Legislators give views on impasse
LOCK HAVEN — Counties are worried they will have to foot the bill for state mandates without any state dollars.
Penn State and three other universities are worried they won’t see any appropriations from Harrisburg.
The Pennsylvania state government’s credit rating has fallen and, for possibly the first time ever, the state government missed payments this month because it didn’t have enough cash.
And the state still does not have a balanced budget for the 2017-18 fiscal year.
Gov. Tom Wolf, a Democratic governor, urged the Republican-majority Legislature to complete the budget by tomorrow. Sunday will come and go without a budget, but three legislators representing this region told The Express that next week looks promising.
“I think we are really close,” said Rep. Garth Everett, R-Muncy.
House Minority Whip Mike Hanna, D-Lock Haven, said, “We are committed to working with everybody next week.”
Senate Pres. Pro Tempore Joe Scarnati, R-Brockway, also said there is hope for a resolution next week.
The highlights of this state budget impasse start June 30, the last day of the previous fiscal year, when legislators passed a nearly $32 billion spending plan, an increase of 3 percent over the 2016-17 budget. The spending plan carried a deficit of $2.2 billion, and the Legislature has yet to agree on how to deal with this. The governor did not sign the spending plan but allowed it to take effect without a revenue plan to support it.
Since then, the House and Senate, both led by Republicans, have gone back and forth a bit with proposed revenue plans.
On July 27, the state Senate approved a budget, by a close vote, that included taxes on utility bills and a severance tax on Marcellus shale natural gas. The state House did not like it.
Last week, the Senate did not concur with the House’s revenue plan. This plan contained no new taxes and offered what seem to be one-time solutions for the budget deficit.
On Sept. 15, the Pennsylvania government delayed a payment of $1.67 billion in reimbursements under Medicaid, and on Sept. 18 it delayed payments of $581 million to school districts.
On Sept. 20, Standard and Poor’s downgraded the state government’s credit rating. Reasons included Harrisburg’s history of late budgets and its history of trying to solve budgets with one-time stop-gaps, not recurring revenues (taxes). The downgrade is the second by Standard and Poor’s in three years, and it has put Pennsylvania among the bottom five states in the nation.
Hanna said the governor put forward what he wanted more than six months ago now. The back-and-forth actions between the House and Senate have delayed a revenue plan, even though the Senate’s plan had bipartisan support.
However, another proposal between both caucuses will be considered next week, he said.
The Pennsylvania State System of Higher Education, which includes Lock Haven and 13 other state universities, received a 2 percent increase in the spending plan, which Hanna called very positive. Without a balanced revenue plan, however, there is always the potential for the governor to propose a funding freeze, he said.
Meanwhile, four other universities — Penn State, the University of Pittsburgh, Lincoln, and Temple which are in the Commonwealth System of Higher Education, not PASSHE — have not had their appropriations approved, Hanna said.
He said the biggest problem with the new plan, as he knows it, is that it does not include enough recurring revenue, which generally is taxes. The plan’s revenue includes gambling expansion, and it relies heavily on borrowing, in Hanna’s view.
The House Democratic caucus is concerned and so is he, he said, “but we have to get this done and we will hear them out.”
The House Republicans’ proposed revenue plan also targeted $1.2 billion in dedicated funds that was identified as “surplus money,” Hanna said. “It is not surplus. It is actually designated throughout the course of the year to specific funding streams.”
Using that money to balance the budget would mean counties would take several funding hits, and the County Commissioners Association of Pennsylvania joined the governor in objecting to the idea.
The latest proposal also goes after some of these funds, but the amount is in the millions now, not the billions, Hanna said.
“When the House Republicans were going through that somewhat foolish exercise, I stood on the House floor and said, ‘You are playing a game when you know nobody agrees with you and Monday we will get a downgrade (from S&P) that will cost us tens of millions of dollars,'” he stated.
Those costs will come in the form of higher interest rates.
Local governments and school districts, which are created by the state, will have to deal with the state’s poor credit rating too, when they attempt to borrow funds, Hanna said.
“Standard and Poor’s and everybody has said it’s because Pennsylvania refuses to address its structural deficit. Today, we are discussing a one-time borrowing. What do you do next year?” he asked.
Rep. Everett said the gap between the spending plan and the revenue to fund it may not be carried forward after this year.
The $2.2 billion gap is a one-time result of the revenues for last year not coming in at the level that the Independent Fiscal Office predicted they would, Everett said.
“We have a plan among the Appropriations Committee. The plan will get us through if revenues come in as predicted, with a small $300,000 surplus,” he said, “so I am willing to go with one-time revenues.”
He added, “We hope Standard & Poor’s will see, when they look at us again, that we have reconciled our problems.”
Everett explained the proposed budget the House recently sent to the Senate. He said it included proposals to increase revenue by expanding gaming, like internet gaming and video gaming in bars and clubs, and by further modernizing the way the state handles the sale of beer, wine and spirits, moving in the direction of privatization.
The proposed budget also included the fund transfers that have become controversial.
In addition, the proposal would have floated a bond issue against some of the national tobacco settlement money that Pennsylvania would receive in the future.
“We have multiple options to meet our revenue gap,” Everett said. “We can make up that revenue without having to increase taxes, without having to do a severance tax or increase the tax on oil or gas.
“I’d like to be able to go back next week and vote on a plan that meets the revenue,” he added.
Everett is a member of the Pennsylvania College of Technology Board of Directors, and the college receives its funding through Penn State’s budget line, he said. “I understand very directly what the impact would be on Penn College,” he said.
He is also a Penn State alumnus.
“We can’t send them their funding because we don’t have enough revenue to send it, but as soon as we get the deal done we can send those funding lines out,” Everett said.
As for counties, they have a reason to be concerned right now, but by the end of next week, they may not need to be, he said.
“I hope that we will have wrapped this up and we can move on to other concerns in front of the Legislature,” he said.
Sen. Scarnati provided this statement by email: “The Senate will reconvene for Session on Monday at 2 p.m. Discussions regarding the budget continue to progress and we hope to resolve the budget impasse next week. We understand the negative effect that not having a full budget in place is having upon our counties and state. It is extremely important that a balanced budget is enacted as soon as possible.”
Hanna said, “My biggest hope is that the House Republican and Senate Republican leaders can put aside their differences… They have to put aside their differences and get this done.”
The Express also contacted the offices of Senate Majority Leader Jake Corman, R-Bellefonte, and Rep. Kerry Benninghoff, R-Bellefonte, but these two legislators did not respond by press time.
Some information for this article was provided by the Associated Press.