Vincent Hughes: ‘We’re running a $3B budget surplus in Pennsylvania’

As the state gets closer to its budget deadline, all eyes are on how legislators will decide to use $7.3 billion in federal COVID-19 aid courtesy of President Joe Biden’s American Rescue Plan. State lawmakers will also have another $3 billion in surplus revenues to work with, which may make budget negotiations a bit easier. 

Democrats in the state House and state Senate are hoping to use the American Rescue Plan funds for a broad array of one-time investments, while Republicans have signaled a desire to take a cautious approach to spending. In the following interview, City & State asks Senate Minority Appropriations Chairman Vincent Hughes about a “New Deal for Pennsylvania” plan that proposes using $6.15 billion in federal funds for things like business assistance, infrastructure improvements and child care. The interview has been edited for length and clarity.

C&S: Senate Democrats are proposing a "New Deal for Pennsylvania” plan that would use $6.15 billion of the state's American Rescue Plan funding. Could you start off by just explaining exactly what types of things this plan would address?

VH: I think the plan is really expansive, and let's be clear, the moment that we're in right now is a moment that requires us to push the envelope in terms of trying to address the needs of the people of Pennsylvania. Pennsylvania's overall budget situation is performing well – we'll get to that in a moment with a $3 billion surplus – however, Pennsylvania's people are still hurting, and they're hurting badly. The pandemic has taken a toll on the health of the people of Pennsylvania. The pandemic has taken a toll on individuals in Pennsylvania, and consequently, we must come up with a bold proposal to really reinvest in the people and help them respond to their crisis, get them back on their feet and put them in a better situation than where they were prior to the pandemic. 

Our New Deal For Pennsylvania program does that. It sees the $7.3 billion that the Biden-Harris administration has provided us, and puts it to work, as it was intended to do – invest in the people of Pennsylvania, invest in their circumstances, invest in their personal situations, and to help them recover, and help put them in a better place. Investments in childcare, and the investments in small business – direct assistance in grants and not loans, the investments in job creation, the investments in job training, the rebuilding of toxic and broken schools. Everything that we talk about in our New Deal for Pennsylvania program is consistent with the guidances that the U.S. Treasury Department has put out with respect to how these dollars should be spent and does what they're intended to do, by the federal government: Put the people first, invest in people, help them rebound, help them recover and propel them to a better position than they were prior to the pandemic.

C&S: Two of the largest pieces of this plan focus on people and projects, and you touched on things like child care, business assistance, utility assistance. Would that be direct assistance, meaning, would recipients of some of this have to pay that back?

VH: None of this has to be paid back. For example, we put in $712 million, I believe, into small business assistance. That is money that, consistent with that very successful small business grant program, goes to small business in the forms of grants, not loans. Those small businesses, those mom and pop businesses, those main street businesses, small less-than-25-employee businesses, have caught hell and are residing in communities that have not rebounded from the hell of this pandemic. So, no, those are grants. Those are not loans and not like the Trump PPP loan program which, in many respects, only helped those that were already best positioned and did not help those that were struggling in a smaller circumstance. 

C&S: Under the "projects" component of the New Deal, it proposes roughly $2.4 billion in economic development efforts and infrastructure investments. Looking specifically at infrastructure, what types of investments would that go toward?

VH: We look at the rebuilding of and the fixing and the repairing of toxic and broken schools. That was an issue prior to the pandemic and still continues to be an issue. Those schools need a major investment to put them in a much better position when they're going to be occupied – pretty much full time – as August and September roll around, when things really start to open up. 

Our housing stock was in a bad situation beforehand, before the pandemic started, took a worse hit in the pandemic, and folks lost tremendous amounts of dollars and were not able to make the necessary investments in their home. We talk about providing direct assistance for folks to do work inside their homes. 

C&S: I do want to circle back to remediating school buildings for a second because I know that's been a priority of yours for a few years now. Is this federal funding, in your eyes, the best chance the state has right now in remediating these school buildings?

VH: It clearly is the best chance because the direction from the federal government is to really focus on one-time investments or short-term investments, so you see a lot of opportunities in the construction space because of those one time investments – or investments in infrastructure like fixing up broadband and making technology accessible and available to communities that have been without technology. Investing in school infrastructure that is consistent with the federal guidelines, it is necessary given [that] we need to have protected communities to still deal with the possibility that the virus could still be traveling. This is the best opportunity to get that done … This may be the time to transition into the condition of the state's budget, because we have money in the state's budget that could, in fact, do the same kind of work. 

We're running at a $3 billion budget surplus here in Pennsylvania. We are $3 billion ahead of projections in Pennsylvania with respect to our income. And so we're really in a very unique position to really put Pennsylvania's people first in a way that we've not been able to do for generations. We've not had the benefit of having a surplus of $3 billion in state money, and on top of that, $7.3 billion in federal support. And all of this without raising taxes. We could implement the governor's education proposal in its fullest sense, drive the money through the funding formula in its fullest sense and do that without having to do the tax increase that he projected would be necessary back in February. We have enough money in the state budget surplus to get that done. We have enough money to fund the Nellie Bly scholarship program without having to raid the [Racehorse Development Fund]. And so, we're in a very special moment where it's really going to take folks to really put people ahead of politics, and really focus on the real needs of Pennsylvania's people and put them first.

C&S: You mentioned potentially using some of the state's better-than-expected revenue to fund some of the governor's proposals – things like the Nellie Bly program, his education funding proposals. Because this is one-time funding right now, wouldn't that require the legislature still to explore some of these long-term funding options, like raising taxes?

VH: No, they don't require tax increases. None of it requires tax increases. There is a transformation that's happening in Pennsylvania which is largely driven by President Biden and Vice President Harris' economic decisions that they've made [that] have really restructured Pennsylvania in a way that we can make these investments, and they can last for a long period of time and not require any new taxes. 

Any elected official says that with a $3 billion dollar budget surplus and a $7.3 billion American Rescue Plan resources, and ... clearly, there's going to be a significant new investment in infrastructure, in Pennsylvania and across America ... This whole issue of putting the people first in Pennsylvania and across the country is materializing, so no need to have a conversation about tax increases to sustain this stuff. We need to make the right investments so that when we create the jobs, so that when we spur job creation and economic development, that we're also training up and educating people so that it can grow naturally. 

C&S: You're saying these massive infusions of cash – whether it's from the federal government – whether it's from the budget surplus. You're saying you think that could maintain some of these initiatives and programs beyond just one fiscal year?

VH: No doubt. I mean, obviously, you got to make smart decisions. If the decision is to wind up giving corporations huge tax cuts when they already received huge tax cuts and you just want to give them more, that's not a smart decision. That's not a long-term investment strategy, all right? Making smart and wise decisions to drive the money into the people first, which is what is happening, which is why we have the surplus that we have right now, because the investments that have come from Washington D.C. … have been a bottoms-up investment, have been the people-first investment, so the money is flowing to the folks and flowing up the economic stream. … 

What President Biden is doing is driving the money at the bottom of the economic ladder, at the people, and having them spend their dollars, which is what they're doing, and it's driving the dollars up the economic stream. That's the best way to do this. That's why we have the surplus that we have. That's why we're driving rapidly towards a much better environment. But we've got to make some thoughtful decisions as we go forward – investing in job creation, investing in job training, investing in our education system, really fixing the worst, and the most discriminatory education funding system in the nation, and right-sizing it and doing it in a way where nobody's hurt but everybody's helped. That's what we've got to do. Those are the smart decisions that have to be made. I hope we can make it. I hope we don't drop the ball.

C&S: The amount of investment outlined in the Senate Democrats' plan is even more what House Democrats are proposing in their $4 billion Pennsylvania Rescue Plan, and with the federal government giving states until the end of 2024 to use these funds, I can envision Republican leaders saying that the state should be more prudent and take a wait-and-see approach, so why spend such a large portion right now?
 

VH: First of all, we've put aside money to deal with some investments in the state's economy and some of the structural budget issues that the state has. We do that, we don't spend the whole $7.3 billion. Our proposal spends $6.1 billion. We may have to, given the strength to the state's economy, we may need to readjust that up a little bit. But understand this, we put money into fiscal stability, we put dollars into fiscal stability, but we put many more dollars into personal family stability and investing in people and putting them first, largely because they need it more than what the state's budget situation needs. Remember we have a growing surplus, over $3 billion right now, so the state's economy is kind of setting itself correctly, the state's budget is setting itself. The real need that has to occur is a real investment in the people of Pennsylvania — in their homes, their personal situations, their families, and everything tied to the people, to the individual. That's where the investments need to occur. 

C&S: Looking at the state's surplus again, does that improve the chances that some of this New Deal plan's initiatives will materialize in this year's final spending plan?

VH: I think what we've got is a situation where two very special things are occurring, and the question is will we build off of that or will we squander the moment? Every economist who's worth his or her salt will tell you that you must make investments in the people ... While we invest in job training, we also must invest in job creation. We must look a year, two years, three years, five years down the line – 10 years down the line – and invest in economic development so that when we train folks up we're training them for the jobs that will be created in the years to come. Those are investments, but those are structural, smart investments that increase the capacity and ability of the people, and they could increase the capacity of the communities that the people reside in. That's the thing that we're dealing with right now, and that's the thing that we're confronting. 

C&S: If we zoom out and look at the state's financial landscape – better-than-expected revenue collections, a massive influx of federal funding, and then some predicted structural budget deficits based on some IFO projections – if you shook your crystal ball, what do you expect this year's budget to look like?

VH: I'm hoping, I'm prayerful, I'm working towards, as I said, a budget that obviously will have no tax increases, a budget that makes smart decisions and thoughtful decisions, but aggressive decisions to really invest in the people of Pennsylvania. I'm hoping that we can finally, once-and-for-all, fix the education problem that has wound us up as a national embarrassment ... I'm hoping we can be bold enough to do something as simple and as common sense as that and do it in a way that no school district loses, every school district gains, but we deal with the issue of the injustice that Pennsylvania's children have been operating under for decades, if not centuries. 

I'm hoping that we make very smart investments in job creation and job training and job preparation. I'm hoping that we make smart investments in violence reduction programs that deal with this growth in violent activities that are occurring across the country, in red cities and in blue cities. I'm hoping we make investments there. I'm hoping that we can make investments in and provide relief and support to our micro-businesses, really small businesses, less than 25 employees, less than a billion dollars in annual revenue, and really help those small businesses out there. The barbers. The small restaurants. The neighborhood mechanic. Those investments. I'm hoping that we see them, we hear their pain, and we respond to their pain because we have the resources to do it, and they need the help. They've been neglected for far too long.