Lack of state funding will cause big problems

HARRISBURG - Gov. Wolf and the Republican-controlled legislature filed out of the Capitol last week without a deal on the budget - and without an end in sight to their impasse.

Hanging in the balance are local governments and nonprofit organizations that provide services ranging from helping adults learn to read to assisting victims of domestic abuse.

All could see their funding dry up in the next few weeks, leaving them scrambling to cobble together contingency plans as the July 1 start of the new fiscal year came and went without a budget deal.

"It would be devastating to us right now," Kelly Davis, executive director of Lutheran Settlement House in Philadelphia, said of losing state funding.

The Lutheran Settlement House offers homeless services, bilingual domestic-violence programs, community education, and employment, as well as senior services, Davis said, and recently launched a renovation project to expand its kitchen and food cupboard.

If the money doesn't come through, Davis said, she may have to begin scaling back on payroll as well as furlough employees.

"Having less staff present at our homeless shelter could be a potentially dangerous thing because we have 110 moms and kids every night, and it's important to have our staffing ratios to keep the peace, provide three meals and a snack, and keep it clean," she said.

If the shelter is full, it uses local funding to pay for a hotel room for domestic-violence victims and their children.

"If we don't have money through the city we won't be able to do that. So it really could be life or death," Davis said.

Without a budget in place by the start of the new fiscal year, the state's spending authority is sharply curtailed.

The Wolf administration has said the state is required to continue funding all services affecting the health, safety, and welfare of residents. That includes corrections facilities and medical-assistance payments for the poor.

But after a few weeks, state vendors, local governments, and social service providers will see their checks halted. The last time there was a protracted budget impasse - in 2009, under Gov. Ed Rendell - many were forced to lay off employees, use cash reserves, or turn people away.

Last week, Wolf said: "I'm trying to minimize any problems that might occur from our not having a budget signed and sealed."

Talks are expected to resume Monday, but the two sides still appear entrenched in their positions. Wolf is seeking to boost education funding through a new tax on natural gas drilling while also pushing to overhaul how residents pay property taxes - and how much they pay.

Republicans have called Wolf's proposed tax increases and spending excessive and early last week delivered to him a budget plan that did not contain any tax increases and less in education spending than Wolf wants. The governor promptly vetoed it.

He also vetoed a liquor privatization plan advanced by Republicans as well as several budget-related bills.

Jack Phillips, director of legislative affairs at the Rehabilitation and Community Provider Association, said most of his members would likely start to feel the financial pinch around the end of the month.

Many nonprofits and providers, in a desperate bid to keep operating, will take out a loan. Often, that means they will be stuck paying down interest long after state funding has resumed.

Phillips said the association had asked the legislature to authorize a temporary appropriations bill or allow providers to take out interest-free loans from the Pennsylvania State Employee Credit Union.

Kristin Houser, vice president of public relations at the Pennsylvania Coalition Against Rape, said rape crisis centers across the state had already reached out for assistance in getting a line of credit.

But Houser notes that crisis centers often make referrals for other services, such as counseling, housing, or health care - all services that also could be affected by the budget impasse.

"If other social services agencies aren't getting their funding, it's going to impact us one way or another," she said.

Some local governments, through which state funding flows, are better equipped to deal financially with a prolonged stalemate. But many are drafting contingency plans, said Douglas Hill, executive director of the County Commissioners Association of Pennsylvania.

While officials in counties such as Montgomery and Bucks noted they were in relatively good shape, Philadelphia might not fare as well.

Mark McDonald, Mayor Nutter's spokesman, said it was too soon to gauge the impact as the city just enacted its budget and programs are fully operating.

But a protracted impasse - one that stretches into August - would affect state aid that school districts receive just before they start the new school year.

"Our hope is that the governor's budget is adopted and enhanced levels of support for public schools in Philadelphia is available," McDonald said.