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Govenor looks to raid EMS fund to balance budget

Pa. Legislature approves $29.1B budget; Corbett withholds signature

June 30, 2014
FROM:     Brad Bumsted and Melissa Daniels, AP
RE:          Pa. Legislature approves $29.1B budget; Corbett withholds signature

HARRISBURG - Republican Gov. Tom Corbett said late Monday he is withholding his signature from a state budget sent to him by the General Assembly before the constitutional midnight deadline, while he continues to work with lawmakers on "meaningful pension reform."

In approving a $29.1 billion budget, the House and Senate did not act on curbing taxpayers' costs to pensions for state employee and teachers. Pensions costs consume 60 cents of every new dollar of state revenues.

The state House and Senate passed the budget with no tax increases. Critics say it is built on gimmicks and one-time revenue fixes.

Corbett, a Shaler Republican, stopped short of saying he'd veto the budget. Lawmakers plan on remaining in session through Thursday. His spokesman Jay Pagni said all options are on the table including a veto, a blue-line or line-item veto of legislative expenses and a special session on pensions.

"Pension reform is needed," Pagni said. "It's killing schools. It's killing taxpayers."

Early Tuesday, top House and Senate leaders were meeting with Corbett in his second floor Capitol office.

Corbett, leaving the state Capitol just before 1 a.m., said he had "very nice conversations" with lawmakers after announcing he would withhold his signature from the budget they sent to his desk hours earlier.

Corbett said in he was going to look at what was in the budget further before deciding whether to sign, saying details were not agreed to ahead of time.

"You're asking me to speculate," he said. "Let us take a look at it."

"There's not a Democratic vote" for pension reform, said House Minority Leader Frank Dermody, D-Oakmont. He claims Corbett's position on pensions is driven by "ideology" and that moving from guaranteed to 401-K type plans just "helps their (Republican) friends on Wall Street." A hybrid House plan includes 401-K type plans for a portion of new employee pensions.

If Corbett thinks he can veto legislative funds, "we're not going to roll over because he takes our money," Dermody added."I'm willing to take a rumble with him on that."

The Senate approved the budget 26 to 24. The House vote was 108 to 95.

The budget would raise spending by $500 million, or 1.8 percent, analysts said. It provides a $300 million increase for education, according to a Senate Republican spreadsheet.

Senate Democrats, who unanimously opposed the plan, say the budget was patched together to attempt to fix a $1.4 billion deficit. It takes money from the Racehorse Development Fund, the Pennsylvania Lottery Fund, the Volunteer Companies Loan Fund, and Tobacco Settlement Fund, among others.

"It's a flimflam sham," said Philadelphia Sen. Vincent Hughes, ranking Democrat on the Senate Appropriations Committee.

His staff predicts a potential shortfall of more than $2.7 billion in future years because of the amount of one-time funding transfers and about $430 million in "questionable" revenue assumptions.

Rep. Dwight Evans, D-Philadelphia and former House Appropriations chairman, predicted it may result in a "very nasty" budget situation in 2015. Evans, a supporter of Corbett's November election opponent, York businessman Tom Wolf, said if Wolf wins he'll likely inherit a budget that runs short of cash.

"There's gonna be hell to pay next year," Hughes said.

Senate Appropriations Chairman Jake Corman, R-Centre County, said he is "bullish" on Pennsylvania's economy for the coming year: "I'm very optimistic ... the next fiscal year will be a rosy one for Pennsylvania."

The budget wrongly assumes 3.5 percent growth, Hughes said.

The proposal would hand the next governor a problem, but also considerable power, Evans said. He predicted the Legislature would abdicate spending priorities by allowing the governor to make cuts to balance the budget. Former Democratic Gov. Ed Rendell did so on several occasions.

The state's problems are rooted in the 2008 recession, Corman said. In 2009, the Senate tried a different approach to "slim down," much as a homeowner would do on a tight budget. There were unforeseen challenges because of this year's tax collections, he said.

The budget will spend $30 million from Volunteer Companies Loan Fund, which aids volunteer fire departments with buying equipment or facilities.

Donald Konkle, the executive director of the Pennsylvania Fire and Emergency Services Institute, said the use is "a slap in the face" to volunteer companies. And he questioned the transfer's legality, saying attorneys were reviewing the language in the act that created the fund. Konkle said last year lawmakers doubled the amount companies could apply for when the fund was at $70 million.

"They're just building a crisis for the future," Konkle said.

House Appropriations Chairman Bill Adolph, R-Delaware County, said the fund is "very healthy" and brings in more in loan payments than it pays out each year.

"All the balances have been checked," he said, adding that loan fund transfers have been done in the past. The 2009-10 budget under Rendell used nearly $1.8 billion in transfers, including $755 million from a "rainy day" fund.

Senate Minority Leader Jay Costa, D-Forest Hills, said some of the funding transfers proposed to affect Department of Community and Economic Development loan funds would be "harmful to the economic development community."

"It puts us in a very difficult situation where you've got very effective loan programs, in particular, revolving loan funds, that are going to be diminished, depleted," Costa said.

Guaranteed cash flow during transition.