Pa. House GOP OKs borrowing, no-new-taxes plan to plug deficit

Associated Press

HARRISBURG — Up against an unprecedented cash crunch, Republicans who control Pennsylvania’s House of Representatives late Wednesday night 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 million-plus 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.

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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.

Speaker of the Pennsylvania House of Representatives, Rep. Mike Turzai, R-Allegheny, speaks Tuesday, Dec. 8, 2015, at the state Capitol in Harrisburg, Pa. The House voted 115 to 86 in favor for a $30.3 billion general appropriations bill on Tuesday, a day after a bipartisan Senate vote to approve a $30.8 billion budget that Democratic Gov. Tom Wolf supports. (AP Photo/Matt Rourke)

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.