The state Senate is back in session, and is gearing up to respond to a budget package the House passed last week.
Senate leaders aren’t revealing much about their plans — though they indicate they have fundamental disagreements with House leaders.
Meanwhile, the standoff is prompting credit rating agencies and budget experts to put the commonwealth on their watch lists.
The Senate initially passed a revenue package in July. It balanced the $2.2 billion budget deficit on a combination of borrowing and new taxes — including ones on Marcellus Shale gas drilling and utilities.
Senate GOP leader Jake Corman noted, that wasn’t anyone’s preference.
“The Senate voted the plan that we did because we thought that was really the only way out of this,” he said.
But House Republicans have rebuffed it; their own proposal includes essentially the same borrowing, but no new taxes. It uses internal fund transfers to make up the difference.
The whole plan creates very little recurring revenue.
Senate Appropriations Chair, Republican Pat Browne, said that’s a big disagreement the GOP-controlled chambers will have to work through.
“Why do they believe they don’t need recurring revenue?” he asked. “I’m telling you, I believe that a recurring revenue package was necessary.”
Senators also disagree with House criticism of Treasurer Joe Torsella.
Until the budget is done, Torsella won’t authorize a loan to patch General Fund shortfalls. That means the fund is currently running so low, Governor Tom Wolf had to delay over a billion dollars in payments to Medicaid insurers last week.
House leaders have said the Treasurer is acting politically. Browne said he thinks that accusation is unfounded.
“I don’t think they’re taking [the fiscal situation] seriously enough,” he said. “I don’t think you can ask someone to borrow you money when you don’t have a final plan in place.”
He added, if Pennsylvania doesn’t pass a revenue plan soon, the commonwealth’s expenses will “bottle up, and eventually payments to school districts and other obligations of the commonwealth pursuant to our appropriations that we made will not be paid.”
“That’s what happened to other states,” he said.
Liz McNichol, a senior fellow with the Center on Budget and Policy Priorities, echoed that.
She said Illinois is a prime example of what can happen when a state can’t pay its bills.
“They weren’t able to come to a budget agreement for the past few years, and have built up a very large backlog of unpaid bills — over $10 billion” she said. “That’s not a situation Pennsylvania wants to get into.”
Illinois only narrowly missed being downgraded to a “junk” credit rating this year.
Rating agencies haven’t slashed Pennsylvania’s score yet.
But the commonwealth is already among the worst-rated states, and many lawmakers say a downgrade is likely if the budget isn’t balanced soon.