Archive

Western Pennsylvania's trusted news source
Revenue fight looms as Pennsylvania Senate reconvenes | TribLIVE.com
Local News

Revenue fight looms as Pennsylvania Senate reconvenes

Natasha Lindstrom

HARRISBURG — Pennsylvania taxpayers will be on the hook for unnecessarily higher costs over the next several decades if the Legislature can't strike a budget deal by the end of the month, Gov. Tom Wolf warned Tuesday.

“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,” Wolf said in a statement Monday and emphasized again in multiple radio interviews Tuesday morning.

More than two months after the 2017-18 budget became law without Gov. Tom Wolf's signature , the Legislature has yet to resolve how to come up with $2.2 billion more needed to fully fund the $32 billion spending plan.

Wolf said the state is in danger of another credit downgrade if the Legislature can't agree on a compromise by Oct. 1.

“If the credit rating agencies downgrade our credit, it wipes out any gain that we have because it will cost us more money to borrow money for future projects,” said Mark Singel, president of The Winter Group and former Pennsylvania lieutenant governor under Gov. Bob Casey, on Tuesday night during an interview on PCN-TV. “You want to maintain that credit rating at all costs.”

Moody's Investor Service reported that Pennsylvania's general-fund cash would have gone negative in August if not for borrowing.

On Friday, the Wolf administration and independent offices of the treasury and auditor-general announced that school districts will not be receiving their next batch of state-pledged pension and Medicaid payments amid the stalemate — a move Republican leaders have balked at as an unnecessary scare tactic.

Wolf, however, expressed optimism that the state Senate will advance an updated revenue plan in “coming days.”

Taxes remain the biggest sticking point.

Wolf and Senate leaders further questioned the latest, no-tax House GOP plan — dubbed the “taxpayers' budget” — for elements such as borrowing against future revenues and relying too heavily on unspent reserves and fund transfers. The governor had backed a separate revenue plan narrowly passed by the Senate two months ago. “Usually when there's a sense of urgency you can get a compromise, and that's what we're looking forward to,” Senate Majority Leader Jake Corman, R-Centre County, told reporters Monday following a closed-door caucus meeting.

Calling a tax hike something else

Wolf and the lawmakers who back a tax increase to help prop up Pennsylvania's finances shy away from using the words “tax increase.”

Instead, they try to use the term “recurring revenue” to refer to a new source of money that provides a reliable cash infusion every year — such as a tax increase.

The Senate, backed by Wolf, passed a roughly $550 million tax package that targets Marcellus shale natural gas production; electric, natural gas and telephone utility customers; and sales through online marketplaces like Amazon and eBay.

The House rejected any sort of tax increase when it passed its plan. Instead, it wants to siphon about $630 million from accounts for environmental protection, mass transit and other programs explicitly created by lawmakers and given their own source of dedicated funding.

Wolf opposes that plan, and Senate Republicans say just $140 million of that amount is actually available and not otherwise committed to a project.

Calling it borrowing

In July, the Senate backed a revenue package based on borrowing $1.3 billion in a securitization arrangement, to be paid back over 20 or 30 years.

House Republicans, however, pushed back on that concept and instead passed a revenue plan that relies heavily on what they call the $1 billion “sale” of a state “asset.”

What that really means is borrowing $1 billion upfront in return for giving the lowest bidder — an investment bank or hedge fund, perhaps — the rights to a certain slice of state revenue for up to 10 years.

Senate Republicans, Democratic lawmakers and public finance professionals say such a transaction is nothing more than borrowing and would likely carry a higher effective interest rate even than a traditional securitization agreement because it shifts some risk to the lender.

The state Senate was scheduled to reconvene at 11 a.m. Wednesday.

The Associated Press contributed to this report.

Natasha Lindstrom is a Tribune-Review staff writer. Reach her at 412-380-8514, nlindstrom@tribweb.com or via Twitter @NewsNatasha.