House OKs plan to plug deficit with no tax hike

The Mercury (Pottstown, PA) - - FRONT PAGE - By Marc Levy

HAR­RIS­BURG » Up against an un­prece­dented cash crunch, Repub­li­cans who con­trol Penn­syl­va­nia’s House of Rep­re­sen­ta­tives ap­proved a no-new-taxes bor­row­ing pack­age to help plug the state gov­ern­ment’s $2.2 bil­lion bud­get gap.

In ad­di­tion to a $1 bil­lion loan, the House GOP’s pack­age would siphon cash from off-bud­get pro­grams, in­clud­ing ac­counts for mass tran­sit, en­vi­ron­men­tal pro­tec­tion and eco­nomic de­vel­op­ment.

“We can ei­ther tax our con­stituents, or we can use the money we al­ready have,” one sup­porter, Rep. Paul Schemel, R-Franklin, told col­leagues dur­ing Wed­nes­day night’s de­bate.

The plan passed, 103-91, gar­ner­ing one more vote than the 102 it needed to pass. Still, it is a small, if un­cer­tain, step to­ward

re­solv­ing Penn­syl­va­nia’s bud­get stale­mate, now in its third month.

It is op­posed by Demo­cratic Gov. Tom Wolf, who says it fails to solve the state’s un­der­ly­ing fis­cal prob­lems, and it faces push­back from the Se­nate’s Repub­li­can ma­jor­ity, which helped pass a $500 mil­lion­plus tax pack­age in July to fully fund a $32 bil­lion spend­ing agree­ment ap­proved over­whelm­ingly by both cham­bers.

Ev­ery Demo­cratic law­maker op­posed it, as did 15 Repub­li­cans, mostly mod­er­ates from south­east­ern Penn­syl­va­nia.

Crit­ics said it uses deeply flawed as­sump­tions, poses cut­backs in mass tran­sit ser­vices and plun­ders money for pop­u­lar causes, such as mu­nic­i­pal re­cy­cling pro­grams.

“This pro­posal robs Peter to pay Paul,” Rep. Joe Markosek, D-Al­legheny, said dur­ing floor de­bate.

With the state’s main bank ac­count scrap­ing bot­tom, the House GOP plan will pro­vide no re­lief be­fore Fri­day, when Wolf has said he will be un­able to pay bills on time. It would be the first time Penn­syl­va­nia state gov­ern­ment has missed a pay­ment as a re­sult of not hav­ing enough cash, state of­fi­cials said.

This lat­est House GOP plan came to­gether overnight Tues­day, fol­low­ing the col­lapse of ear­lier plans. It stitched to­gether sup­port from a cau­cus that has been deeply di­vided be­tween anti-tax con­ser­va­tives and mod­er­ates who back a tax in­crease, par­tic­u­larly on Mar­cel­lus Shale nat­u­ral gas pro­duc­tion.

In a state­ment re­leased late Wed­nes­day af­ter­noon, Wolf’s of­fice slammed the House GOP’s pack­age.

It would leave the state with an­other $700 mil­lion deficit next year and in­flict “sig­nif­i­cant, dam­ag­ing cuts to trans­porta­tion, recre­ation, pub­lic safety and en­vi­ron­men­tal pro­grams,” his of­fice said.

Demo­cratic law­mak­ers warned that a down­grade to the state’s bat­tered credit rat­ing is also in the off­ing. The re­vamped pack­age re­lies on bor­row­ing $1 bil­lion against fu­ture rev­enue from Penn­syl­va­nia’s share of 1998’s mul­ti­state set­tle­ment with to­bacco com­pa­nies and di­vert­ing $600 mil­lion-plus from off-bud­get pro­grams.

It also would count on hun­dreds of mil­lions of dol­lars more in un­used cash from state pro­grams, money that the Wolf ad­min­is­tra­tion says does not en­tirely ex­ist, and the po­ten­tial for li­cense fees should the state au­tho­rize an­other ex­pan­sion of casino-style gam­bling. The Se­nate’s pack­age had also re­lied heav­ily on bor­row­ing and the ex­pec­ta­tion of a casino gam­bling ex­pan­sion.

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 pe­ri­ods when tax col­lec­tions are slow.

How­ever, this year, Penn­syl­va­nia’s two in­de­pen­dently elected fis­cal of­fi­cers — Trea­surer Joe Torsella and Au­di­tor Gen­eral Eu­gene DePasquale, both Democrats — have re­fused to sign off on the sort of bor­row­ing that would be nec­es­sary for Wolf’s ad­min­is­tra­tion to pay its bills on time.

Ahead of Fri­day, Wolf’s ad­min­is­tra­tion has told the eight in­sur­ers that ad­min­is­ter ben­e­fits for 2.2 mil­lion Med­i­caid en­rollees that they may not re­ceive their monthly pay­ments of about $800 mil­lion on time.

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