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Pennsylvania schools borrow $900 million to survive state budget impasse

NEW YORK (Reuters) - School districts across Pennsylvania have borrowed about $900 million altogether since July 1 to stay open because of the state’s budget impasse, State Auditor General Eugene DePasquale told Reuters on Wednesday.

That amount is more than double DePasquale’s last estimate in October. The total will top $1 billion if there is no state budget by January, he said.

“The longer it goes, the worse it gets,” he said.

Lawmakers in the state’s Republican-led legislature are still hashing out a spending plan after a political stalemate with Democratic Governor Tom Wolf that has made Pennsylvania’s fiscal 2016 budget late by 161 days.

In the meantime, funding is not flowing to school districts and social service agencies that rely on state aid, forcing many to borrow and suffer.

Lawmakers got closer this week to a budget deal they could present to Wolf, who is overseeing his first state budget since taking office in January.

Republicans balked at Wolf’s original proposals to hike taxes to pay for increased education funding. Wolf ran for office on a plan to restore education cuts made by his predecessor.

On Monday, the state Senate passed a $30.8 billion spending plan that would boost education funding. The House passed a different budget on Tuesday, and now the differing bills must be reconciled.

The Senate on Monday also approved legislation aimed at improving the financial condition of the public retirement system by, among other changes, establishing a hybrid 401(k)-style plan for newly hired teachers and state employees.

Pension reforms are part of talks aimed at ending the budget impasse but are separate from the appropriation bills.

Pennsylvania’s underfunded pensions, among other factors, have pressured spending priorities. By fiscal 2021, the state’s annual pension contribution is expected to grow to $3.5 billion, or 9.2 percent of general fund expenditures, the state’s Independent Fiscal Office said in its annual economic forecast on Wednesday.

That is up from $1.7 billion, or 5.8 percent of appropriations, in fiscal 2015, it said.

Ballooning retirement obligations will contribute to an average spending growth rate of 4.1 percent annually, compared to revenue growth of 3.4 percent each year, according to its report.

The state’s long-term fiscal imbalance could grow to a nearly $3 billion structural deficit in five years, it said.

Reporting by Hilary Russ; Editing by Alan Crosby, Bernard Orr