The Cost of Pennsylvania's Budget Stalemate

Pennsylvania's budget fight will come with its own price tag

Pennsylvania state government's projected $2.2 billion deficit, and a protracted fight over how to fix it, will come with its own special price tag.

The final cost is a moving target, and whether or how the fight will end remains unclear, now nearly four months into the state's fiscal year.

But the state stands to shell out hundreds of millions of dollars in the coming years, considering the prospect of long-term borrowing to finance the deficit, compounded by a credit downgrade last month.

"That's almost undeniable when you've got the downgrade and the borrowing," said Auditor General Eugene DePasquale, a Democrat who is the state's independently elected fiscal watchdog. "And regardless of the merits of any of the proposals, there's extra costs that wouldn't exist if you had a balanced budget passed."

With the help of short-term loans from the Pennsylvania Treasury, state government has paid its bills since lawmakers overwhelmingly approved a nearly $32 billion budget measure on June 30.

That means everyone who depends on state aid, such as schools, counties and social service agencies, are not saddled with the borrowing costs they racked up in the state's last protracted budget fight two years ago.

But, with the state absorbing its biggest cash shortfall since the recession, the Legislature has not agreed on a plan to fully fund the budget bill it passed, and scrounging the necessary money is currently on two tracks.

Democratic Gov. Tom Wolf is moving ahead with his own plans, while the Republican-controlled Senate is due back in session Monday to sort through the latest financing measure sent over by the House.

The coming week also could see the Senate vote on legislation authorizing a big expansion of casino-style gambling in a quest for millions more dollars from license fees and taxes on gambling losses.

The budget fight, to a significant extent, revolves around the size of a tax increase necessary to help plug the state's finances, pitting Wolf and the Senate against the House Republican majority.

There is one thing the sides agree on, if unhappily: borrowing more than $1 billion as the primary source of money to fill the deficit. That could require more than $500 million in interest payments over 20 years, plus transaction fees.

Add to that last month's Standard and Poor's downgrade of Pennsylvania's already battered credit rating.

Wolf's administration calculates the downgrade will immediately add more than $50 million a year to the state's borrowing costs — making it more expensive to borrow money to cover a deficit that helped spur the downgrade in the first place.

Then there are short-term borrowing costs to help pay bills on time. The state has thus far paid about $240,000 in interest to the Pennsylvania Treasury this fiscal year, the treasurer's office said Friday. More loans may be necessary in the coming weeks.

Legal costs are also possible.

There is at least one lawsuit over the state's budgeting practices, and more lawsuits may be on the way. On Wednesday, Senate Majority Leader Jake Corman, R-Centre, suggested his caucus may sue to block a Wolf-sanctioned move to borrow against proceeds from the state-controlled wine and liquor store system.

Republican lawmakers prefer to borrow against Pennsylvania's share of the 1998 multistate settlement with tobacco companies.

In the meantime, the House is holding up $650 million in aid to five universities — Penn State, Lincoln and Temple universities, the University of Pittsburgh and the University of Pennsylvania's veterinary school — without the money to underwrite it.

DePasquale warned that the schools, without the aid, could slap a mid-year tuition increase on in-state students who, until now, have received tuition discounts, sometimes exceeding $10,000 a year.

"When I think of some of the bigger costs that are going to hit the people of Pennsylvania, that's my biggest concern right now," DePasquale said.

There are, perhaps, other serious long-term costs that don't involve actual money. Those, said DePasquale, include the "long-term consequences to our democracy when compromise becomes a dirty word."

Copyright AP - Associated Press
Contact Us