HARRISBURG, Pa. — Tax increase proposals drew most of the attention when the state Senate approved a package of legislation late last month designed to bring Pennsylvania’s budget stalemate to an end, but lawmakers also tacked on a provision that would give them more leverage during any future standoff with the governor.
The bill that passed comfortably and was sent over to the House would enshrine into law the power to take the type of actions made by lawmakers during a standoff two years ago, by giving them explicit power to borrow money to pay salary, benefits and bills if their reserves run dry during drawn-out budget negotiations.
The proposed changes to the Fiscal Code, long used as a catch-all for budget-related items, said money “available” to the House or Senate through “a short-term agreement or other instrument executed with a lending institution” would be considered “augmenting revenues” and could be used to pay bills and fund paychecks for lawmakers their staff.
The borrowed money would be deposited with the Treasury Department, which would then use it to fund the Legislature’s costs. It would be paid back once a deal is done.
It’s a provision, said Senate Republican lawyer Drew Crompton, they hope will not have to be used any time in the near future. Because the $32 billion spending portion of the budget has been enacted, it won’t be needed this year.
The overall budget is more five weeks late because a $2 billion revenue hole remains. The Republican-majority Senate on July 27 approved a mixture of taxes, borrowing and fund transfers, a plan that Democratic Gov. Tom Wolf supports.
That deal is now pending in the Republican-controlled House, where there is widespread sentiment against taxes and borrowing within the GOP caucus.
Two years ago, lawmakers were about four months into the new fiscal year when their money began to run out. House Democrats obtained interest-free advances from the state treasury, but the other caucuses had separation-of-powers concerns so they looked outside the executive branch for the money.
In October 2015, Republicans and Democrats in the state Senate borrowed $9 million at about 3 percent from PNC Bank, with a $25,000 origination fee, while House Republicans obtained a $30 million line of credit at a slightly higher rate from a group of five banks, and paid a $90,000 origination fee.
The new language in the Fiscal Code was designed to address concerns about the propriety of that approach by putting it into law.
Crompton said the loan would avoid giving Democratic Treasurer Joe Torsella the power to decide which legislative bills should be paid.
Some 80 percent of the Senate’s budget goes for salaries and benefits, but the other 20 percent leaves decisions, he said, about “if we want to pay rent, and if we don’t want to hold all the bills that we get from outside sources, be it Capitolwire, be it legal bills— and there’ a whole host of other things in that last 20 percent.”
Seeing the prospect for a budget standoff ahead, Torsella’s chief counsel, Christopher Craig, wrote in a June 23 memo that courts have ruled that public employees still on the job must be paid, even if the budget to fund their salaries hasn’t been passed.
The memo said separation of powers under the state constitution gives the Treasury Department authority to fund salaries and “core functions” for the legislative, executive and judicial branches.
“The citizens of the commonwealth are constitutionally entitled to be represented by a functioning, elected General Assembly, to have cases heard and resolved by an independent judiciary and to have laws passed by the Legislature executed and enforced by the executive branch,” Craig wrote.
There’s no word on when the House might return to Harrisburg to consider the taxes, as well as other budget related legislation — including the budget standoff borrowing language.