As the PA budget drama continues, the team at Pugliese Associates has been walking the cobblestone-tiled halls of the Capitol staying up-to-date and connecting with key legislative folks on all that is slowly unfolding. When I say “slowly” I mean a process that seems to be neither completely stalled nor moving backwards. But with no resolution to the 2017-18 budget as we inch forward into August, and an impending stalemate as we head into September, there is a real threat for another protracted and painful battle ahead.
Early last week, the Senate reconvened session to reach consensus with the Senate Democrats, the House, and the Governor. An agreement was quickly developing on how to close the $2.2 billion budget gap created by current, depressed revenues, following the passage of the 2017-18 FY spending plan that had passed overwhelmingly by the General Assembly and which the Governor allowed to lapse into law on July 10. Hope emerged as the Senate considered next steps to move the Tax Code bill (to raise the revenue) and the Fiscal Code bill (to authorize the spending).
But alas, neither bill was voted on.
Why? Well, at this point, in order to ease my budget season blues, I will attempt to replay the sequence of events and along the way take some liberties by interweaving my Mediterranean ancestry.
Politics Is War Without Bloodshed
By mid-week, a battle of two titans had developed. The Speaker of the House, Mike Turzai, was voicing displeasure with the revenue package that was coming together in the Senate. In part, he cited grave concerns about new, recurring revenue based on taxation which Senate leaders were considering. Secondly, he was displeased that the Senate was unable to muster support for two budget revenue hallmarks of the House Republicans: additional liquor privatization items and expanded gaming in the form of video game terminals in bars and taverns, both of which are contained in legislation already passed by the House.
During multiple meetings last week, with Speaker Turzai face to face with his counterpart and President Pro-Tempore of the Senate, Joe Scarnati, as well as meetings between the full Senate and House Republican leadership teams, the Speaker forcefully advocated for a no-tax revenue package, insisting his caucus had no appetite for a tax vote. Although, by all reports, the meetings were cordial, there is no doubt in my mind that frustration levels were running high. On one side of the table sat the Speaker, insisting on a decidedly more conservative revenue package, though against the grain of what could be agreed to by the Democratic Governor. On the other, the Senate Republicans, who had been on the cusp of brokering a pragmatic budget deal to which they hoped all sides could agree. And between them, an ever-widening gap.
Without a partner in the House, Senate Republicans recessed, left Harrisburg, and waited to see what the House would do. Would the Speaker lead his chamber across the Rubicon?
Vini, Vidi, Vici?
And so, in an unusual move, House Speaker Mike Turzai called the members of the House back to Harrisburg this past weekend (on the 22nd and 23rd of July) to garner support for his no-tax revenue plan which had been the source of budget negotiations earlier in the week.
To win, the Speaker would need the decisiveness of a military leader. If successful, his message back to the Senate might have echoes of that great Roman general and the man who would eventually cross the Rubicon. Indeed, it was Julius Caesar who wrote the briefest of reports to the Senate in 47 BC upon his victory at the Battle of Zela:
“Vini, vidi, vici”, or “I came, I saw, I conquered.” If successful, this was the exact message (more or less) the Speaker had hoped to send back to the Senate and, indeed, all budget parties.
To win, Turzai would have to aggressively sell his plan to, and rely solely upon, his House Republican colleagues:
- $1.5 billion borrowed against future payments due the state from the 1998 multi-state settlement with the nation’s big tobacco companies;
- $450 million in funds redirected from restricted accounts;
- $200 million from the Pennsylvania Professional Liability Joint Underwriting Association, the entity set up to provide medical malpractice insurance to doctors and health care facilities having trouble finding coverage elsewhere;
- $50 million from unspecified liquor reforms, an effort for which the House GOP has been pushing hard.
In the backdrop of this drama: frustrated House members who were called back into session during a late July weekend, with some reports that upwards of 20 failed to return to Harrisburg at all; a pending credit downgrade for Pennsylvania announced by Standard & Poor’s Global Ratings; a Governor who has said he could support a plan for borrowing funds so long as it included recurring taxes; Democrats in the House and Senate who have been widely supportive of a gross receipts tax on natural gas, similar to the tax on other public utilities; and Senate Republicans who had just crafted a near deal with all other parties except the House Republicans.
The stakes were high Saturday when, at high-noon, House Republicans headed into a caucus meeting that would last over three hours. But as the minutes ticked away into hours, and as the House returned to the floor so that Republican leaders could conduct a “whip count” to determine support for the Speaker’s no-tax revenue package, it quickly became apparent that the votes were not materializing.
And then, with a slamming of the gavel, session was closed. It was announced that Sunday session was canceled and House members could return home once more.
Now, as all eyes turn back to the Senate, which is expected to return to session this Wednesday, the questions are: How quickly will all parties return to the negotiating table? Will the plan that had previously been agreed to by the Senate GOP, legislative Democrats and the Governor once again gain traction? If not, will other industries (i.e., Marcellus shale gas) be the new targets of recurring tax revenue? Finally, can any of this get completed soon in order to avoid another credit downgrade to Pennsylvania, the effects of which would cost the Commonwealth, and have a rippling effect at the municipal and school district level?
At this point, it appears the Senate will move the Tax Code and Fiscal Code bills with the four-party (minus House Republicans) agreed-to revenue plan and funding authorizations and send these bills to the House for consideration. There is little to no indication as to whether the House will return to Harrisburg to finalize the budget. If they wait until September, however, things such as funding the state-related universities and capital redevelopment programs (RCAP) may also fall victim to the delay, not just the basic revenue required to run the Commonwealth.
So as the Roman lobbyist Rocconius Titus Puglia once quipped, those are my “two denarii”.
I want to thank Christian Muniz, who has a plethora of knowledge in Roman history and I will add, is an excellent writer, for his invaluable assistance in writing this blog.