Revenue discussion update: Wolf warns sternly as House GOP works toward consensus plan

Revenue discussion update: Wolf warns sternly as House GOP works toward consensus plan

Author: Jason Gottesman/Tuesday, August 29, 2017/Categories: News and Views

Progress toward an eventual budget solution crept forward on Tuesday as several dozen House Republicans gathered in the state Capitol for a briefing on a plan some members have developed that relies mainly on special fund transfers to dig Pennsylvania out of its current $2.2 billion deficit.


The work of the House’s majority caucus was put under a bit of a microscope, however, given a stern missive Gov. Tom Wolf sent to that caucus’s leadership earlier in the day warning that time is running out on developing a solution to Pennsylvania’s current and structural budget woes.


In the letter, he said that the Commonwealth’s General Fund—its largest checkbook—will run out of money on September 15th and remain below zero for much of the remainder of the fiscal year, adding that Treasurer Joe Torsella has informed the administration that no more short-term internal borrowing will be authorized absent a balanced budget.


He further warned that credit rating agencies have signaled that if a revenue plan is not completed in the near-term they will downgrade the state’s bond rating, potentially increasing the cost of borrowing money.


"[T]his is a simple math problem. Without action, there is not sufficient revenue to balance the budget," Gov. Wolf wrote. "There has been robust debate about how to meet this challenge. Time is not on our side, and now is the time to put statesmanship before anything else. There is too much at stake."


Also on Tuesday, Gov. Wolf informed legislators his administration is leveraging over $700 million from the state’s Motor Licensing Fund to carry the Commonwealth through a revenue dearth until the September 15th drop-dead date for the General Fund’s solvency.


Of that $700 million, $459 million will be an advance from PennDOT that will go to the General Fund specifically to pay for State Police obligations. The other $241 million will be a loan from the Motor License Fund to the General Fund that will need to be paid back by March 1, 2018. That payment will go toward “a major payment for school districts” to allow schools to continue to function normally in the near-term period.


"While Pennsylvanians were assured that the House would return as soon as possible to act upon the bill sent by the Senate, it is now clear that the House's work will not be completed this month," the governor wrote to the House. "In a good faith effort to allow you a little more time, but ensure we can still meet our obligations, I have authorized a loan transfer from the Motor License Fund to the General Fund to enable the Commonwealth to pay its bills in the very short-term."


In terms of House action on developing a revenue plan, the most Capitol-visible sign of progress on some sort of a plan occurred Tuesday when a somewhat large group of House Republicans gathered behind closed doors to engage in a listening session on a plan that could transfer as much as $2.2 billion from what some say are $12 billion in untapped special funds that could be utilized to balance the budget.


The meeting was the culmination of a month-long endeavor on behalf of plan supporters to engage members throughout the state by travelling to brief various regional caucuses and holding hearings.


It’s also the latest indication that the aforementioned Senate-passed plan that provided for over $2 billion in funding led by $1.2 billion in borrowing from the Tobacco Settlement Fund, $400 million from increases to the state’s Gross Receipts Tax, and $100 million from a natural gas severance tax was largely a non-starter in the House.


While the details remained somewhat nonspecific by Tuesday afternoon, it the focus appeared less to be on a desire to plug the entire budget deficit with the fund transfers, but offset the need to borrowing as much as $1.5 billion from the Tobacco Settlement Fund to make up for the FY 2016-2017 lingering deficit.


That plan, at least as of now, would then be merged together with acceptable components from a yet-to-be-revealed House GOP leadership-endorsed plan developed by the House Appropriations Committee to comprise of the final revenue plan.


Supporters and crafters of the borrowing plan hope that it’s at least the gravy in the revenue stew likely to be served up when the House returns to voting session on September 11th.


By all reports coming from the discussion, the fund transfer plan was not received with outright hostility, though members had a number of questions about the specifics.


“There’s a lot of people that have done a lot of work and I think the main goal is if there is an opportunity to do an alternative to borrowing for last year’s shortfall, moving into this next year, if there’s other alternatives, we should not be letting any stones unturned, we should not be letting any coins in the cushions of the sofas,” said Rep. Mike Tobash (R-Schuylkill).


“There’s been a lot of communications and sales, but the members have been asking thoughtful questions and I think it’s been productive.”


House Majority Leader Dave Reed (R-Indiana) commented to reporters that, in his view, the plan “is as real as any other proposal out there right now.” Adding that if the plan does get to 102 votes in what is likely to be a later-in-the-week headcount of membership, then the House will take it up.


“We are looking for a way to end this budget process once and for all,” he said. “We are going to try to get to 102 votes, if it gets to 102 votes we are going to send it to the Senate particularly as a replacement for the borrowing component to what the Senate had passed and we’ll move on from there.”


But, will the plan have 102 votes?


According to a Monday conversation with House Democratic Appropriations Committee Chairman Joe Markosek (D-Allegheny), it appears unlikely House Democrats will support a plan not led by recurring revenue.


“Whatever solution we have, in my opinion, it must contain way more recurring revenue than one-time revenue,” he said. “Otherwise, you are just going to be back into this deficit problem year after year after year.”


As of Tuesday, the House is not expected to return to session prior to their previously scheduled date of September 11th, a date just five full days short of the September 15th deadline.