The General Assembly is poised to close out its 2020-2021 budget by approving a $10 billion plan to fund state operations through the end of June, in part, by tapping $1.3 billion in leftover federal stimulus funding.
The General Assembly last June passed a $25 billion budget that provided five months of funding for most state agencies while providing a full-year of funding for public schools.
In addition to the stimulus funding, the spending plan relies on $2 billion in federal Medicaid dollars.
The move to use the stimulus funding to balance the budget also means that a number of special interest groups that had been clamoring for more state assistance to cope with the economic fallout from the pandemic will have to wait.
Gov. Tom Wolf had urged the General Assembly to use the federal stimulus funding to provide more than $300 million to make child care more affordable and $200 million for rent and utility assistance; $225 million for hazard pay for front-line workers and $325 million for small business forgivable loans and grants for small businesses, including $100 million targeting the hospitality industry, which has been devastated by the state’s mitigation orders, shutting bars and limiting restaurants to 25 percent their normal capacity.
Wolf’s spokeswoman Lyndsay Kensinger declined comment when asked Thursday night whether Wolf supports the plan approved by the House appropriations committee.
By leaning on the federal dollars, the state’s plan is poised to implement a $35.5 million spending plan, including the spending approved in June and the additional spending under consideration Friday.
Under the proposed plan, the state will also tap almost $500 million in state reserves and special funds to balance the budget. The House appropriations committee approved the plan on a party-line 22-15 vote Thursday afternoon with no debate.
The plan does raise questions, said Nathan Benefield, vice president and chief operating officer of the Commonwealth Foundation, a conservative think tank in Harrisburg.
One problem is that by tapping the stimulus funding and other one-time sources of revenue, lawmakers are setting themselves up for a bigger challenge when it comes to balancing the state’s next budget, he said.
“As it stands, this budget deal provides some spending reductions and prudently uses excess reserves to close the budget gap,” said Benefield. “However, by relying on one-time funds, it opens the door to tax hikes in 2021. And it does nothing to help families and students struggling with education costs and school closings caused by the pandemic.”
Marc Stier, director of the Pennsylvania Budget and Policy Center, a left-leaning think tank, agreed that this plan may be setting up the state for a bigger challenge next year, unless there is another round of federal stimulus.
“Given the reliance on one-time funds and the uncertain prospects for the economy especially in light of the resurgence of COVID-19 which will lead to a slow recovery in state tax revenues, this budget plan again puts off difficult decisions to the future,” he said. “Balancing the next budget will be increasingly difficult and harsh if we do not receive either a new federal stimulus program that helps state and local governments and encourages a faster economic recovery.”