$1.7B in payments delayed amid budget stalemate

HARRISBURG » Pennsylvania state government will delay more than $1.7 billion in payments due largely to Medicaid insurers and school districts, Democratic Gov. Tom Wolf said Friday, amid an unprecedented cash crunch and a fight in the Republican-controlled Legislature over how to plug a projected $2.2 billion budget hole.

Wolf’s office issued the brief statement acknowledging the delays on the day the state’s main bank account was projected to dip below zero. Wolf did not make a public appearance to discuss the payment delays, but his office said he would speak with top lawmakers by telephone over the weekend to discuss the budget stalemate.

The payments are reimbursements for medical care, addiction treatment and mental health counseling under Medicaid and for the state’s share of pension obligation payments to Pennsylvania’s school employees pension fund. The Medicaid reimbursements, due Friday, will be delayed for at least a week, Wolf’s office said.

School districts expected the pension obligation reimbursements to be delayed by a matter of a few days, although state officials expect rolling delays of payments, at least until spring, for as long as the budget stalemate goes on.

“We’ve been told it’s going out next week,” said Jay Himes, executive director of the Pennsylvania Association of School Business Officials. “After that, we’ve been told, ‘Don’t hold your breath.’”

John Callahan, of the Pennsylvania School Boards Association, said the organization was relieved that Wolf’s administration would be able to make the pension payment to districts, but it worried about the fate of a bigger payment, in excess of $1 billion for public school operations, that is due from the state in October.

Insurers that administer benefits for 2.2 million Medicaid enrollees say the delayed payment will force them to borrow money to make timely payments to hospitals, physicians and pharmacies that are required by federal law. The cost to borrow contractually can be charged to the state, Wolf’s administration said.

It is the first known time that Pennsylvania state government has missed a payment as a result of not having enough cash. Wolf has spending authority under a nearly $32 billion budget bill lawmakers overwhelmingly passed June 30, amounting to a 3 percent increase.

Since the Recession, Pennsylvania state government has reliably bailed out its deficit-ridden finances by borrowing money from the state treasury or a bank during the fall, a period when tax collections are relatively slow.

However, Pennsylvania’s two independently elected fiscal officers, Treasurer Joe Torsella and Auditor General Eugene DePasquale, both Democrats, are refusing to authorize a short-term loan during the stalemate.

Should the Legislature never agree on a plan to support spending levels already approved, Wolf might need to freeze program spending across state government, including to schools, hospitals, counties and other entities, lawmakers say.

Still hung up in the Legislature are measures carrying about $600 million in aid to Penn State, the University of Pittsburgh, Temple and Lincoln universities and the University of Pennsylvania’s veterinary school.