Pennsylvania Eyes Passage of $28B Budget With $3B of GOs, Debt

Pennsylvania lawmakers anticipate they will pass a $28 billion fiscal 2009 budget today along with a plan to borrow nearly $3 billion of general obligation and appropriation debt to support capital projects throughout the commonwealth.

The proposed bond bill would give the state more borrowing power than previous years. Last year, lawmakers approved $752 million of debt for infrastructure upgrades compared to the roughly $3 billion that Gov. Edward Rendell would like to invest in the state for fiscal 2009, which began July 1. The borrowing plan includes $1.2 billion for water and sewer infrastructure developments, $800 million for capital projects that generate redevelopment, $650 million to upgrade utility systems that will expand renewable energy sources, and another $350 million to repair 400 of the state's most deficient bridges, among other infrastructure improvements.

The second-term governor and legislative leaders late Monday evening came to a fiscal 2009 budget agreement that held off a potential furlough of state employees before the fiscal year began on Tuesday. This is the sixth year in a row in which officials have not passed an operating budget by the June 30 deadline. Last year, Rendell furloughed 20,000 non-essential state employees for one day in order to push the legislature to move forward with the fiscal 2008 budget.

The administration announced that officials agreed upon a budget that is $545 million less than the $28.3 billion proposal that Rendell submitted to the legislature in February, and lawmakers from both chambers expect to pass that agreed-upon budget today, according to Johnna Pro, spokeswoman for House Appropriations chairman Rep. Dwight Evans, D-Philadelphia.

"This is a good budget in a tough year," Rendell said in a press release. "It will help to create thousands of jobs that can't be outsourced and it will invest in innovative programs that will help us break free from our dependence on foreign sources of oil."

Yet Matthew Brouillette, president of the Commonwealth Foundation, an independent research and educational institute for public policy, said lawmakers have not been very forthcoming with budget details.

"This is probably the most secretive budget that we've ever seen in that nobody's being given any numbers. They say they have an agreement, but nobody will say what that number actually is," Brouillette said. "It's a moving target. We suspect that they wanted to at least say that they had a handshake agreement, but really didn't have things completed, which is no surprise given the past five years they have missed their budget deadline as well."

The nearly $28 billion fiscal 2009 budget is 3.8% larger than the fiscal 2008 budget of $27.2 billion, according to a Rendell press release. Brouillette said the spending boost is modest, but does not properly reflect Pennsylvania's smaller increases in general fund revenues.

The state estimates general fund revenues to reach $28.34 billion in fiscal 2009, according to the commonwealth's last official statement, with that amount $440 million more than the anticipated $27.9 billion of general funds the commonwealth collected in fiscal 2008, the administration announced yesterday in a press release. That $27.9 billion amount is up slightly from the $27.19 billion general fund total for fiscal 2007.

"In general, this is a smaller increase in spending than previous years," Brouillette said. "However, we don't believe that it is a fiscally responsible budget given the declining revenues the state has been experiencing and given the way Pennsylvania has traditionally lagged behind the rest of the nation with regard to economic slowdowns. So we would argue for a much smaller increase in the budget that would make sure that we are not putting ourselves in the position of having shortfalls or having to raise taxes in the coming fiscal years."

Pennsylvania has $36.67 billion of outstanding debt, of which $8.51 billion is GO debt, according to Commonwealth Foundation data.

Fitch Ratings and Standard & Poor's rate Pennsylvania AA. Moody's Investors Service assigns the credit its Aa2 rating. On Tuesday, Standard & Poor's released a statement indicating the missed budget deadline would not affect the state's credit rating. Yesterday, Moody's announced it was monitoring Pennsylvania and three other states, California,Illinois, and Massachusetts, in regard to the states' missed fiscal 2009 budget deadlines. Yet Moody's said states typically meet debt service responsibilities even during periods of budget delays.

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