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Pa. state government running out of options for cash to pay bills

Written by Marc Levy/The Associated Press | Aug 20, 2017 7:02 PM
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FILE PHOTO: Democratic Gov. Tom Wolf. (AP Photo/Marc Levy)

(Harrisburg) -- Top state officials are warning that Pennsylvania's deficit-strapped government is rapidly approaching a more severe stage in its seven-week-old budget stalemate, one in which Democratic Gov. Tom Wolf may have to start deciding which bills to pay and which to postpone.

Taxes are still being collected and checks are being cut by the Pennsylvania Treasury under a nearly $32 billion budget bill that lawmakers approved June 30, the day before the current fiscal year began.

But that spending plan is badly out of balance and, without a loan or an emergency revenue package, the state will face hard decisions within days.

"Somebody's not getting paid if this doesn't get fixed," Auditor General Eugene DePasquale, a Democrat, said Friday. "Who it is -- the vendors, I don't know -- that's a decision for others to make. It's simply a math equation: there's not enough money to pay everybody."

This scenario is new to a state government that has weathered months-long budget stalemates and an entrenched post-recession deficit that has left budgetmakers plugging bigger holes every year and nursing one of the nation's worst credit ratings.

"We are entering an era of a new frontier, and by that I mean things we have never seen before," said Drew Crompton, the top aide to Senate President Pro Tempore Joe Scarnati, R-Jefferson.

Wolf's office wouldn't answer questions about the governor's contingency plans, saying only that it was monitoring cash flow as it waits for the House of Representatives to return to Harrisburg to complete a revenue package.

Since the recession, the state Treasury Department has reliably bailed out the state during low-flow periods of tax collections.

However, Treasurer Joe Torsella, a Democrat first elected last November, said Wednesday that he may not continue loaning money, questioning whether patching the state's growing gap was a fiscally responsible use of the department's short-term investment cash.

Approval from Torsella and DePasquale is legally necessary for the Wolf administration to borrow from a bank. But, without a credible revenue package in place, neither says he is willing to authorize a short-term bank loan to the state, assuming a bank would actually lend to the state.

Meanwhile, the Wolf administration is seeking to borrow money from off-budget state programs without approval from lawmakers or the Treasury Department, state officials said.

Time is ticking.

Torsella's office projects that the state's main bank account will fall below $0 by Aug. 29 and go $1.6 billion in the red by mid-September. Without a revenue package or a loan, it will remain in negative territory for until next spring, when the heavy tax collection season begins, his office said.

House Republican leaders have no plans to return to Harrisburg before Sept. 11, and rank-and-file House Republicans said Friday that the caucus had not embraced the Senate's $2.2 billion revenue package, passed last month, or found consensus around an alternative.

The Senate's plan, supported by Wolf, is built on borrowing $1.3 billion against Pennsylvania's future proceeds from the 1998 multistate settlement with tobacco companies, raising $400 million worth of taxes on consumers' utility bills and mounting another huge expansion of casino-style gambling.

Regardless of financial difficulties, the state is legally bound to make debt payments, cover Medicaid costs, keep prisons open and meet biweekly payrolls of around $150 million, state officials said. But Wolf's administration could postpone payments to vendors, such as utilities, insurers, suppliers and landlords, and put off paying discretionary items, such as tax credits, grants and public school aid.

Ultimately, if the House does nothing, it could be up to Wolf to withhold $1.6 billion in program money, a prospect that could have broad consequences, while nearly $600 million in aid to five universities -- Penn State, Temple, Lincoln, Pitt and Penn's veterinary school -- is held up in the stalemate. Another $52 million for Penn State's College of Agricultural Sciences also is in limbo.

The House's Republican majority has kept its budget discussion in its own caucus, with little, if any, communication with Wolf, Democratic lawmakers or the Senate's Republican majority.

"This is not sloth that's keeping us from getting this budget done," said Rep. Kate Harper, R-Montgomery. "There are very difficult value choices that have to be made and I don't see unanimity in the Republican caucus on how to get there."

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