PA: Pa. House kills Senate budget, transit bills as battle lines remain unchanged

As expected, Pennsylvania House Democrats on Wednesday shot down Senate Republican bills that would have flat-funded the state budget — now seven weeks overdue — and used yet-to-be-expended capital dollars to fund the operating costs of struggling transit agencies.

The House called two committee meetings on Wednesday to quash, on party-line voting, the pair of bills that the Senate had sent over the night before. SEPTA — the Philadelphia metro area’s transit agency — has said it would need a funding fix by tomorrow in order to avoid starting drastic service cuts, an issue that has pushed budget concerns into overdrive.

No specific path forward is apparent, although “the Senate has at least recognized the problem” with the transit piece of the budget puzzle, said House Majority Leader Matt Bradford, D- Montgomery County, admitting “I may be an optimist.”

Wednesday’s committee action expounded somewhat on why Democrats and transit agencies believe the Senate’s ideas are unworkable, an issue that hinges on the cash flow of the state’s Public Transit Trust Fund (PTTF), which doles out money to mass transit agencies based on ridership and mileage.

Despite assertions from the Senate’s Republican majority that the flexible funding plan would avert SEPTA’s plan to slash service by nearly half over the next several months, SEPTA general manager Scott Sauer said Wednesday that it would not.

“We will continue with those cuts as scheduled,” Sauer told House members, given that “we would have to stop almost our entire capital program” to make use of the Senate’s preferred funding method — a short-term solution at best and a long-term setback at worst.

The Senate bill at issue would appropriate nearly $1.2 billion over two years, split about equally between mass transit and rural road and bridge infrastructure — issues that are typically tackled in tandem to appease both urban and rural legislators.

Roughly a third of this funding would come out of unused funds from the state’s interactive gaming tax. The remainder would come from money already in the PTTF, which has a current balance of about $2.4 billion, according to state treasury data.

But this balance is not unencumbered, according to transit agencies, and is already committed to upcoming capital projects.

“The essence of this bill moves capital funds to operations,” said PennDOT Secretary Mike Carroll, and “every single transit agency in the commonwealth will suffer deficiencies as a result of $750 million being shifted from capital to operating.”

Senate Republicans said yesterday that PennDOT’s list of transit agencies’ capital projects accounted for only about half of the PTTF balance. But Carroll said this is a misunderstanding of how expenses are scheduled, and that the balance also must be able to pay out matching funds for projects that are funded by federal grants.

“Every dollar has an expected use,” Carroll said. Further, Democrats noted, transit would lose net funding, given that a portion of the re-purposed PTTF dollars would go to roads and bridges.

Republicans still pressed for transit agencies to take the deal, if only to buy time while a more sustainable fix is sought. Gov. Josh Shapiro’s proposed budget framework sought to hike transit funding through an increased portion of sales tax revenue, but the Senate has opposed doing this without a way to back-fill the lost sales tax dollars in other funds.

“The solution before us, while perhaps not perfect, has provided us a path,” said House Minority Leader Jesse Topper, R- Bedford County.

The same disagreement exists for the budget as a whole. Shapiro’s proposal included a handful of new initiatives and inflationary adjustments that increased the total spend from the general fund — the state’s main operating account — by about 7.5%, to $51.5 billion. Last month, House Democrats passed an appropriations bill that shaved about $900 million off Shapiro’s ask, a compromise offer.

The Senate presenting a flat-funded budget — even as a stop-gap measure — indicates that the GOP still doesn’t have a clear picture of how it can meet Democrats part-way, House members lamented.

“The only time you use numbers from last year is early on in the process,” as a place-holder, said House Appropriations Committee Chairman Jordan Harris, D- Philadelphia. “This is not something you do a month-and-a-half in [to a late budget] after not passing a spending plan.”

Pennsylvania has roughly $11 billion in the general fund’s surplus balance and the “rainy day” reserve account, which Shapiro has proposed to spend down while also tempering the budget deficit with new revenues from legalized recreational marijuana, slot-machine-like “skill games,” and other sources – none of which are amenable to Republicans, who have pushed to first slow the spending increase before creating new taxes and regulatory systems.

But a flat-funded appropriations bill simply isn’t possible by itself, as Harris pointed out Wednesday.

The state’s share of Medicaid, for instance, is set to increase by over $2 billion in the coming year due to rising healthcare costs and a patient pool that will require more care. The state can’t keep Medicaid spending level without also making statutory reductions to the program, a demand Republicans have not fully articulated, at least publicly.

“Hopefully at some time soon, we’ll have a better understanding of what they’re able to lift in their chamber” when it comes to Medicaid and other line items, Harris said Wednesday.

Neither the House nor the Senate has session time scheduled until September, but they can be recalled to Harrisburg with 24 hours’ notice.