State’s Fiscal Woes Hit Dire Straits

Kristi Pronovost Merit Shop Spokesman Blog

By: Brent Sailhamer, Director of Government Affairs, ABC Keystone 

In an interview earlier this week, Senate President Pro Tempore Joe Scarnati said, “we’re out of money and we’ve never been in this position before.”  That statement underscored the severity of a budget impasse that has dragged on for nearly three months past its Constitutional deadline.  And now, state officials are closing the coffers as outside groups ramp up the pressure.

Just days ahead of the Constitutional deadline of June 30 for requiring a balanced state budget, the legislature sent Governor Tom Wolf a comprehensive spending plan, known as a general appropriations bill, for the 2017-2018 fiscal year.  Notably absent, however, was a revenue package to pay for the nearly $32 billion in spending.  Since then, the Republican-controlled legislature has been grappling with the Governor, and itself, to determine a way to pay for the bill that Wolf allowed to lapse into law.  Last week, the Commonwealth Foundation, a conservative think tank, filed suit against the Governor, claiming that signing a spending plan without accompanying revenue amounted to a violation of the Constitution.

In August, the Pennsylvania Senate rolled into Harrisburg for a two week period, in which they assembled a broad proposal for revenue that included a new severance tax on natural gas extraction and a gross receipts tax on natural gas usage, which would be paid directly by consumers.  The proposal also included expanded gaming and alteration to Pennsylvania’s antiquated liquor laws, however it was quickly labeled as Dead On Arrival by House Republican leaders.  Late last week, the House narrowly passed an alternative proposal, recalling excess funds on state accounts like transportation funding to be used to fill the one-time budget deficit.  Early this week, the Senate officially announced that the alternative plan was a no go.

So where does it go from here?

Newly elected state Treasurer Joe Torsella turned up the heat early this week when he announced that the Commonwealth would be delaying payments to Medicaid and the School Employees Retirement System (SERS), the entity that manages school employees’ pensions.  The Governor’s office has warned that such a delay would result in a credit downgrade for the state.  Whatever the end result, this financial domino-effect is set to cause serious consequences throughout the state’s financial system as lawmakers quickly scramble to formulate a plan that they can live with.