Progress toward a long-delayed budget solution crept forward on Tuesday as several dozen House Republicans gathered in the state Capitol for a briefing on a plan some members have developed that relies mainly on special fund transfers to dig Pennsylvania out of its current $2.2 billion deficit.
The work of the House’s majority caucus was put under additional scrutiny by a stern missive Gov. Tom Wolf sent to GOP leadership earlier in the day warning that time is running out on developing a solution to Pennsylvania’s current and structural budget woes.
In the letter, Wolf noted that the commonwealth’s General Fund – in effect, its largest checkbook – will run out of money Sept. 15 and remain below zero for much of the remainder of the fiscal year, adding that Treasurer Joe Torsella has informed the administration that no more short-term internal borrowing will be authorized absent a balanced budget.
He further warned that credit rating agencies have signaled that if a revenue plan is not completed in the near-term they will downgrade the state’s bond rating, potentially increasing the cost of borrowing money.
“[T]his is a simple math problem. Without action, there is not sufficient revenue to balance the budget,” Wolf wrote. “There has been robust debate about how to meet this challenge. Time is not on our side, and now is the time to put statesmanship before anything else. There is too much at stake.”
Also on Tuesday, Wolf informed legislators his administration is leveraging over $700 million from the state’s Motor Licensing Fund to carry the commonwealth through a revenue dearth until the Sept. 15 drop-dead date for the General Fund’s solvency.
Of that $700 million, $459 million will be an advance from PennDOT that will go to the General Fund specifically to pay for State Police obligations. The other $241 million will be in the form of a loan from the Motor License Fund to the General Fund that will need to be paid back by March 1, 2018. That payment will go toward “a major payment for school districts” to allow schools to continue to function normally in the near-term.
“While Pennsylvanians were assured that the House would return as soon as possible to act upon the bill sent by the Senate, it is now clear that the House's work will not be completed this month,” the governor wrote to the House. “In a good-faith effort to allow you a little more time, but ensure we can still meet our obligations, I have authorized a loan transfer from the Motor License Fund to the General Fund to enable the Commonwealth to pay its bills in the very short-term.”
In terms of House action on developing a revenue plan, the most visible sign of progress occurred Tuesday, when a relatively large group of House Republicans gathered behind closed doors to engage in a listening session on a plan that could transfer as much as $2.2 billion from what some say is $12 billion in untapped special funds that could be utilized to balance the budget.
The meeting was the culmination of a month-long endeavor on behalf of plan supporters to engage members throughout the state by traveling to brief various regional caucuses and holding hearings.
It’s also the latest indication that the aforementioned Senate plan that provided for over $2 billion in funding – led by $1.2 billion in borrowing from the Tobacco Settlement Fund, $400 million from increases to the state’s Gross Receipts Tax and $100 million from a natural gas severance tax – was largely a non-starter for the House.
While the details remained somewhat murky by Tuesday afternoon, the focus appeared to be less on plugging the entire budget deficit with the fund transfers, but rather offsetting the need to borrow as much as $1.5 billion from the Tobacco Settlement Fund to make up for the lingering FY 2016-2017 deficit.
That plan, at least as of now, would then be merged together with acceptable components from a yet-to-be-revealed House GOP leadership-endorsed plan developed by the House Appropriations Committee to comprise the final revenue plan.
By all reports coming from the discussion, the fund transfer plan was not received with outright hostility, though members had a number of questions about the specifics.
“In my time in there I didn’t hear any ‘Oh, this is stupid, we shouldn’t do this.’ So, that’s positive,” said Rep. Seth Grove (R-York). “I think it was well received by the members that heard it, but the question is: Will there be 102 votes?”
House Majority Leader Dave Reed (R-Indiana) commented to reporters that in his view, the plan “is as real as any other proposal out there right now.” He added that if the plan does get to 102 votes in what is likely to be a later-in-the-week headcount of membership, then the House will take it up.
“We are looking for a way to end this budget process once and for all,” he said. “We are going to try to get to 102 votes. If it gets to 102 votes, we are going to send it to the Senate, particularly as a replacement for the borrowing component to what the Senate had passed, and we’ll move on from there.”
But will the plan have 102 votes?
According to a Monday conversation with House Democratic Appropriations Committee Chairman Joe Markosek (D-Allegheny), it appears unlikely House Democrats will support a plan not led by recurring revenue.
“Whatever solution we have, in my opinion, it must contain way more recurring revenue than one-time revenue,” he said. “Otherwise, you are just going to be back into this deficit problem year after year after year.”
As of Tuesday, the House is not expected to return to session prior to the previously scheduled date of Sept. 11 – just five days short of the Sept. 15 deadline.
Jason Gottesman is the Harrisburg Bureau Chief of The PLS Reporter, a news website dedicated to covering Pennsylvania’s government.