Senate rejects House budget plan; S&P downgrades state’s credit rating

Jason Addy
York Dispatch

A solution to the state’s $2.2 billion budget gap continues to elude lawmakers after senators shot down a no-new-taxes plan that House Republicans passed last week by a single vote.

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

By a 43-7 vote Wednesday, Sept. 20, the Senate rejected the House GOP’s plan to fill the multibillion-dollar hole by borrowing $1 billion against future revenue from a multistate settlement with tobacco companies and diverting $600 million-plus from off-budget programs.

Critics of the House GOP’s plan have warned over the last few weeks that it would lead to a credit downgrade. Those warnings were vindicated Wednesday, Sept. 20, when Standard & Poor’s dropped Pennsylvania’s credit rating for the second time in three years, citing the state’s history of late budgets and indications that the trend will continue.

The downgrade means the state will pay more to borrow money — an estimated $10 million more for every $1 billion the state borrows or refinances.

More:Wolf says time running out on budget deal before downgrade

More:Senate GOP confronts no-tax package in state’s budget fight

York County Sens. Scott Wagner and Mike Regan were among the seven Republican senators who voted to approve the House GOP plan. In a statement after the credit downgrade, Wagner blamed Democratic Gov. Tom Wolf for a lack of leadership and creating the budget shortfall by not putting aside any tax revenues last year, even though collected revenues did not match budget expectations.

State Sen. Scott Wagner. Dawn J. Sagert photo

Wagner, like his colleagues in the House, believes the state should rein in spending to match revenues instead of creating new taxes to support increased spending.

“If today’s news is not a cause to be in the Capitol working with the Legislature to find a solution that actually benefits taxpayers, I don’t know what is,” Wagner said, pointing out Wolf’s absence in Harrisburg. “But I will not be complicit in allowing the taxpayers to take one more hit through higher taxes.”

Missed opportunity: State Rep. Seth Grove, R-Dover Township, said the state’s budget impasse would have been over if the Senate passed the House plan, with Wolf indicating he would not veto the bill if it reached his desk.

An agreement on the House’s plan would have solved the state’s cash flow problem, allowed Wolf and Treasurer Joe Torsella to make payments that they’ve delayed and possibly averted the state’s credit downgrade, Grove said. 

In the past week, Wolf delayed $1.7 billion in payments, mostly to Medicaid insurers and school districts, pointing to an empty bank account. It is the first known time that Pennsylvania state government has missed a payment as a result of not having enough cash.

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

More:Pennsylvania’s ugly budget fight gets personal and regional

Rep. Seth Grove is shown during an interview at his office in West Manchester Township, Wednesday, Feb. 17, 2016.

With the budget stalemate now pitting House Republicans against Senate Republicans, who have sided with Wolf on his calls for new taxes to boost revenue streams, Grove said he is unsure how all sides will be able to reach an agreement.

“I do not know why my colleagues in the Senate want to insist on massive tax increases to fund a budget,” Grove said. “They just killed any last chance of taxpayers not seeing a tax increase again this year.”

Despite the Senate’s rejection, Rep. Kate Klunk, R-Hanover, said the House GOP plan remains a “viable” option because it stops the trend of raising taxes to cover added spending. It is “a responsible plan that puts the people of Pennsylvania first,” Klunk said. 

Kate Klunk

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“To say I’m disappointed would be an understatement,” Klunk said of the Senate's vote.

Rep. Carol Hill-Evans, York County’s only Democratic representative in the House, said she is “frustrated” by the continued impasse and the credit downgrade.

State Rep. Carol Hill-Evans D- York City, Thursday, July 20, 2017. John A. Pavoncello photo

Lawmakers had “so many opportunities to work this out … yet time after time we failed,” Hill-Evans said. “That credit downgrade does nothing to help our taxpayers.”

Hill-Evans said she remains hopeful, but not optimistic, that lawmakers can finish the budget by Oct. 1.

Rep. Stan Saylor, R-Windsor Township, did not immediately return calls for comment. He is the chair of the House Appropriations Committee.

The Associated Press contributed to this report.