HARRISBURG — The state will be unable to make at least $2.5 billion in payments to schools, counties, and key service providers due to Pennsylvania’s ongoing budget impasse, a top Shapiro administration official warned Tuesday.
In two letters viewed by Spotlight PA and signed by Secretary of the Budget Uri Monson, the administration told a host of providers, from tech schools and libraries to ambulance services and homeless shelters, that payments will be delayed over the next six weeks.
“Negotiations are continuing and the dialogue is respectful and productive; however, finding agreement can be slow moving and we have not yet come to final agreement,” Monson wrote.
All told, the letters warned of delays to $2 billion worth of education funding, most of it consisting of delayed monthly payments to school districts, and $542 million in health and human services funding, most of it to county child welfare offices.
Both letters conclude with Monson saying that “as soon as a budget bill is delivered by the Legislature to the Governor’s desk for his signature,” the administration will “work expeditiously” to get money out to providers.
Pennsylvania lawmakers were supposed to complete the budget by June 30, but have been unable to reach a deal due to deep disagreements over state spending, Capitol sources previously told Spotlight PA. Democratic Gov. Josh Shapiro proposed a $51.4 billion budget in February, up from $48.3 billion last year. Much of the proposed increase accounts for rising Medicaid costs alongside continued aid for poor school districts and more money for mass transit.
However, Republicans who control the state Senate have balked at such an increase. The proposed spending is well above the state’s likely revenues next year; Shapiro pitched using the state’s ample cash reserves to make up the difference. After those dollars run out, the state would either need to reduce spending or increase revenue.
Both options have been floated in talks.
On the savings side, Shapiro and state Senate Republicans want to reduce Medicaid patients’ eligibility for expensive weight-loss drugs.
To raise new revenue, state House Democrats passed a plan that would legalize recreational marijuana and tax its sale. Their GOP counterparts in the state Senate have prioritized regulating and taxing slot-like skill games.
A deal to bridge these divides hasn’t been reached despite weeks of closed-door negotiations. As of Tuesday, neither the state House nor Senate is scheduled to return to Harrisburg until fall.
John Buffone, spokesperson for the County Commissioners Association of Pennsylvania, confirmed county officials received the letter. He said the commonwealth’s 67 counties are “bracing for missed payments that fund essential programs such as mental and behavioral health services, child protective services, intellectual disability supports, drug and alcohol treatment, and assistance for individuals experiencing homelessness.”
Each county’s ability to manage shortfalls brought on by a state funding lapse varies significantly, he added. Some may have sufficient reserves to temporarily cover costs by “redirecting funds from other priorities, delaying projects, or missing out on investment earnings.”
But if the impasse continues, “counties may face the prospect of taking out loans or tax anticipation notes, passing along interest and borrowing costs to local taxpayers,” Buffone said.
“While we’re hopeful for a timely resolution, counties are preparing for escalating challenges the longer the delay continues,” he concluded.
Mackenzie Christ, spokesperson for the Pennsylvania School Boards Association, said an impasse “interferes with planning and creates cash flow issues” as boards must approve their new budgets by June 30 and set plans for the start of the school year in the coming weeks.
Without a state spending plan, “it’s going to be very difficult for them to hire necessary staff, make needed repairs, upgrade technology and improve curriculum without knowing what their state allocations will be,” Christ said in an email.
And although local property tax collections should start coming in around August and September, some districts do not have a large enough property tax base to keep the district from experiencing cash flow shortages, Christ added, so “they will be forced to borrow” to cover ongoing operational costs.
“We know that some school districts have already been forced to borrow due to the cash flow issues they’re experiencing due to the impasse,” she said. “And unless the state budget includes funds to reimburse districts for their borrowing costs, that cost is borne by the districts and their taxpayers.”