Despite Gov. Josh Shapiro's insistence this week that Pennsylvania state budget negotiations are "incredibly close" to ending an impasse entering its fourth month, county leaders and service agencies in Southwestern Pennsylvania say they're preparing to scale down operations without dedicated state funding.
A coalition of groups took to the state Capitol on Thursday, stressing the state's funding delay, combined with a federal shutdown that began Wednesday, could compound their already-existing cash-flow problems.
Speakers said a majority of member organizations surveyed by the Pennsylvania Association of Nonprofit Organizations — more than 80% — said they'd run out of contingency funds by the end of October.
"The longer the delay, the deeper the damage and the higher the costs. Yes, the budget is complex, but complexity is no excuse for inaction," said Jim Sharp, an executive at the Rehabilitation and Community Providers Association, to a crowd gathered in Harrisburg. (Most lawmakers were absent/No lawmakers were spotted. Neither the House nor Senate were in session, but both are expected to return next week.)
'We are just going bonkers'
Back in Southwestern Pennsylvania, county officials agreed that the outlook is bleak, and a conclusion to budget negotiations can't come soon enough.
" The state's inaction is really unconscionable at this point, and it's costing people their livelihoods," said Ted Kopas, a commissioner in Westmoreland County.
Kopas said 125 county workers will be furloughed by Oct. 13. That's because Westmoreland has drawn down more than $30 million in reserves since the state blew past a July 1 budget deadline — funds that would otherwise be earning the county hundreds of thousands of dollars in interest. He said the next step is pursuing loans to keep operations going.
This week Westmoreland Commissioners also canceled a planned public meeting.
"So much of the business that we do at our public official meetings is approving contracts with service providers," Kopas said. "It's difficult to commit to those longer-term arrangements when you have absolutely no idea where the money's coming from."
The trickle-down effects have hit especially hard in other counties, such as Armstrong, which on Wednesday closed most of its senior centers and paused payments to families with foster children.
Although Allegheny County is expected to weather the state budget impasse — and a potentially drawn-out federal shutdown — "a good bit of the way through the fall," county manager John Fournier said a spending and hiring slowdown could soon "become a hard hiring and spending freeze."
County services provided with the support of state and federal partners, such as foster care services, " are being slowed down tremendously," Fournier added. "So it's not just a fiscal impact, it's an operating impact, too."
Normally, state funds flow to counties, which contract with organizations that provide addiction services, behavioral health treatment, child welfare assistance, and aid to other vulnerable groups.
Pittsburgh Community Services Inc. helps people find housing, look for jobs, and aids clients directly through a food pantry, among other services.
The state budget impasse means the agency is not being reimbursed for the services that it is providing, said Sarah Cook, the Oakland-based group's executive director.
"So in these next few weeks, we need to start to think about how long we can continue to operate with the cash that we have on hand."
Cook urged lawmakers to keep in mind the needy individuals her organization serves.
"Every day through our doors, we see children, we see seniors, we see families, we see people looking for work, and they rely on nonprofits like PCSI and all the other nonprofits in our community and across the state," she said. "And every day of delay forces agencies to make hard choices. And we are faced with having to decide if we're gonna cut programs or furlough staff, and all of that puts our community at further risk."
At The Women's Center & Shelter of Greater Pittsburgh, president and CEO Nicole Molinaro said her organization hasn't missed out on any payments yet, though she anticipates it will soon as it begins to bill for services provided in October and beyond. Roughly half of the organization's $8 million annual budget comes from government sources.
She likened the organization to a duck — appearing calm above the surface of the water but paddling furiously underneath.
"There's not been any disruption in our services. There will not be any disruption in our services," she said. "And at the same time, behind the scenes, we are just going bonkers, doing different scenario planning."
Other similar domestic violence and sexual assault organizations across the state have already had to lay off staff, or tap into lines of credit, she said.
"Domestic violence programs were considered to be essential services during the pandemic," she said. "So it doesn't make sense to me why we are not considered to be essential services now."
Credit lines and fees
While counties debate their loan options, schools have already started taking out lines of credit to pay staff.
As of this week, the state impasse has resulted in school districts missing more than $3.76 billion in expected state payments, according to school administrators and union leaders. Pittsburgh Public Schools has said by mid-October its own reserve fund would dry up.
Some educators are making ends meet by taking out loans to cover the budget gaps. But when districts take out loans, the cost of the interest they accrue gets passed on, said Aaron Chapin, president of the Pennsylvania State Education Association.
"The more public schools that have to take out loans, the more taxpayers pay," Chapin said in a recent statement.
Many human service nonprofits have also been forced to borrow or tighten their belts because of the lack of a state spending plan.
A state-backed $500 million loan program announced last week by Republican Treasurer Stacy Garrity — who also recently announced her challenge to Shapiro's reelection bid — could offer some comfort to counties and pre-K education providers. Garrity said it would be a short-term solution with a 4.5% annual interest rate, lower than some private lenders.
But leaders of the Republican-led state Senate said Tuesday they'll sponsor legislation to make the Treasury's loans interest-free.
Still, Butler County Commissioner Leslie Osche, herself a Republican, isn't impressed. While her county isn't cutting services or notifying employees of furloughs, she said commissioners would not seek out a state-issued loan.
"Why would we pay the state interest because of their failure to act?" Osche said. Instead, she said, officials were deciding whether to withhold revenue collected for — and ordinarily forwarded to — the state.
"We're gonna have a discussion with all of our elected officials, our row officers, about whether or not we want to just sit on fees that we normally collect and remit to the state," she said. "The money that we're paying out to cover what we would normally have received from the state, we're losing interest on that."
At an unrelated event Tuesday, Shapiro repeated a familiar refrain: He introduced his budget proposal back in February, and he doesn't get to vote on the final product.
"The legislature has to show up for work, do their job, treat the citizens they represent with respect enough to actually show up for work and put a budget on my desk that has bipartisan consensus," Shapiro said at a school outside Harrisburg.
A Quinnipiac poll released Wednesday said about half of voters blame both the Democratic-controlled House and the GOP-led Senate for the budget delay. Meanwhile, Shapiro's approval rating is an all-time high of 60%.
Julia Zenkevich contributed reporting.
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