Senate begins review of House-passed budget-balancing plan

When the Pennsylvania Senate reconvened Monday for the first time since July, members wasted no time in beginning a review of the budget-balancing plan the House passed last week.

To recap, last week the House of Representatives – by the slimmest of margins and on a straight party-line vote – passed a budget-balancing plan led by: selling off some future revenue from the state’s Tobacco Settlement Fund for a $1 billion cash infusion; $630.5 million in special fund transfers; $400 million in prior-year lapses; $225 million in gaming expansion revenue; $50 million in liquor license transfers; $20 million in legislative surpluses; and $200 million from taking money from the Joint Underwriters Association fund.

The plan differs greatly from the one the Senate passed in late July that borrowed $1.25 billion against the state Tobacco Settlement Fund money and provided over $500 million in recurring revenue led by over $400 million from changes to the state’s gross receipts tax placed on certain utility services, $100 million from a natural gas tax, the closing of certain sales tax loopholes and implementing a 12 percent tax on fireworks.

To date, Pennsylvania’s combined budget deficit remains at $2.2 billion. Treasurer Joe Torsella has refused to authorize or provide for additional borrowing to keep the General Fund afloat without a sustainable revenue plan.

As a result, Gov. Tom Wolf announced Friday he was withholding roughly $1.7 billion in scheduled payments to managed care organizations and pension fund obligations to keep the state’s largest checkbook solvent in the absence of a revenue agreement and additional funding.

Senate President Pro Tempore Joe Scarnati (R-Jefferson) said that while the House plan might not be perfect, it did kick-start negotiations.

“I think it accomplished what they wanted to do: make a statement and get back into negotiations,” he said. “They accomplished that and that’s clearly a move Pennsylvanians and taxpayers…they want to see it resolved.”

However, he noted, the plan did not do much to help Pennsylvania’s short-term financial situation, adding that he, like most lawmakers, is concerned about the possibility of a credit downgrade. 

“If we want to go down to the ranks of Illinois, we are almost there. We will be the second-worst in the nation. That doesn’t spur economic development or investment when you have such a credit downgrading,” he said of an impending downgrade from Standard and Poor’s. 

“That credit downgrading has an effect on state government, but also municipal government and school districts, and it raises the cost of doing business significantly,” he added. “I’m a fiscal conservative, and you have to factor (those increased costs) into your thought process with what you want to do with budgeting.”

It’s that kind of urgency that has Senate Majority Leader Jake Corman (R-Centre) hopeful for a quick resolution to the budget-revenue process as the Senate looks to re-engage the House and the governor in order to find an agreeable plan.

“I think what drives us all is that there is a sense of urgency now. There should be – and there should’ve been earlier,” Corman said after the Senate Republicans held a closed-door caucus discussion on the plan. “Usually, when there’s a sense of urgency, you get compromise – that’s what we’re looking forward to.”

In terms of process, however, Corman said the Senate is disinclined to concur on the proposal sent over by the House.

“I don’t even think most House members want us to concur. I know some do – and some do in our caucus – (but) there’s enough concern over it that we do not want to concur,” he said. “There will probably be some elements of their plan that will get to the final plan, but where it would leave us moving forward by plugging a $2.2 billion budget (deficit) with one-time spending made people really uncomfortable – some of those funds we may be able to access, others we are not so sure we can.”

A scheduled committee vote on the House plan was postponed Monday as the process of re-engaging budget negotiators was in its early stages.

Meanwhile, Gov. Wolf noted that weekend success in conversations with Republican lawmakers has led to optimism that a deal could be reached in the next several days and potentially put up for a vote by the beginning of next month.

"Over the weekend, I spoke with House and Senate leaders to try to finalize a budget that protects investments in critical programs important to the people of Pennsylvania," he said. "We made progress and, with more work, I believe we can reach a compromise in the coming days. It will take all sides, including both chambers and my administration, working together and considering all ideas to get this done. And if a compromise is reached, there is a commitment from all involved to put up a vote before Oct. 1. It is urgent that we finish our bipartisan work on a consensus, responsible budget immediately or we will face a credit downgrade and further disruption in important programs and payments." 

The Senate plans to be in voting session both today and tomorrow as lawmakers continue to work toward a plan of action to resolve the 81-day long impasse.

The House is not expected to be back in session until Sept. 25.

Jason Gottesman is the Harrisburg Bureau Chief of The PLS Reporter, a news website dedicated to covering Pennsylvania’s government.