September 14, 2017 / 8:54 PM / 2 years ago

Pennsylvania could halt spending on Friday without budget

HARRISBURG, Pa., Sept 14 (Reuters) - Pennsylvania could run out of cash on Friday, leaving $860 million of bill payments up in the air as lawmakers continue to argue over a revenue package that is more than two months overdue.

The state legislature passed a $32.5 billion spending plan on June 30, the end of the fiscal year and the deadline for the current year’s budget.

But it failed to agree on a revenue package to pay for those expenses, and the state has been borrowing money from its own short-term investment pool.

Treasurer Joe Torsella has said he will not issue more such loans and that the state’s general fund will likely run down to zero on Friday.

While Pennsylvania will be able to make some payments - including nearly $102 million of debt service costs due on Friday - it will not be able to pay all the bills that are due, said Treasury spokesman Mike Connolly.

An estimated $860 million of payments for various items, possibly including schools and Medicaid, could be delayed until the legislature fully funds the budget.

On Wednesday night the state House of Representatives narrowly approved a revenue package, but the Senate appeared likely to reject it unless a compromise can be reached over the weekend.

“We plan to take a few days to review the House plan. At this point, we will return Monday,” said Jennifer Kocher, a spokeswoman for Senate Republicans.

The Senate had passed its own plan in July, proposing to close a $2.3 billion budget gap with borrowing and two new taxes: a first-ever severance tax on natural gas and a gross receipts tax on consumer utility bills.

But tax-averse Republicans in the House balked and did not pass their own bill until Wednesday night. It proposes no new taxes but would raise about $1 billion by selling a portion of the funding stream from the 1998 tobacco settlement, in which tobacco companies agreed to pay U.S. states for tobacco-related healthcare costs.

As part of its plan, the House also proposed a controversial measure to siphon off $630 million from 38 special funds established over the years for such things as mass transit infrastructure, parks and recreation, and recycling.

Governor Tom Wolf and both parties in the legislature “understand that recurring revenue is necessary to solve the structural deficit and avoid a credit downgrade,” said Wolf spokesman J.J. Abbott in an email to Reuters. (Reporting by David DeKok in Harrisburg, Pa.; Editing by Hilary Russ and Matthew Lewis)

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