As state lawmakers continue staring at the virtual certainty of a credit downgrade and an emptied-out General Fund in the absence of a balanced budget, the rhetoric and frustration amped up Monday.
That’s when the House Republican Caucus again tried to find some sort of a compromise on $2.2 billion worth of money needed to balance the $31.99 billion budget enacted earlier this summer.
“This isn’t governing; this is an embarrassment,” said Senate President Pro Tempore Joe Scarnati (R-Jefferson) upon leaving an unrelated meeting with Gov. Tom Wolf. “We are certainly going to see darker days ahead as the dollars dwindle down. To my knowledge, the responsible thing for the Treasurer to do is not be out borrowing more money for money we don’t have.”
Just last week, Treasurer Joe Torsella said that he may no longer deem it to be prudent to loan money to the General Fund – the state’s largest checkbook – in the absence of a viable revenue plan.
While the Treasury loaned the General Fund $750 million to cover a two-week period of a below-zero General Fund balance, he anticipates the fund will again drop below zero as soon as next week. At that point, the fund’s continuing need to remain balanced on Treasury’s loans for a significant portion of the remainder of FY 2017-2018 will exceed prudent lending standards.
“Treasury’s Short-Term Investment Pool is not a rainy-day fund – it is neither intended nor managed to be a backstop to the General Fund," Torsella said last week. “As an investment fund, it is governed by law mandating only ‘prudent’ investments. An overly concentrated loan by the pool to the General Fund – at a time when the underlying budget is $2.2 billion out of balance, revenues are declining and we are still without an enacted revenue package – would represent a substantial investment risk.”
Meanwhile, various factions of the House Republican Caucus have remained busy working to convince colleagues to vote for their respective plans.
More than a dozen members were gathered in the House’s majority caucus room Monday, working over a plan that included the utilization of special funds to reduce the need to borrow as much as $1.2 billion from the state’s Tobacco Settlement Fund – a controversial move provided for in an earlier Senate-passed revenue plan – to balance FY 2016-2017.
It’s just one of a number of proposals being floated in the House, none of which have been given a serious chance of success.
“We’ve been leading throughout this entire process,” said House Republican Caucus spokesperson Steve Miskin in reference to budget- and revenue-related bills passed by the House earlier this session. “The fact is – and this shouldn’t come as a surprise to anyone – we don’t believe that taxes is the first venue to go to. Our members are conducting a thorough review of all the funds that are out there to see what reserve or excess funds can be transferred to alleviate that deficit.”
He added that some portions of the Senate-passed revenue plan, particularly the re-initiation and increase in the gross receipts tax on some consumer services, were non-starters in the House.
Miskin put the blame for the current deficit – and the need for substantial budgetary revenues – on “a lack of governance” from Gov. Wolf, adding his failure to put money in budgetary reserves last year created the deficit lawmakers are now trying to deal with.
“We are in this situation now…at least half of that is due to the governor’s spending spree of last year,” he said. “Putting things in reserve should have been done a year ago when it was made very clear by his own budget secretary and the Independent Fiscal Office that revenues were not coming in as certified.”
For Scarnati, the potential fiscal crisis is evidence that the time for inciting rhetoric and grand ideas without legislative proposals is over.
“I have a lot of people in this building that walk around with all of these great ideas…where’s your bill? Show me your bill. Did you offer an amendment to the budget? Did you engage in this process?” he asked rhetorically. “You get 26 votes there, 102 there and it goes, but you just can’t sit back and roll grenades in the room and say there’s $3 billion in savings. Show them and, when you got the votes for it, we’ll get it done.”
He added the current options are not limitless.
“Either cut the budget or fund the budget you passed,” he said. “It’s not a buffet.”
The former, he said, could lead to devastating consequences, whether the cuts come through a lower General Appropriations bill that reflects current revenues (something not currently being vetted in either chamber) or through the governor balancing the budget by putting money in budgetary reserves.
“You’re going down to the lowest common denominator,” he said about areas that could have their budgets slashed should a revenue plan fail to get off the ground. “I’m not a big spender, I’m not a tax-and-spend guy…but you’ve got to be reasonable.”
He added that should such cuts occur – potentially to the tune of $2.2 billion – public schools and human services programs would be the hardest hit. Cuts necessary to the internal workings of the state Legislature could cost as many as 100 jobs in the Senate alone.
“If everybody’s taking a haircut – a real haircut – I’m all in, but just don’t pick on the Senate,” he said.
According to Miskin, things might not be so drastic in the short-term. He noted the state is expected to collect more than $31 billion in revenue this year regardless of what new revenue plan, if any, the legislators develop.
“The fact is, revenues are coming in every single day – taxes and fees and whatnot,” he said. “The money is there – that money is going to be there.”
Currently, the House is not expected to return to session until Sept. 11, though they could return before that should consensus develop on a plan sufficient to balance the budget.
Jason Gottesman is the Harrisburg Bureau Chief of The PLS Reporter, a news website dedicated to covering Pennsylvania’s government.