Pennsylvania treasurer: Budget negotiators need to reach a consensus — and soon
State Treasurer Joe Torsella says time is running out for Harrisburg budget negotiators to come to an agreement on a revenue package.
“Dominos will begin to fall starting in August and September, and our message to everyone is … from a very narrow cash-flow perspective, the state will not have enough money to pay its bills coming sometime soon,” Torsella said Tuesday during a Tribune-Review editorial board interview.
In late June, Gov. Tom Wolf allowed a bipartisan $32 billion spending plan to lapse into law, but lawmakers and the governor have not reached a consensus on how to pay for it.
Last weekend, the House of Representatives failed to achieve a resolution on a proposal to borrow against future Tobacco Settlement Fund payments and make transfers from other state accounts.
All negotiating parties continue to work toward a proposal that includes borrowing using the Tobacco Settlement Fund to pay the debt service — it’s called securitization — and new revenue sources.
The $32 billion spending plan represents an increase in spending of about $54 million over the 2016-17 fiscal year, but new revenue from the borrowing will go toward only covering the $1.5 billion budget shortfall for that year.
“The securitization that is on the menu of options for satisfying the budget obligations for the upcoming year would be to cover the revenue shortfall for last year and not for any new spending,” said Jennifer Kocher, spokeswoman for Senate Majority Leader Jake Corman, R-Centre.
The revenue shortfall from last fiscal year was $1.5 billion, and to avoid a similar revenue shortfall, the state is seeking about $600 million in additional recurring revenue, Kocher said.
The state Senate is scheduled to be in session Wednesday and Thursday for lawmakers to discuss options and send a plan to the House.
Senate Democratic Leader Jay Costa, D-Forest Hills, said the borrowing proposal must be combined with recurring revenues or the state will be penalized by credit rating agencies with a downgrade.
“If you’re going to do borrowing, you’ll need recurring revenues, is what they (credit rating agencies) tell us,” Costa said.
He said Democrats are pushing for a higher tax on Marcellus shale operations. Lawmakers also could look at expanding legalized gaming, an extension of the gross receipts tax on natural gas users or eliminating the sales tax exemption for basic cable services.
Torsella, a Democrat elected in 2016, said he’s “agnostic” as to how the budget is balanced, just as long as it’s in balance.
But he warned that credit ratings agencies won’t look favorably on a state budget balanced with borrowing and “one-time gimmicks” such as budget transfers.
And a credit rating downgrade, he said, is akin to “a backdoor tax.”
“What the credit rating really is is a burden on Pennsylvania taxpayers because we have a suboptimal credit rating, and if it goes lower it increases the cost of borrowing money for the things we need to borrow money for,” he said.
Steve Miskin, spokesman for the House Republicans, agreed with Torsella’s position that borrowing is not optimal but said spending has outpaced revenues for years.
“It’s our hope and anticipation that when the final budget-related bills are done, we are able to deal with the cost-drivers to help curtail some of the spending,” Miskin said.
The governor’s office says the spending blueprint is sound and passed both the House and Senate with “huge bipartisan support.” The House approved the plan 173-27 and the Senate by 43-7.
Wolf spokesman J.J. Abbott said the proposal streamlined government and put more funding toward schools, human services, job training and fighting the heroin crisis.
“Gov. Wolf felt parties were making progress at the beginning of last week before the process took a detour,” Abbott said. “He looks forward to resuming bipartisan negotiations and working to balance the budget in a bipartisan, responsible way.”