Today’s announcement that Standard and Poor’s lowered its rating on Pennsylvania’s debt is now the second downgrade it has slapped on Pennsylvania in three years as budget makers have struggled to pull the state out of a stubborn post-recession deficit. Aside from today’s downgrade, Governor Wolf stated that the Legislature has until the end of the month to pass a revenue package that includes sustainable revenue in order to deal with the structural deficit instead of one-time fund transfers that have done nothing to reduce the structural debt the Commonwealth has faced over the past 6/7 years.
These two announcements have created a tipping point for legislative action. This week the Senate returned to session to consider the latest version of HB 453, the recently amended revenue package passed by the House of Representatives last Wednesday (see last week’s blog for details). Today, September 20th, the Senate by a vote of 43-7 voted to non-concur in the House amendments to the bill. It was agreed by the caucuses to employ a seldom used conference committee approach where all 4 caucuses have representation on the committee (the majority in each chamber has 2 seats while the minority party receives 1 seat for a total of 6 legislators on the committee). The committee will then hopefully come up with a report that then is voted by both chambers in the Legislature on a straight up or down and on to the Governor for signage.
So, let’s consider HB 453 as a set of guideposts to a final budget deal. To be sure, while there remains a considerable distance between the Senate and House, particularly on the issue of recurring revenue, that distance is slowly shrinking. For example, the House Republican plan “booked” $1 billion in their plan by proposing to borrow against the master Tobacco Settlement payments to the state, which is not dissimilar to the agreement already made between the Senate and Governor Wolf. We believe that the conference committee report will include expanded gaming, which will probably include iGaming, iLottery and fantasy sports betting but NO Video Gaming Terminals (VGT’s). In addition, it will probably include a Marcellus Shale Tax and a lower amount of securitizing from the State Tobacco Settlement Fund. There is a potential that the revenue package the conference committee may agree to may not close the anticipated deficit and if that comes to fruition, then funding for state relateds (Pitt, PSU, Temple and Lincoln) can receive limited or no funding in this fiscal year.
For more information on the ongoing dialogue here are some recent resources:
http://www.patreasury.gov/media/archive/2017/09-20-Torsella-S&P-Downgrade.html