Budget mess may mean 'real trouble soon,' Pa. treasurer warns

HARRISBURG — State Treasurer Joe Torsella warned Thursday that the commonwealth could run out of money to pay its bills by the end of August unless the legislature quickly passes a responsible revenue package to balance its budget.

That's alarmingly early in the year, said Torsella, who said he also fears that the state's cash-flow problems could last for a worrisome eight straight months.

"That's not some distant prospect," said Torsella, a Democrat. "There is going to come some real trouble soon."

If the state did run out of money, Gov. Wolf could be forced to make dramatic cuts.

Budget negotiations continue in private, and spokespeople for some of the leaders said they remained optimistic a deal could be reached — although they disagreed on when and provided no details as to why.

"Gov. Wolf continues to negotiate with Republicans and Democrats in the General Assembly and is optimistic that all parties can come together to balance the budget," said J.J. Abbott, the governor's spokesman.

Jennifer Kocher, a spokeswoman for the Senate Republicans, said: "There is a willingness by everyone involved to finalize everything and to do so quickly. We are close to a final deal."

But Steve Miskin, a spokesman for House Republicans, said he did not believe a deal on revenue would happen "right away."

"Hopefully I'm wrong about that," he said.

Many of the hallways in the Capitol were empty Thursday. Both the Republican-controlled House and the Senate were in recess — with no definite return date — and many legislators had returned home to their districts.

On June 30 the legislature passed a nearly $32 billion spending plan, and Wolf, a Democrat, allowed it to lapse into law without his signature this week. Missing are the code bills, which further detail how that money is to be spent, and a revenue package that would outline where the state would get the money to cover those expenses.

Negotiators face the challenge of closing a $1.5 billion shortfall in the fiscal year that just ended — the largest since the 2009 recession — and a projected $700 million deficit in the one that began July 1.

The treasurer's office predicts that without a revenue package, the general fund — the state's main bank account — would need to borrow as much as $3 billion this fiscal year.

Money in the general fund regularly ebbs and flows throughout the year, and the Treasury typically provides short-term loans to cover the state when its account is short. But in recent years, Torsella said, the loan amounts have increased and covered longer periods of time.

"What was a cold that you could take an aspirin for is now an eight-month chronic illness," he said.

Torsella said Treasury would still be willing to do some short-term lending, but "I've said we don't have the ability to do it to this degree, and I can't responsibly be OK with going to the private market if there's no revenue to sort of base that on."

Miskin, the House GOP spokesman, said the treasurer's "publicity interviews" aren't "changing how legislative leaders are thinking about it."

"Everyone gets it," he said.

He contended the state was facing a $1.5 billion shortfall in last fiscal year's budget "because the administration and the treasurer kept spending money we didn't have."

He said that instead of allowing the spending plan to lapse into law absent a revenue package to pay for it, Wolf should have struck spending lines from it to bring it into balance – a process known in Harrisburg as "blue-lining."

"Ultimately, it is the governor's responsibility to sign the budget or blue-line it," Miskin said. "Since that didn't happen, now he has to decide whether he can fund things. He should be putting money in budgetary reserves — but that requires making a decision."