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AAA  Sep. 13, 2017 8:38 PM ET
House GOP looks to borrowing, no new taxes to plug deficit
By MARC LEVY, Associated Press THE ASSOCIATED PRESS STATEMENT OF NEWS VALUES AND PRINCIPLES 
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(AP) — Up against an unprecedented cash crunch, Republicans who control Pennsylvania's House of Representatives prepared a late Wednesday night vote on a no-new-taxes borrowing package to help plug the state government's $2.2 billion budget gap.

In addition to a $1 billion loan, the House GOP's package would siphon cash from off-budget programs, including accounts for mass transit, environmental protection and economic development.

"We can either tax our constituents, or we can use the money we already have," one supporter, Rep. Paul Schemel, R-Franklin, told colleagues during Wednesday night's debate.

If it passes, it is a small step toward resolving Pennsylvania's budget stalemate, now in its third month.

It is opposed by Democratic Gov. Tom Wolf and facing pushback from the Senate's Republican majority, which helped pass a $500 million-plus tax package in July to fully fund a $32 billion spending agreement approved overwhelmingly by both chambers.

Democratic lawmakers opposed it. It uses deeply flawed assumptions, poses cutbacks in mass transit services and plunders money for popular causes, such as municipal recycling programs, they said.

"This is a phony budget proposal, and it is a dangerous budget proposal," Rep. Joe Markosek, D-Allegheny, said during floor debate.

With the state's main bank account scraping bottom, the House GOP plan will provide no relief before Friday, when Wolf has said he will be unable to pay bills on time. It would be the first time Pennsylvania state government has missed a payment as a result of not having enough cash, state officials said.

This latest House GOP plan came together overnight Tuesday, and followed the collapse of earlier plans proposed since June. House GOP backers said they believed they had scraped up enough support from a caucus that has been deeply divided between anti-tax conservatives and moderates from southeastern Pennsylvania who say a tax increase is necessary to stitch together the state's threadbare finances.

In a statement released late Wednesday afternoon, Wolf's office slammed the House GOP's package as failing to solve the state's underlying fiscal problems.

It would leave the state with another $700 million deficit next year and inflict "significant, damaging cuts to transportation, recreation, public safety and environmental programs," his office said.

Democratic lawmakers warned that a downgrade to the state's battered credit rating is also in the offing.

The revamped package relies on borrowing $1 billion against future revenue from Pennsylvania's share of 1998's multistate settlement with tobacco companies and diverting $600 million-plus from off-budget programs.

It also would count on hundreds of millions of dollars more in unused cash from state programs, money that the Wolf administration says does not entirely exist, and the potential for license fees should the state authorize another expansion of casino-style gambling.

Since the recession, Pennsylvania state government has reliably bailed out its deficit-ridden finances by borrowing money from the state treasury or a bank during periods when tax collections are slow.

However, this year, Pennsylvania's two independently elected fiscal officers — Treasurer Joe Torsella and Auditor General Eugene DePasquale, both Democrats — have refused to sign off on the sort of borrowing that would be necessary for Wolf's administration to pay its bills on time.

Ahead of Friday, Wolf's administration has told the eight insurers that administer benefits for 2.2 million Medicaid enrollees that they may not receive their monthly payments of about $800 million on time.

Associated Press
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