As Pa. budget impasse persists, Wolf warns of dire consequences

HARRISBURG — Gov. Wolf on Tuesday urged House Republicans to take swift action to balance the budget or risk putting Pennsylvania in a "much more dire financial situation" that could include painful spending cuts.

With a budget impasse about to drag into a third month, the Democratic governor has remained mum about what he would cut should the legislature not send him a plan to fund the $32 billion budget it passed two months ago.

But his budget office has been quietly churning out plans to deal with the financial difficulties. An internal administration document shows one dire scenario could cut 12 percent from nearly every department's budget, including more than $700 million from public schools and nearly $282 million from the Departments of Health and Human Services for homeless assistance, mental health, and other programs.

That plan also would eliminate state funding for the state-related universities: Temple, Pennsylvania State, Lincoln, and Pittsburgh.

"No decisions have been made at this time," said J.J. Abbott, spokesman for Wolf.

Wolf's warning came as he announced Tuesday that he had shuffled money between bank accounts to allow the state to continue to pay its bills for three weeks. But that money will likely run out by Sept. 15, when hefty Medicaid payments are due.

The governor told House Republicans in a letter dated Tuesday that without a swiftly balanced budget, "the consequences that will be forced upon the commonwealth will be unfortunate and could include impacts to programs on which our constituents rely."

He added later, "Time is not on our side, and now is the time to put statesmanship before anything else. There is too much at stake."

To cover finances for the next few weeks, Wolf transferred roughly $700 million from the motor license fund — typically reserved for maintenance and safety on public highways and bridges — to the state's primary bank account. Most of that is an earlier-than-usual payment to help defray state police costs. Roughly $241 million of that is a loan that must be paid back with interest by March.

The transfer allows the state to make a large payment to school districts and cover other obligations until mid-September.

This is not the first loan to the state's general fund this month. Democratic State Treasurer Joe Torsella recently approved a $750 million line of credit. He has said he would hesitate to approve further loans without what he called a responsible revenue package.

Wolf's latest transfer "does not represent a solution to the challenges straining the commonwealth's finances," Torsella said in a statement. "It simply buys time for the legislature to finish work that was due months ago."

The House is scheduled to return to session Sept. 11 — four days before money from this latest transfer runs out.

Legislators passed a nearly $32 billion spending plan hours before the July 1 start of the new fiscal year without a corresponding way to pay for it. Negotiators have struggled in recent months with how to plug a $1.5 billion shortfall in the last fiscal year and a $700 million deficit in the one that began July 1.

The credit rating agency Standard & Poor's has warned Pennsylvania that it could be facing a credit downgrade, which would make it more costly to borrow money in the future.

The Republican-controlled Senate passed a series of bills late last month that would balance the budget with a mix of borrowing and new or increased taxes. But tax-averse Republicans who hold a commanding majority in the House have expressed concerns.

Though there have been some meetings and talks over the last few weeks, it does not appear a resolution is close.

Steve Miskin, a spokesman for House Republicans, said some members were meeting in the Capitol Tuesday to work on budget ideas. Exactly what their budget proposal would entail remains to be seen, but it could include plans to expand liquor privatization or legalize slots-style machines called video-gaming terminals (VGTs) in bars and restaurants.

"The fact is, VGTs are better than raising taxes, privatizing the liquor system is better than raising taxes, because it's not raising taxes on hard-working Pennsylvanians," Miskin said.

Staff writer Angela Couloumbis contributed to this article.