By Chris Comisac
Bureau Chief
Capitolwire
HARRISBURG (March 23) – All the tough talk from the governor and his administration last week gave way to “doing the right thing,” as Gov. Tom Wolf announced he would allow most of the supplemental budget bills sent to him last week to become law, putting an end to a nearly nine-month budget impasse.
However House Bill 1801 will do so without Wolf’s signature because he says the spending plan, in his estimation, “doesn’t add up” and “is not in balance.”
“All these calls to do the right thing, to do the right math here in Harrisburg, have gone unheard, so I cannot in good conscience sign this bill,” said Wolf during an early Wednesday afternoon event in his state Capitol reception room.
“But to allow us to move on and face the budget challenges of 2016-17, I am going to allow HB1801 to become law,” Wolf said. The bill will become law on Sunday.
Wolf then ran through the litany of programs and services that will now have enough money to continue to operate for the remainder of the year, all of which he said will not have enough funds available to them next year “if Harrisburg doesn’t change its ways.”
And the threat of a veto override didn’t force him to seek an option different than the one he promised last week, and during the several days since he received the budget bills.
“I think, overwhelmingly, people wanted to do the right thing, and that’s what I’m responding to,” said Wolf.
When pressed on the matter and asked if legislative Democrats said they might override a veto due to concerns about school funding, Wolf answered, “I received pressure to do the right thing.”
According to Wolf and GOP leaders, the $30.031 billion budget finalizes the current 2015-16 Fiscal Year budget.
“We obviously are very happy with the news that the governor has announced that he will let the budget impasse come to an end,” said House Majority Leader Dave Reed, R-Indiana, at a state Capitol news conference a little later in the day.
“This is certainly long time coming; we’re certainly hopeful the governor sticks by his comments today and allows the budget to become law and we can bring this 15-16 saga to an end,” added Senate Majority Leader Jake Corman, R-Centre.
The supplemental spending bill restores the funding Wolf blue-lined as part of his partial veto of the budget on Dec. 29, including more than $3.147 billion in basic education funding, $939.4 million in state correctional institution funding, and nearly $1.87 billion in Medicaid Capitation funding. Additionally, the supplemental appropriations bill increases public school funding by a total of $200 million compared to the FY2014-15 budget.
However that last figure might not be what ends up getting out to school districts.
Wolf said he intends to fully veto a Fiscal Code bill associated with the GA bill. The Fiscal Code directs how much of the spending in the GA bill is spent.
Components within the Fiscal Code bill affecting the way the administration proceeds with its Clean Power Plan, as well as new oil and gas well regulations, were two of the primary reasons for his veto, Wolf said.
The Fiscal Code bill also contained a new funding formula that would have been used to drive out the $150 million in added basic education funding and a $2.5 billion school construction borrowing plan. That borrowing plan would have delivered construction reimbursements, through the state’s PlanCon program, to school districts throughout the state that have been on a waiting list to receive that money.
Wolf spokesman Jeff Sheridan said the PlanCon borrowing also prompted Wolf’s veto, with Sheridan describing the plan being “prohibitively costly to issue due to inflated debt costs resulting from the lack of any concrete steps in the current budget to address the structural deficit.”
“Obviously the most pressing thing is PlanCon,” said Corman when asked about the impact of a Fiscal Code veto.
The GA bill includes a one-time roughly $289 million reduction in the existing line item for those construction reimbursements, a reduction that would have been offset by the PlanCon borrowing. A veto of the Fiscal Code means no PlanCon borrowing, but the $289 million reimbursement cut remains in place in the GA bill allowed to become law. It also turns out the current budget is out of balance by roughly the same amount ($290 million), according to the Wolf administration, which intends to ensure the one-time cut in the GA bill isn’t covered by the Fiscal Code’s PlanCon borrowing.
So despite what would have amounted to a $200 million increase in education funding for public schools if both the GA and Fiscal Code bills had been enacted, the budget that will be enacted will represent, effectively, an $89 million reduction in funding for public schools.
Still, since Dec. 29, the state’s public schools have been operating with about $3 billion less than they received last year due to Wolf’s line-item veto of basic education funding. The nearly $3 billion infusion of funds was welcomed by the Pennsylvania School Boards Association (PSBA).
“We think the budget effectively becoming law on Sunday, without the governor taking any action on it, is still a good thing,” said PSBA spokesman Steve Robinson in a phone interview. “Schools were in dire need of funding.”
“But we also realize that without a Fiscal Code, there are a lot of things that still need to be addressed, including PlanCon,” added Robinson, who noted also needing attention are pension reform and reimbursing districts for interest incurred due to borrowing during the impasse.
“There’s a lot of work that still needs to be done, but the immediate crisis has been averted and schools will hopefully not have to close doors with the money starting to flow again,” Robinson said.
The state’s largest teachers union also welcomed the money, and in an equally measured manner.
“This isn’t the kind of budget that our schools need or that our students deserve, but it keeps our schools open and ensures that Pennsylvania’s students can finish the school year without the threat of their schools shutting down,” said Pennsylvania State Education Association President Jerry Oleksiak in a statement. “It’s unfortunate that we’re now judging the quality of the investments Pennsylvania makes in its students by celebrating the fact that their schools might not run out of money before June.”
Legislative Republican leaders said they will review their options regarding Wolf’s planned Fiscal Code actions. Reed and Corman said they would be willing to work with the administration to develop any fixes, if needed. Both chambers of the General Assembly aren’t currently scheduled to be in voting session again until Monday, April 4.
“That’s clearly something we’re going to have to take a look at,” Corman said about the PlanCon situation created by a Fiscal Code veto. “We may have to take up a separate piece of legislation immediately to try to deal with that.”
Corman also noted that while Wolf says he’s for a fair funding formula for basic education dollars, Wolf is still planning on vetoing that formula in the Fiscal Code.
“Obviously that formula will be gone, and he will be able to drive it out the way he sees fit, as he’s done so far, so we’ll have to take a look at that and see if there’s any way to deal with that issue,” said Corman.
There could also be a problem with distributing any of the new basic education funding without the formula, but Corman and Reed said that’s still something in need of review. A Senate source said the initial read on a Fiscal Code veto is that the additional funding would be frozen, effectively reducing education funding in the GA bill by $439 million, including PlanCon.
Robinson said he hasn’t heard any concerns from school districts regarding the distribution of funding released after Dec. 29, but PSBA will be watching to ensure schools don’t get any less than they did last year.
Also becoming law without Wolf’s signature are the five non-preferred appropriation bills that contain a 5-percent increase in funding for Pennsylvania’s state-related universities. All of those institutions have been doing without any state support since the beginning of the current fiscal year. The bills will appropriate a total of approximately $600 million in funding to Penn State University, the University of Pittsburgh, Temple University, Lincoln University and the University of Pennsylvania.
Wolf’s actions backtracked from the tougher, full-veto talk of last week and even earlier this week. Since then, it was suggested Democratic leaders might not be able get their caucuses in the House and Senate to uphold a full veto.
However, after Wolf’s actions, those same legislative leaders echoed Wolf’s “doing the right thing” narrative.
“The governor is doing a hard thing, but it’s the right thing,” House Minority Leader Frank Dermody, D-Allegheny, said in a press release, “And he’s giving the House and Senate a chance to start over with the 2016-17 budget and finally do the job we failed to do for the last nine months.”
Senate Minority Leader Jay Costa, D-Allegheny, said he did not believe an override vote would have reached the Senate, but if it had, he said Senate Democrats would not have broken ranks with Wolf.
“We had the ability, I believe, to hold our members in line,” Costa said.
With his action, Wolf, along with legislative leaders, who met privately with the governor – no staff included – prior to the announcement, said they will begin in earnest to discuss the budget for the coming 2016-17 fiscal year. Early last month, Wolf proposed a $33.3 billion spending plan, including $2.72 billion in expected new recurring revenues, that was built on the General Assembly approving a $30.8 billion budget for the current year and tax changes that would generate between $800 million and $900 million in new recurring revenue.
“By closing out 15-16, it allows us to move forward to 16-17,” Corman said.
Corman explained the starting point for the FY2016-17 budget discussions will be about the state’s mandatory spending, and whether the Commonwealth’s cost-to-carry budget can be reduced at all, which will help in addressing the existing structural deficit.
When Wolf was asked about his plan for spending in the coming year, given that it was based on at least $800 million in new spending and revenue for the current year that isn’t going to happen, he responded: “I think the big challenge is the gap between whatever anybody says we’re going to spend and what we have [to spend]. We all are looking at the cost-to-carry – the normal increase in expenditures – which gives us about a $2 billion deficit. The number varies depending on who you talk to … but everybody has a number and they’re all big, big numbers” and current revenues aren’t enough to cover it.
