There was little sign of a breakthrough when Pennsylvania's state budget impasse blew past its 100th day last week. Instead, state legislators found something new to argue about: whether a loan program offered by Republican state Treasurer Stacy Garrity was a lifeline for groups who rely on state funding, or a political stunt that could further delay a final deal.
Late last month, Garrity announced plans to provide up to $500 million in low-interest loans to school districts and nonprofit groups that depend on state funding for their programs. She characterized it as an effort "to take care of our most vulnerable Pennsylvanians," as the budget impasse dragged on.
But Democrats have questioned whether Garrity has the authority to offer the loans at all.
"As much as the gubernatorial nominee would like to be the hero in this particular instance, she does not have the authority to loan money during a budget impasse," Senate Democratic leader Jay Costa said at a news conference last week.
Democrats already suspected Republicans of engaging in political gamesmanship, by trying to prolong the budget dispute as a way of weakening Gov. Josh Shapiro's re-election prospects next year. Offering the loans, meanwhile, is likely a political winner for Garrity, a gubernatorial hopeful who is almost certain to be Shapiro's Republican challenger next year.
(Republican Senate leader Joe Pittman said it was "absolutely ridiculous" to think legislators in his party were acting on such considerations. A Quinnipiac University poll this month, meanwhile, found Shapiro has a 60% approval rating.)
So far, the loans from the treasurer's office are available to counties, providers of early-childhood and pre-K education programs, as well as rape-crisis centers and domestic-violence groups. And as agencies and counties are increasingly being forced to furlough staff and cut services, some are welcoming Garrity's move.
"We are grateful to our state leaders for recognizing the essential role of sexual assault service providers across the Commonwealth however, this is a short-term fix to the larger issue," the Pennsylvania Coalition to Advance Respect said in a statement. "While the budget impasse persists, rape crisis centers will continue to incur expenses."
Senate Democrats argued Garrity is legally empowered only to invest state funds, not loan them: Republicans counter that current state law does allow Garrity to make loans that charge interest — since loans too are a form of investment.
But the GOP also says it isn't fair to make agencies pay interest on money they are forced to borrow because of a crisis they didn't cause. And so Senate Republicans last week passed a bill — with support from two Democrats — to make Garrity's loans interest-free
" If we had a budget, they'd have the money, so I don't know how we ask them to pay interest on something they should already have in their coffers," said Senate Republican Pro Tempore Kim Ward to colleagues on the floor.
The measure now sits in the state House Appropriations committee, where it's unlikely to be taken up by Democrats, who opposed the loan program from the get-go.
"Early education providers and local governments deserve real, sustainable funding, not a short-term loan at 4.5% interest," a spokesperson for Democratic House leader Matt Bradford in a Friday statement. "Unfortunately, they are in this position because Senate Republicans refuse to negotiate on a realistic budget agreement that makes key investments in the very programs and services that are struggling right now. We urge the Senate Republicans to get back to work and deliver for children, our most vulnerable populations and the commonwealth as a whole."
Democrats argue some school districts have already borrowed from private lenders, with higher interest rates, meaning Republicans are dispensing favors to some entities while others are already saddled with interest.
"That's not her job, that's not her role," said state Sen. Vincent Hughes, who chairs the Senate Appropriations committee. "You don't get to be the king or the queen, you have to be the treasurer."
" The School District of Philadelphia is borrowing $1.5 billion… which means that they have to pay $30 million in fees, $30 million that could be going to school supplies, or $30 million that could be going into classrooms to maybe hire some counselors or deal with a teacher shortage crisis," he added.
(Pittsburgh Public Schools is relying on cash reserves for now, officials said this week, but declared a hiring freeze Thursday.)
This is not the first time the two parties have squabbled over the state Treasurer's role in a protracted budget dispute — only the roles in that decade-old dispute were reversed. In 2015, then-treasurer Timothy Reese fulfilled a request from Gov. Tom Wolf to loan funds to the state to operate its prison system, as that year's budget impasse lasted into the winter. Reese had been appointed by Wolf to fill a vacancy in the post, and it was Republican legislators including Ward who objected that the treasurer's office was overstepping its authority.
But in a Senate floor speech last week, Ward said Garrity had acted with the blessing of state Attorney General Dave Sunday, also a Republican.
A spokesperson for the AG's Office confirmed that. Sunday's role includes reviewing "the statutory authority of the agency to perform [a] function," said Brett Hambright in a statement. "Based on that review, we provided the Treasury with approval to proceed with this program."
There seems to be little prospect for a quick resolution of the budget dispute itself. Senate leaders say they are on a 24-hour call to come back to Harrisburg, but the chamber is not scheduled to be in session until Oct. 20. The House isn't expected to assemble again until Oct. 27. And while the House did pass a somewhat pared-down version of earlier budget proposals last week, senators left for their districts before considering it.
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