Is the budget pain coming for Pennsylvanians?
Ho-hum. Another year, another state budget crisis over how to pay for rising government costs amid falling tax revenue and a perpetual $2.2 billion deficit.
For the second time in three years, the majority House Republican Caucus finds itself at odds with Democratic Gov. Tom Wolf and a bipartisan group of senators.
House Republicans, led by fiscal conservatives, have declined to negotiate bills to pay for the budget. No taxes or bonds of any kind, they say, to cover costs. Wolf, with the backing of enough Senate Republicans and Democrats to pass a measure, has sought various tax increases and other methods to fully fund programs and stave off Wall Street’s threat of imposing higher interest costs on taxpayer-backed bonds.
Up until now, citizens, state workers and school teachers have been unscathed by the Capitol infighting. Workers have been paid through normal tax dollars or short-term loans from the state Treasury or private banks, alleviating layoffs and program cuts.
But this pain-free gravy train could come to an end for Pennsylvanians if a deal to pay for the nearly $32 billion budget is not done by Sept. 15.
That is when biweekly paychecks are issued to state employees, and $100 million in bond payments and $1.5 billion in Medicaid bills are due. With $544.5 million in its budget accounts as of this week, the state can’t cover all those bills, especially if Treasuer Joe Torsella, a Democrat, withholds short-term loans as he has threatened over the stalemate.
If a deal is not done, Wolf may have no choice but to freeze between $1.7 billion and $2.4 billion in spending and that will lead to cuts across the state, said Sen. Jay Costa, D-Allegheny, minority caucus chairman.
“Sept. 15 is the day we wake up and recognize a whole series of changes and a whole series of reductions are going to be in place and those are going to have significant consequences,” Costa said.
Wolf has already frozen about $188 million. He isn’t talking specifics about his next move, saying Wednesday he will “manage” the finances.
House Republicans need to negotiate or pass his February budget or the Senate’s tax and bond plan, he said. In addition, Wolf called “nonsense” a House GOP plan to take $2.4 billion from special funds, saying it will hurt volunteer fire companies, 911 centers, transportation and other projects that benefit local communities.
“Taking from special funds is a bad idea,” Wolf said. “The key is for the House Republicans to get back in the room and get the job done.”
The House plans to return to session Monday to vote on the fund transfer plan presented by a group of 16 conservative lawmakers. There’s no guarantee it will pass and there’s no telling what the House GOP’s next step would be — except blame Wolf.
Hoping Wolf cuts spending is not the House GOP caucus’ goal, said Steve Miskin, spokesman for House Majority Leader Dave Reed, R-Indiana, and Speaker Mike Turzai, R-Allegheny. Still, Miskin said, Wolf caused the deficit by not freezing spending last year when tax revenue was short.
“This is the only governor I’ve ever known who doesn’t think it’s his job to manage the safe and make decisions,” Miskin said.
Senate President Pro Tempore Joe Scarnati, R-Jefferson, has said Wolf should freeze spending. If the House does not vote to pay for the budget it passed June 30, Scarnati said in a recent Associated Press interview, “I find hypocrisy in that.”
Wolf cannot grab any pot of money to cover the deficit and balance the budget. Most of the budget is earmarked for mandatory state and federal costs in human services, corrections and other areas. Discretionary spending is a small percentage of the whole budget.
Where does he find the discretionary money for the deficit?
House Republicans already found some of it by not voting on a separate $650 million budget bill to fund state-related universities: Penn State, Temple, Pittsburgh and Lincoln. If those universities go without tax money, the deficit would fall to $1.75 billion.
Wolf then should freeze $400 million in discretionary tax credits to businesses and private schools, Costa said. That would drop the deficit to $1.35 billion.
The fastest way to plug the rest of it is to reduce all school districts’ per-pupil state subsidy by equal percentages. Such a tactic is not fair to districts that built their budgets on state funding pledges. but it’s one of the biggest pots of discretionary funds, Costa said.
In 2011, Republican Gov. Tom Corbett used mostly education funding to cover a state deficit – and then was voted out of office three years later.
If Wolf has to cut education funding, Costa said, House Republicans will be at fault for being an outlier in the budget talks.
Miskin doesn’t see it that way, but admitted the caucus was alone.
“We are on an island,” he said, “looking out for taxpayers.”
Those taxpayers could be swamped next week in funding cuts without a deal.