Pennsylvania's budget impasse continues after the legislature failed to override Gov. Tom Wolf's veto of the $30 billion fiscal 2016 spending plan.
Six votes to override line items and fund human services and other agencies affected by the stalemate all received 115-to-83 votes along party lines, but fell 17 votes short of the two-thirds necessary to override.
Wolf, a Democrat, was scheduled to meet Wednesday with leaders of the Republican-controlled legislature to discuss an overhaul of the pension system for state employees. Pension overhaul and privatization of the state liquor-store system, though not part of the budget bill itself, could be in play during the process.
All three major bond rating agencies downgraded Pennsylvania last year, citing its estimated $53 billion unfunded pension liability. Fitch Ratings and Standard & Poor's rate the commonwealth's general obligation bonds AA-minus. Moody's Investors Service rates them Aa3.
Rep. Frank Dermody, D-Oakmont, said the Republicans' attempt was unconstitutional. "You simply cannot line-item override a bill that was not line-item vetoed."
House Majority Leader Dave Reed, R-Indiana, accused Democrats of hurting state-dependent agencies, many of which are running out of money. He also cited the urgency of school resuming soon.
"At least get the funding out to the human service agencies, some of the schools, some of the federal dollars," he said. "Obviously they're going to continue to be held hostages. If the governor lets the hostages go, there's nobody to point the gun at."
The state will not pay county governments for social programs without a final budget.
While the roughly 500 school districts statewide could still operate with their own tax revenue, a prolonged budget delay could hurt districts low on reserves, according to Nuveen Asset Management.
"For this reason, it's important for investors to keep an eye on Pennsylvania's budget process to determine which local governments and school district aid distributions could be most negatively [affected]," said Nuveen.