State House Sound Bites

Capitol reporter Katie Meyer covers Pennsylvania politics and issues at the Pennsylvania state capitol.
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Breaking down the budget: How to get out of the hole

Written by Katie Meyer, Capitol Bureau Chief | Jun 30, 2017 6:14 AM
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Lawmakers are on track to pass a spending plan, but no revenue package. Some are concerned the eventual revenues won't be sufficient to truly keep the budget balanced. (Photo by AP)

 

(Harrisburg) -- You can tell it's budget week in Pennsylvania because, on any given day, you'll find the Capitol packed with lobbyists and advocates from around the commonwealth, pushing for a piece of the pie.

They mill around the rotunda, waiting for news from lawmakers deliberating in chambers upstairs.

This year, there's been precious little information getting out.

"There's only been a handful--not even a handful, maybe just a couple of conversations on the budget," said Senate Minority Leader Jay Costa, a few days before the budget deadline. "It's a little different than previous years."

Costa is a top member of his party, and yet two days before the end of the fiscal year, he really didn't know what Republicans were planning.

He's had concerns for weeks, though.

At a recent press conference, he told reporters even if the budget balances on paper, that doesn't mean it'll balance in practice. Lawmakers and the governor initially said the current spending plan was solid, too. But then it came up $1.5 billion short.

"A year from now, someone will be standing here and probably repeating the same thing," Costa said.

Democrats hold small minorities in both the House and Senate and don't have much legislative sway--which puts often puts them in a position of critiquing the budget from an outsider perspective.

Top GOP lawmakers have been the ones primarily driving negotiations. House Majority Leader Dave Reed said they're keeping the commonwealth's deficit firmly in mind.

"When we look at a balance sheet, we are looking at the deficit that exists in '16-17 that we're about to end tomorrow, we're looking at balancing at '17-18, and we're looking at '18-19 as well," he said. "Not that we'll necessarily get it perfect--you know, it's hard to project a year out. But we're being mindful of all those years together."

There are a few key numbers to remember when trying to figure out Pennsylvania's often-convoluted finances.

This fiscal year, revenues came in $1.5 billion dollars short. That's money that has to be made up in the new budget.

Then, there's the 2017-18 fiscal year's total spend number. According to the most recent plan released, that'll be $32 billion--a compromise between legislative Republicans and Governor Tom Wolf.

About 800 million of those dollars constitute new spending, which requires new revenue to balance it out.

Finally, there's the structural deficit. That's an engrained imbalance between revenues and expenditures, projected over multiple years. The state's Independent Fiscal Office estimates it's around $3 billion right now.

IFO Director Matthew Knittel elaborated that "any shortfall this year that is not addressed through permanent changes by lower spending and/or higher revenues also carries forward to next year."

So then the question is: will this budget meet that standard?

In short, it's hard to know.

Even though a spending plan has been introduced and will likely pass by the deadline, there's still no trace of an official revenue package to back it up.  

"The worst scenario is really that you pass a budget and create a deficit," said Nathan Benefield, director of the conservative nonprofit Commonwealth Foundation.

"I think that's what happened in part [in the 2016-17 fiscal year], that they passed a budget, did not pass a revenue package, and part of the way they said they were balancing it was borrowing money that never came through; the promise to pass a gambling bill they still haven't passed. That added to the deficit we now are facing today."

Benefield said passing a spending plan without knowing how to pay for it opens the door to sloppy budgeting.

And he added, it's a gray area, constitutionally speaking.

"Putting out a budget without having a revenue plan alongside it, is in violation of the demands of having a balanced budget, and having revenues to match the spending," he said.

But Benefield is also quick to say that even if lawmakers are cutting constitutional corners, there's nothing to stop them, short of voting them out of office.

Political analyst Terry Madonna, of Franklin and Marshall College, said that's also the case for lawmakers passing budgets that don't deal with the commonwealth's structural issues.

"They can do what they want with the numbers--you know, put the numbers on paper and show a balance of revenues versus expenditures, and we won't know for months whether or not the numbers made any sense," he said.

Though the revenue plan isn't out yet, GOP leaders have confirmed it won't contain any tax increases. The main source of recurring revenue is probably going to be a gaming expansion that will net the commonwealth around $200 or $300 million annually.

Another big portion of the cash is likely coming from borrowing against a fund--possibly the state's 1998 tobacco settlement money.

Costa, the Senate Democratic leader, does intend to vote for the spending plan, and he said he thinks lawmakers will be able to cobble together the money to back it up, at least for this year.

"It's a good number," he said of the $32 billion spend. "It's an appropriate number, it's a number that I think we can reach in terms of finding the revenue to be able to support that in a bipartisan, bicameral way, and I think that's what we have to work towards."

But as for meaningfully improving the state's fiscal health?

Maybe not, he conceded.

"At some point we have to pay the piper," Costa said. "And this isn't the year, obviously, that we're going to do that because we put limitations on ourselves. At the end of the day, we are forced to deal with the revenue options that we have. And we're trying to deal with that."

This story is the third in a series on the roots of Pennsylvania's budget deficit. You can read the first two installlations here and here

Published in News, State House Sound Bites

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