Lawmakers Take A Break From The Budget; Constitutionality Concerns Persist

Jul 13, 2017

Nearly two weeks after the state budget deadline, House and Senate members and Governor Tom Wolf do not have an agreement on a revenue plan to fund for it. 

Wolf let the unbalanced spending plan become law Monday night, a decision that puts Pennsylvania in a sort of constitutional no-man’s-land for the second year in a row.

Around the Capitol there’s no clear consensus on whether the state’s allowed to handle its budget this way—or if there are any consequences for doing so.

At the moment, the halls of the Capitol are quiet after days of feverish, all-hours negotiations on a revenue deal that never came together.

Lawmakers returned to their districts after negotiations fell apart early in the week, over how much new revenue the budget needs in order to be considered balanced, and to stave off credit rating downgrades.

The House and Senate are on a six-hour call, with no session days scheduled for the foreseeable future.

Leaders said they’ll be back to the table soon, though House GOP Leader Dave Reed indicated they could use a break.

“Sometimes maybe a couple hours away for everybody is a good thing. Everybody can regroup and we can put it back together,” he said.

For at least the near future, state government is left with a budget that authorizes it to spend $32 billion this fiscal year, but doesn’t say where the money should come from. 

Opinions are split on whether that’s a problem.

Reed has publicly questioned the constitutionality of an unbalanced budget.

“If I were governor, I would have blue-lined enough out of that budget to keep it in balance and then narrowed that discussion,” he said. “The governor decided to go in a different direction.”

But Wolf defended the decision.

“I’m not the attorney, but we are taking a close look at what we can do constitutionally, and I’m very comfortable that we’re doing the right thing,” he said.

So, who’s right?

It’s unclear. There’s not a lot of precedent for the state passing spending plans and revenue packages separately.

When it happened last year, there were fears of lawsuits and massive spending cuts, and credit rating agencies put the commonwealth on watch lists.

But a revenue package passed two weeks later, and things settled down.

In looking for other legal examples, some point to a 1932 State Supreme Court decision that said spending couldn’t exceed available funds.

Wolf argues that for now, funds are still available. $30 billion of the $32 billion budget is already accounted for.

“Revenue is coming into Pennsylvania as we speak,” Wolf said, noting he tracks it continuously on his computer.

House Republican Spokesman Stephen Miskin conceded that’s true, but said the letter of the law still dictates the commonwealth shouldn’t spend money if it doesn’t know where it’s coming from. 

“While I see their argument, that doesn’t make it right,” Miskin said.

As lawmakers work to fill that last $2 billion and put together the code bills that dictate specifically how it should be spent, Wolf spokesman JJ Abbot said state spending will automatically continue as it did last fiscal year.

The only exception is a pool of money known as non-preferred appropriations—about $600 million that helps cover costs at some state universities.

The House has to authorize that, and Reed said it’s not happening yet. 

“Certainly, the non-preferred appropriations will not go to the governor’s desk until we feel there’s enough revenue to meet that standard, but we can only do so much,” he said.

Functionally, negotiations are now going on without a deadline.

Unless the state is sued for its unbalanced budget—which didn’t happen last year, at least—it doesn’t appear to be facing immediate consequences.

Wolf noted, that doesn’t mean there aren’t any.

“We have gotten a dire warning from Standard and Poor’s about the possible credit downgrade, and we’re all taking it very seriously, and it just underscores the need for all of us to make sure that we’re working with a budget that is honestly balanced,” he said.

A credit downgrade would make it more expensive for the state to borrow money.

In a letter sent to lawmakers last weekend, State Treasurer Joe Torsella and Auditor General Eugene DePasquale projected Pennsylvania will carry a negative general fund balance for eight months of the next year.

They say that could make it necessary to borrow up to $3 billion to maintain daily operations, and without new revenue in the budget, the needs might exceed the amount the Treasury can lend.

The state may have to borrow from a more expensive outside lender as soon as next month.