HARRISBURG, Pa. (WHTM) — What to do with the commonwealth’s uncommon wealth?
That’s been the question, with Republicans arguing to save more of the $9 billion Pennsylvania is sitting on and Democrats arguing to — depending on one’s perspective — “spend” or “invest” more of it.
But few people questioned the mere premise that the state is in rather good fiscal shape. Until now.
Pennsylvania got a D-minus, the lowest among all states that have already decided how to spend at least half their federal rescue money, according to a report by The Volcker Alliance, a “nonpartisan, nonprofit organization dedicated to improving the public service and making it more effective,” explained Bill Glasgall, the organization’s senior director for public finance.
The group’s name comes from Paul Volcker, a former chairman of the federal reserve who was first nominated to the post by President Jimmy Carter, a Democrat, and then re-nominated by President Ronald Reagan, a Republican.
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“That’s not good. That’s the lowest grade the Volcker Alliance gives,” the report’s author, Beverly Bunch, said of the D-minus. “There are a number of other D’s. But D-minus really raises concerns about the short-term and long-term fiscal sustainability of the state.”
Why the doom, given that Bunch and Glasgall don’t dispute the unprecedented billions of dollars Pennsylvania is holding?
“We wanted to look at how states are spending this money, whether this is sustainable — whether they’re putting the money toward legitimate one-time actions like investing in new roads or parks, covering salary gaps, paying down debt,” Glasgall said. “Or whether they’re using it to cover ongoing expenses.”
The problem with the latter, he explained, is that the money — specifically, $7.3 billion in rescue money for Pennsylvania among $195 billion given to all states — is a one-time jolt, which must be spent by 2026.
“When the money runs out in 2026, is the state then facing a fiscal cliff?” Glasgall said, characterizing how the group analyzed states. “Is it either going to have to raise taxes or cut programs?”
The answer for Pennsylvania, both said, is likely yes. Evidence of that, according to them: Of the $7.3 billion, $3.8 billion was destined for the state’s $38.6 general fund, which pays for a lot of ongoing state programs.
“So this is 10% of the budget that’s basically being used to plug what otherwise might be a shortfall, and that could be a problem going forward when that money’s not there,” said Bunch, who is also a professor at the Center for State Policy and Leadership at the University of Illinois-Springfield.
But a spokesperson for Gov. Tom Wolf (D) said the fact that the money is first going into the general fund — rather than going directly toward one-time needs or projects — is a distinction without a difference.
The $3.8 billion was used “to support continuing government services and replace revenue lost in the pandemic,” Beth Rementer, the spokesperson, told abc27 News in an email message. The Volcker Alliance generally approves of using rescue funds to replace revenue lost because of the pandemic.
Wolf wants to use much of the remaining money to pay for programs like small business aid and rent/property tax rebates to Pennsylvania residents.
“Our fiscal situation is extremely positive … due in large part to the governor’s commitment throughout his administration to make responsible state investments and focus on fiscal stability,” Rementer wrote. “Now we are flush with cash and have an opportunity to truly invest in our commonwealth and ensure an even brighter future,” leaving the next governor “with a multi-billion-dollar budget surplus.”
Stacy Garrity (R), the state’s treasurer, took no such exception with the report, saying it “confirms what I and others have been saying for a long time: Pennsylvania will face a fiscal cliff in the coming years, and using one-time revenues for recurring expenses is not the way to go.”
Jason Gottesman, a spokesman for House Republicans, disagreed with part of the report’s approach: “I think what the analysis fails to take into account is the fact that any time you spend money in appropriating for the state budget, those costs then get built into the next budget,” he said.
But he agreed with its broader point.
“I think what ultimately this means is that we need to be cautious, which house Republicans have been advocating for,” Gottesman said. “So we need to use the money we have now — use it prudently, make smart investments for Pennsylvania — and make sure we’re guarding against that exact fiscal cliff that they are warning against.”
And ultimately “the General Assembly is responsible for appropriating the $7.3 billion,” Rementer noted.