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State loses authority to pay bills as fiscal year begins
HARRISBURG - A partisan deadlock over Pennsylvania's budget stretched into the new fiscal year Wednesday, as the state lost legal authority to pay most of its bills and warned vendors that they may not be paid on time.
Nursing homes, hospitals and others that rely on billions of dollars in Medicaid reimbursements were among the vendors and contractors that were advised about the potential interruption in payments.
Spokesmen for some state agencies acknowledged that their operations depend on the willingness of vendors to extend credit. But delaying payments to vendors could force those businesses to scrape bank accounts and put off paying their own bills.
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In the just ended 2008-09 fiscal year, tax receipts ended up $3.3 billion shy of expectations, adding up to a shortfall of more than 11 percent, the Revenue Department said Wednesday.
No breakthroughs emerged from nearly 10 hours of closed-door talks between Gov. Ed Rendell and top legislators Monday and Tuesday. High-level talks are not expected to resume until after the holiday weekend.
No counterproposals surfaced Wednesday, and with the Democratic governor and Republicans dug in to their respective positions, many observers predicted a protracted stalemate that could last for weeks.
Rendell continued to advocate a 16-percent increase in the state income tax - a major friction point with Republicans, who insist that state spending be cut to compensate for a projected multi-billion-dollar revenue shortfall.
But while the income-tax increase has support of the Legislature's top Democrats, at least some rank-and-file Democrats are balking at the prospect, and Republicans who control the Senate are dead set against it.
Rendell maintains that boosting the income tax is fairer and less painful than the alternative - cuts in crucial programs that could force counties and school districts to raise property taxes - while legal and constitutional requirements limit the spending that can be cut.
"You will see there is no way that we are going to be able to have a constitutionally passed and signed budget without revenue increases," Rendell told reporters after an unrelated event.
Senate President Joe Scarnati said Rendell is using "scare tactics" to win votes for the more than $2 billion in new taxes he has proposed.
"The numbers I see for a tax increase are zero votes in the Senate Republican caucus, and I am not sure he has the required number of votes in the House of Representatives to pass his tax increase budget," the Jefferson County Republican said.
The arrival of the new fiscal year without an approved budget put the state government in violation of a constitutional provision that requires a balanced budget, making Pennsylvania one of several states that lost their power to write checks.
The state's welfare checks, debt payments and pensions will continue to be sent out and self-funding agencies, such as the Liquor Control Board, will not be affected. State parks will not close immediately, and many highway projects, paid for in the 2008-09 budget, will continue.
So far, government services in Pennsylvania have not been interrupted and the tens of thousands of state employees are being asked to continue working even though they would begin to miss pay starting July 17 and receive no pay at all after July 24. Once a budget is approved, they would be paid retroactively.
Legislators missed their July paychecks on Wednesday, although legislative staff members were to be paid out of a legislative reserve fund.
The Democratic-controlled House adjourned until Thursday after meeting for about 90 minutes Wednesday despite Republican efforts to force debate on a budget.
"Adjourning at this hour on this day is an insult to the people of Pennsylvania," said Rep. John Maher, R-Allegheny.
House Majority Leader Todd Eachus, D-Luzerne, suggested that switching off the television cameras in the House chamber might improve the chances of reaching a budget deal.
"It's not a moment where we need to have politics and hyperbole," Eachus said.
