senate and 166-24 in the House, the General Assembly passed a compromise version of legislation (SB 75, Act 156/1988) permitting -- subject to voter approval in a local referendum "small games of chance" for the fund-raising activities of volunteer fire and ambulance companies, veterans groups, religious and charitable organizations and other not-for-profit groups that provide community services.

            A earlier version was vetoed by the governor based on his contention that the initial bill (SB 279) lacked appropriate controls and regulations on games such as fishbowls, punchboards, raffles and lotteries.

            As enacted, the new law places a limit of $500 on individual prizes and $5,000 weekly on total prizes awarded in such games.  Sponsoring groups could conduct special raffles awarding up to $25,000, but such raffles could be conducted no more than twice annually.

            Except for raffles, which may be held only once each month, all "small games of chance" are to be conducted at the location of the sponsoring organization.

            The law establishes a $1,000 annual licensing fee to be paid to the state by game distributors and a $2,000 annual registration fee to be paid to the state by manufacturers of games.

            Sponsoring clubs and organizations would be licensed by county treasurers for a $100 annual fee and licenses could be revoked and penalties imposed for anyone of 13 violations specified in the law.

            The licensing of convicted felons and gambling law violators is prohibited. Except for prizes identified on raffle tickets, the advertising of prize amounts is banned.

            * Cigarette Tax Designation -- Legislation (SB 1339) that would have designated that a portion of the state's cigarette tax be used to assist volunteer fire companies passed the Senate (50-
0) but died in the House.

            Under the proposal, slightly more than half a penny ($.0055) of the state's 18¢ per pack tax on cigarettes (approximately $6.9 million annually) would have been designated for a Volunteer Fire
Company Challenge Grant Program that would have entitled volunteer fire companies to receive state matching grants of up to $2,500 based on the success of their local fund-raising efforts.

            *** Deposits in Thrift Institutions -- Enacted was a measure (HB 1010, Act 182/1988) providing clear authority for the deposit of state and local public funds in savings associations, savings banks, federal savings and loan associations or federal savings banks whose principal offices are in Pennsylvania. The new law was intended to clarify ambiguous provisions of previous law dealing with deposits made by the state and political subdivisions in Pennsylvania thrift institutions.

            * Deposits in Credit Unions -- Legislation (SB 1282) that would have statutorily authorized credit unions to become depositories of state funds passed the Senate (49-0). The bill died in the House.

            *** Taxpayer Amnesty/Amusement Tax Relief -- Legislation (HB 369) giving local governments the authority to grant a one-time tax amnesty period to delinquent taxpayers who owe earned income taxes was enacted (Act 30/1987).

            Under the measure, municipalities and school districts -- in order to finally collect delinquent earned income taxes -- could establish a "one-time period" during which delinquent taxpayers would be able to pay the full tax that is overdue without being subjected to interest or penalty charges.

            Additionally, the legislation prohibited taxing authorities from imposing an amusement tax on membership, membership dues, donations, fees or assessments paid by the general public to
fitness or health spas.

            The measure also reduced the maximum amusement tax levied by governing bodies on bowling alleys from 10 percent to four percent.

            *** Tax Return Check off for U.S. Olympics -- Enacted was a measure (SB 445, Act 59/1987) that established a voluntary check off on 1987 state income tax returns for contributions to the United States Olympics.

            Under the program, taxpayers due refunds from the state were able to have all or part of their tax refund designated to support the United States Olympics Committee, Pennsylvania Division. The check off applied only to returns filed in 1988 for the 1987 tax year.

            *** Sinking Fund For Redevelopment Assistance -- A special fund created in the 1985-86 legislative session to provide state support for redevelopment projects was expanded under SB 814 which became Act 63 of 1987.

            Under SB 814, the state was authorized to raise up to $400 million in bond sales for redevelopment assistance projects that will stimulate economic activity in a region. In the prior two-year session a Redevelopment Assistance Sinking Fund was established to retire the debt on the redevelopment assistance bonds with up to $30 million annually from revenues generated by the state's Realty Transfer Tax. SB 814 changed the cap from the annual $30 million debt service payback to a $400 million limit on total project expenditures.

            The practical effect of the legislation was to permit the state to provide $23.8 million to St. Christopher's Hospital for Children for construction of a new facility in north Philadelphia.

            SB 814 also removed a $5 million project cost requirement in financially disadvantaged municipalities, reducing it to $1 million so that smaller communities could participate.

            Redevelopment assistance projects previously authorized by legislation enacted in the prior session were unaffected by SB 814. These included the Philadelphia Convention Center, the Midfield Terminal at Greater Pittsburgh International Airport, Homer Research Labs in the Lehigh Valley, the Buhl Planetarium Science Center in Pittsburgh, and the Franklin Institute in Philadelphia.

            *** Disaster Relief Funding -- A legislative proposal (HB 1539) designed to restore full funding for a disaster relief program improperly administered by the prior administration of former Governor Dick Thornburgh cleared both the Senate and House and was signed by Governor Robert P. Casey (Act 52/1987).

            The measure provided for an additional $4 million for the program designed to aid the victims of flood and tornado disasters that occurred in various regions of the state during 1984, 1985 and 1986.

            Specifically, the legislation increased the initial $15 million appropriation for the flood relief program to $19 million. The increase in funding was necessary because the Thornburgh administration improperly and prematurely disbursed $4 million from the program to municipal governments -- $4 million that was primarily intended to help individuals pay for the cost of uninsured and uncompensated flood and tornado damage to their homes and properties.

            With the additional funding, individuals who were wrongfully denied state grants of up to $12,500 because they received Small Business or Farmers' Home loans were to be reevaluated in
accordance with the original provisions of Act 88 of 1986.

            * Municipal Flood Assistance -- The Senate passed two measures (SBs 1055; 1056) that would have appropriated more than $4.7 million to several municipalities for flood damage repairs.
Most of the funding was contained in Senate Bill 1056 which included a $3 million appropriation to Allegheny County for the repair and stabilization of the Pine Creek watershed in the North Hills region surrounding Pittsburgh which was the site of disastrous flooding in May of 1986 -- flooding that damaged hundreds of homes and businesses and claimed eight lives.  Although the two bills failed to win final consideration in the House, additional funding for the Pine Creek project was
contained in the capital budget and General Fund budget enacted by the legislature in 1988.

            *** State Pay -- A measure (HB 1288, Act 28/1987) increasing the salaries of the governor and his cabinet, judges and legislators was adopted.

            It was the first salary increase enacted in three years.

            Salaries were increased to $91,500 for Supreme Court justices, and $89,500 for Superior and Commonwealth Court justices. Most Common Pleas Court judges were to receive $80,000
under the measure.

             The governor's salary will increase from $85,000 to $105,000 effective the next election. Cabinet salary increases, which were to apply only to cabinet officers appointed after July 1, 1987 range between $14,000 and $15,000. The heads of the larger agencies such as PennDOT and Public Welfare were to receive $80,000 annually.

             Members of the General Assembly received an increase of $12,000, from $35,000 to $47,000 annually.

            *** Pension Credit Transfer -- Enacted was a measure (SB 139, Act 53/1987) permitting certain former county employees to transfer pension service credit to the State Employees' Retirement System.- The legislation was designed to cover 58 employees who were shifted from county government payrolls to the state government payroll as a result of Act 49 of 1985 which
required that the state furnish appellate court judges with chamber facilities and "staff" in the county in which the judges reside.

            The law also contained a provision that allows Delaware River Port Authority policemen to retire at age 50 and receive full pensions.

            *** Computerized Judiciary -- Financing of a statewide judicial computer system was approved (SB 815, Act 64/1987).

            Under the legislation, a judicial computer system augmentation account was to be set up from fines and fees collected by the judiciary in excess of the amount collected in 1986-87. The account cannot exceed $20 million per year until 1994, after which the limit will be $10 million annually.

            The 1987-88 general fund budget appropriated $2 million to the Supreme Court for the computer system's startup costs. This was to be repaid from the special account.

            * Tax Withholding -- The Senate voted to pass (46-0) legislation (SB 1107) that would have permitted ministers and other members of the clergy to be treated for income tax purposes as self-employed business persons. As such, income taxes would not be required to be withheld from their paychecks. The bill, which failed to win final House action, was identical to another Senate-approved measure (SB 747) which was gutted in the House and became the vehicle to permit the manufacture of liquor-filled candy in Pennsylvania.

            *** Alternative Retirement System Contributions -- Enacted was a measure (SB 852, Act 78/1987) requiring Penn State University, the State System of Higher Education (SSHE) and the
commonwealth to increase their level of contributions to an alternative retirement program known as TlAA-CREF which covers 4,890 employees who work for Penn State, the SSHE and the Department of Education.

            The legislation increased the employer contribution rate from 7 percent to 8.95 percent of payroll for members of the alternative system. The cost of the increase to Penn State, SSHE and the commonwealth was estimated at $2,824,380 in the first year.

Environmental Resources and Energy

            *** Pennvest -- Pennvest, a multi-billion dollar plan to help rebuild Pennsylvania's water and sewage systems, was signed into law as Act 16 on March 1, 1988.

                  House Bill 1100 was the subject of intensive negotiations between Governor Casey and all four legislative caucuses. Senate Democrats finally forced their Republican colleagues to move on the bill by temporarily withholding support for so-called Sunny Day fund appropriations, which require a two-thirds majority vote for approval.

                  The resulting compromise, hammered out in a conference committee, was approved in the Senate, 47-0.

                  Pennvest is expected to generate over $2.5 billion over the next 25 years for low-interest loans and grants for water and sewerage system improvements.

            Financing will come from state appropriations, federal funds, unused debt authorization, capital budget funds and a $300 million bond issue which was approved by Pennsylvania voters in
the April 1988 primary. Additional funds will be generated in by reinvesting loan repayments.

            Pennvest is administered by a 13-member Pennsylvania Infrastructure Investment Authority board headed by the governor.

Most assistance is in the form of low-interest loans.  However, the authority is empowered to issue water system and sewage system improvement grants to economically hard-pressed
municipalities.

Interest rates on loans vary from one percent to 75 percent of the rate paid by the commonwealth for its bonds. The lowest interest rates apply to areas with the highest unemployment.

Assistance is capped at $11 million for a project serving a single municipality and $20 million for a project serving two or three municipalities. The $20 million cap on assistance could be
lifted for projects that serve four or more municipalities; nine of the board's 13 members would have to approve such exceptions.


            *** Mandatory Recycling -- A comprehensive solid waste management plan highlighted by statewide mandatory recycling was signed into law as Act 101 on July 28, 1988.

Residents in 413 communities in 54 counties will be required to separate portions of their curbside trash for recycling. The legislation (SB 528) is expected to result in the recycling of at
least 25 percent of Pennsylvania's trash within the next decade.

Communities will be required to recycle leaf waste and at least three of the following materials: clear glass, colored glass, aluminum, steel and bimetallic cans, high-grade office paper, newsprint, corrugated paper and plastics. State government agencies and other entities, both public and private, will be encouraged to purchase recycled materials.

Municipalities with populations of 10,000 must establish recycling plans within two years; communities with populations ranging from 5,000 to 10,000 and densities of more than 300 people per square mile will have three years to begin recycling programs.

The legislation will also make county governments responsible for developing municipal waste management plans. The counties must develop comprehensive waste plans within 2 and a half years, subject to the ratification of a majority of the municipal governments within their boundaries. County governments were given control over where waste is disposed of within their
boundaries.

The measure also helps municipalities pay for recycling programs and encourages the development of environmentally-safe disposal facilities. Municipalities get grants to pay for 90 percent of the cost of starting a recycling program; distressed communities get 100 percent grants.

Operators of municipal waste landfills and resource recovery facilities are required to pay $2 into a state Recycling Fund for every ton of trash disposed of at their facilities.

An additional $1 per ton fee will be imposed on operators of landfills and resource recovery facilities by communities that host such facilities. A final surcharge of 25 cents per ton will be set aside to pay for preventing or abating adverse environmental effects which occur after landfills are closed. A separate "Site Specific Post Closure Fund" will be established by counties for each municipal waste landfill operating within their boundaries.

The state Department of Environmental Resources will give municipalities grants to establish collection sites for the disposal of potentially hazardous household cleaning products and pesticides, provide Recycling Fund assistance for municipal hiring of disposal facility inspectors and prohibit landfills or resource recovery facilities from being located within 300 yards of a school, park or playground.


            *** Superfund -- Pennsylvania has its own version of the federal Superfund program as a result of legislation (HB 1852) signed into law as Act 108 on Oct. 18, 1988.

The legislation allowed for the expenditure of $61 million previously collected for the state's toxic waste cleanup program and established a continued funding mechanism. It also orders DER
to form a hazardous waste facility sitting team which will have until July 1, 1992 to choose a hazardous waste disposal site.

If the team fails to meet the deadline, and independent sitting team will take over. The two-team concept was the result of compromise between Senate Republicans and the Democratic
administration. Senate GOP leaders had insisted on the independent panel language while Democrats wanted a DER sitting team.

Funding for hazardous waste site clean up will come from a variety of sources including the capital stock and franchise tax on business, the commonwealth's general fund, hazardous waste
transportation and management fees and federal allocations.

Pennsylvania's Superfund program will supplement, not replace, the federal government's Superfund. It was designed to clean up sites that do not qualify for assistance from the federal government and make more money available to accelerate the cleanup of federal Superfund sites located in Pennsylvania.

According to the administration, the new law will result in the cleanup of 250 sites by the year 2000.


            *** Low Level Radioactive Waste -- Legislation which authorizes the design, sitting and licensing of a low-level radioactive waste disposal facility in Pennsylvania was signed into law as Act 12 on Feb. 4, 1988.

Senate Bill 948 implements the 1985 Appalachian States Low- Level Radioactive Waste Compact. Pennsylvania had agreed in the compact to host a low-level radioactive waste disposal facility.  West Virginia and Maryland are the other compact members.

The legislation gives the secretary of the Department of Environmental Resources final authority to select a waste disposal site. The secretary will choose from three sites which have been screened by the disposal facility's operator-licensee and approved by the Environmental Quality Board. DER's approval of a license for the facility will be appealable to the Environmental Hearing Board.

DER will select the operator-licensee after evaluating "Requests-For-Proposal" from interested firms. The RFPs will outline methods to be used for site screening, design and operation plans, plans to meet public participation requirements, minimum host municipality benefits and guarantees, operator qualifications and compliance history and regional impact.

The legislation includes a series of host municipality benefits, including:
            --operator-funded, independent facility inspectors who work for the host municipality, or host county;
            -- direct membership on the Low-Level Public Advisory Commission and Appalachian States Compact Commission;
            -- guarantees that persons residing within two miles of the disposal facility may sell their homes to the operator at market value;
            --periodic sampling of surface and well water within three miles of the disposal facility;
            -- periodic "whole body radioactivity measurements" for residents of the host municipality and those living within five miles of the disposal facility;
            -- a guaranteed minimum financial benefit and,
            -- payment of school district and municipal property taxes for individuals residing within two miles of the disposal facility.

Senate Bill 948 also includes provisions for post-closure care, emergency care and monitoring of the disposal facility; a requirement that the state receive title to the facility's land and a requirement that the facility be constructed above-grade.


            *** Certification for Radon Testing -- Legislation to require state certification of those who
test or provide safeguards against radon was signed into law by the governor (SB 137, Act 43/1987).

Prior to the legislation. more than 10 firms were engaged in radon testing and mitigation work in Pennsylvania and none were certified. Proponents felt certification was necessary to protect
the public health, prevent fraud, and prevent inaccurate results .


            *** Infectious Waste -- The state Department of Environmental Resources was required to study and investigate the disposal of infectious and chemotherapeutic waste for at least one year under legislation (SB 1387) signed into law as Act 93 on July 13, 1988.

DER will prepare a plan detailing the present and projected volume of waste production, the adequacy of present facilities and criteria for citing commercial facilities. The plan must be submitted to the Environmental Quality Board within 14 months.  DER cannot issue permits for construction or operation of an incineration or disposal facility for infectious or chemotherapeutic wastes until the plan is adopted by the EQB.

DER will develop regulations and standards for the transportation, processing, storage, incineration and disposal of infectious or chemotherapeutic waste; best available technology
standards; air quality standards from new on-site and commercial facilities and liability insurance requirements.

A manifest system will be mandatory for waste generators, transporters, handlers and disposers. Transporters must be licensed by DER.


            * Storage Tanks -- New and existing fuel storage tanks would have been registered, permitted and monitored under legislation approval (47-1) by the Senate. The bill's introduction followed in the wake of a fuel tank collapse and massive spill into the Monongahela River near Pittsburgh January 2, 1988.

Senate Bill 1328 would also have created an Underground Storage Tank Fund to help owners and operators o£ such tanks meet federal financial responsibility requirements.

All existing above-ground storage tanks would have been registered with the Department of Environmental Resources within one year.

Large above ground tanks would have required permits from DER renewable at 10-year intervals. Small above ground tanks and underground tanks would have required authorization from DER.

Fines, civil penalties and permit and registration fees would have gone into a Spill Prevention Trust Fund.

Other provisions of the bill would have:
            -- required DER inspections of all tanks;
            -- required underground tank owners to maintain monitoring systems;
            -- required above ground tank owners to develop site specific Spill Prevention Response Plans; and
            -- required DER to develop siting regulations for new above ground tanks.

            The bill was in the House Appropriations Committee when the session ended.


            *** Environmental Hearing Board -- The Environmental Hearing Board is an independent quasi-judicial agency as a result of legislation (HB 1432) signed into law as Act 94 on July 13, 1988.

            The revised board consists of five full-time administrative law judges, each an attorney with five years of practice before administrative agencies.

            Board members were to be appointed by the governor and subject to Senate confirmation. Their salaries would be the same as the chairman and commissioners of the Public Utility
Commission.

            An Environmental Hearing Board Rules Committee was established, consisting of nine attorneys who have practiced before the board for at least three years.

            The hearing board will have offices and hearing rooms in Harrisburg and Pittsburgh; a Philadelphia office would be optional.


            *** Mine Subsidence Assistance -- Homeowners with mine subsidence damage can receive state grants and loans through the Department of Environmental Resources under a bill signed into law as Act 82 on July 6, 1988.

            Grants under House Bill 750 will be issued when properties are deemed unsafe for occupancy, and can be used only for temporary relocation until homes are repaired, until subsidence
danger ends or until a new residence is found. Loans can be used to repair damaged dwellings, will be available according to the severity of damages and will carry an interest rate of less than three percent.

            Grants and loans will not be available to homeowners with mine subsidence insurance, and those receiving funds will be required to purchase subsidence insurance if there is a threat of further damage. Grants cannot be awarded for dwellings within a one mile radius of a site where subsidence has occurred within the past three years. Loans cannot be awarded when subsidence has occurred within a one-half mile radius of a dwelling within the past year. DER must publish notices of subsidence's in local newspapers.


            * Landslide Insurance -- The Senate approved legislation (SB 1146) which would have renamed the Anthracite and Bituminous Coal Mine Subsidence Fund and expanded the fund's insurance to cover damage from landslides.

            Landslide insurance is not available commercially.

            Senate Bill 1146 was in the House Conservation Committee when the session ended.


            * Emergency Mine Bond Fund -- The Senate approved legislation (SB 1344) which would have made anthracite surface mine operators eligible for assistance under the Emergency Bond
Fund to reclaim abandoned mine lands.

            Mine operators would have had to prove that three bonding companies rejected their requests for coverage or that their bonds were canceled due to a bonding company's bankruptcy or
insolvency.

           The bill was in the House Appropriation Committee when the session ended.


            * Lead Ban -- The Senate unanimously approved legislation which would have banned the use of lead in plumbing. The 1986 Federal Safe Drinking Water Act required states to implement such a ban in 1988.

            Senate Bill 1551 would have required that community water systems notify customers who may be affected by lead contamination. The notification would have included potential lead sources in the water, potential health effects, methods to mitigate lead content, steps the water system is taking to deal with lead contamination and the need to seek alternative water supplies.

            People requesting a connection to a water system would have been required to certify that materials used in the connection are lead-free. DER would have been required to conduct inspections of public water systems and places where plumbing supplies are sold. Inspections would also have been required during the construction, modification or repair of residential or nonresidential facilities.

            The bill was in the House Conservation Committee when the session ended.


            * Water System Interconnections -- Legislation which would have encouraged interconnections between water systems was unanimously approved by the Senate.

            Under current law, connections between water systems require a permit from the state Department of Environmental Resources.

            Senate Bill 1283 would have exempted service connections from the permitting process if the seller has an allocation permit.

            The bill was on the table in the House when the session ended.


            * Sewer Extension Permits -- Permits would no longer have been needed for sewer extensions which collect the equivalent volume of less than 250 single family dwellings under legislation (SB 1353) unanimously approved by the Senate.

            The legislation was in the House Conservation Committee when the session ended.


            * Right-Way-To-Throw-Away Program -- Legislation designed to encourage the safe disposal of hazardous waste generated by households and small businesses was approved by the Senate, 48-1.

            Senate Bill 610 would have required the state Department of Environmental Resources to divide the state into districts and establish collection points for small quantities of hazardous waste.

Senate Bill 610 was in the House Appropriations Committee when the session ended.


            *** Energy Conservation and Weatherization Funding -- Legislation (SB 586) expanding the definition of energy conservation and assistance programs in connection with the distribution of oil company overcharge monies refunded to the state was signed July 9, 1987 by the governor, making it Act 42 of 1987.

            Oil overcharge distributions ($96.8 million) are no longer restricted to the original federally-approved programs. Senate Bill 586 expanded the state's program definitions to include new
projects and to allow greater flexibility in designing new programs.


            * Sewage Sludge -- Counties could have assumed responsibility for monitoring the land application of sewage sludge under legislation (SB 723) approved unanimously by the Senate.

            The measure would have still required the state Department of Environmental Resources to maintain an inventory of all lands to which sludge has been applied.

            Senate Bill 723 was in the House Conservation Committee when the session ended.


            * Stage II Vapor Recovery Systems -- The state Department of Environmental Resources would have been prohibited from requiring the installation of "Stage II" vapor recovery systems on service station fuel pumps under legislation (SB 875) approved unanimously by the Senate.

            Gasoline vapors are believed to contribute to the destruction of the ozone layer. Stage II recovery systems would collect the vapors through a second hose installed on gas pumps.

            The bill was in the House Conservation Committee when the session ended.

Education

            *** Education Subsidies; $18,500 Minimum Teachers' Salary; School Construction Reimbursement -- Subsidies to local school districts were boosted by $154.2 million in fiscal 1988-89 over what was allocated in the prior year and a compromise subsidy formula (HB 1013) to provide the $2.5 billion in aid to schools was adopted (Act 110/1988).

            The subsidy formula had been debated at length, with Senate Republicans proposing a formula that would have given about 250 school districts less than what Governor Casey originally
proposed. The final plan gave all districts subsidies at least equal to the governor's proposal and more.

            The complex Equalized Subsidy for Basic Education (ESBE) formula included the governor's suggested increase in the Factor for Education Expense (FEE) from $2,125 to $2,230; an increase in the so-called poverty supplement which provides additional funding to districts based on concentrations of children from poor (AFDC) families; an increase in small district assistance from $75 per average daily membership (a.d.m.) to $85 a.d.m., and an increase in the minimum guarantee of a district's full entitlement from 1987-88's 90 percent to 95 percent. The latter feature allowed some districts to receive funding increases of more than an eight percent maximum. No district receives less than a 2 percent increase.

            Among other features, the conference committee report on House Bill 1013 also established a statewide minimum teacher's salary of $18,500 and provided funding to districts with starting salaries below that level. Affected districts were given the option of implementing the higher salary immediately or waiting until existing contracts expire.

            The bill also included $26 million for the "TELLS" student testing and remediation program and $5 million for the start of Governor Casey's "incentive grant" program to reward schools that
demonstrate educational improvements and show a decline in student dropout rates.

            The prior year's education subsidy bill (HB 719, Act 50/1987), which provided the formula to spend $2.35 billion in aid to schools in 1987-88, also contained language increasing the level of state reimbursement for school construction. It was the first increase in the level of state support for school building construction costs since the formula for such assistance was first established in 1968.

            Act 50 of 1987 increased the per pupil reimbursement for school construction costs as follows: from $2,300 to $3,900 for elementary schools, from $3,000 to $5,100 for secondary schools
and from $3,700 to $6,300 for area vo-tech schools. Under the program, the state reimburses districts for a share of their bond indebtedness for construction projects over the life of the bond issue. The higher level of reimbursement was made retroactive to projects that began on or after July 1, 1984.

            Act 50 of 1987 also provided temporary special aid to school districts which previously had suffered severe tax revenue losses due to the bankruptcy of businesses in the district.


            *** Home Schooling -- Requirements for Home Education Programs were established in legislation (SB 154) signed into law as Act 169 on Dec. 21, 1988.

            Parents or guardians who plan to educate children at home are required to file yearly affidavits with their school district superintendent.

            Home education programs must provide 180 days or 900 hours of instruction at the elementary level and 180 days or 990 hours of instruction at the secondary level. Required courses are specified for each level. Documentation is required to demonstrate that educational progress is occurring.

            The legislation also includes provisions for the disposition of unused school district property.


            *** Teacher Loan Forgiveness -- Enacted was a measure (HB 2513, Act 155/1988) establishing a program of student loan forgiveness for education college graduates who accept teaching positions in under-served rural and urban areas of the state.

            Qualifying teachers who have borrowed money through the Pennsylvania Higher Education Assistance Agency would have their loans forgiven at a rate of up to $2,500 a year, up to a maximum of $10,000.

            The measure is seen as a way to attract teachers to inner city and rural school districts.


            *** High School Dropout Prevention -- The state Department of Education was charged with developing a program to reduce the state's high school dropout rate under House Bill 9 which became Act 49 of 1987.

            School districts that have a higher dropout rate than the state average became eligible for grants. No school district could receive more than 10% of the total funds available, $750,000 in fiscal 1988-89.

            The program, intended to apply to kindergarten through 12th grade students, was to include such things as: remedial education, employment and training services, vocational education and outreach activities.

            School districts were required to involve parents and guardians of students enrolled in the programs.


            * Programs for Latchkey Children -- The Senate voted (48-0) in favor of a proposal that would assist and encourage local school districts in the establishment of pilot child care programs for so-called "latchkey" children -- children whose parents are not at home before and after the normal school day begins and ends.

            Under Senate Bill 519, which died in the House Education Committee, a latchkey child was defined as one from age 5 to 12, attending school in Pennsylvania.


            * Prepaid College Tuition -- College tuition credits could be purchased in advance under legislation approved by the Senate.

            The measure was not considered in the House before the session ended.

            Sen