Pa. budget stalemate enters month five

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Most Pa.counties aren’t paying social service providers during 4+ month budget stalemate @NACoTweets

 As wards of the state, Pennsyl­vania’s counties have been mal­nourished and mistreated this year.

A four-month-and-counting state budget stalemate over school funding and deficit reduction is starving them and the providers of state-funded services, who continue to do work despite not being paid since June. On top of fouling up this year’s finances, the impasse is also putting counties in a tough place as their budget seasons approach.

First-year Gov. Tom Wolf (D) and the Republican-controlled House and Senate remain far apart on Wolf’s proposed $1.8 billion income tax increase as part of the $33.7 billion budget, though negotiations have picked up in mid-November, with lawmakers target­ing a deal by Thanksgiving. Their battle blew past what was formerly the longest budget stalemate — 101 days in 2009. Even when the budget is resolved, and counties and their service providers are reimbursed, many providers may take an overall loss because of interest payments on loans to keep their organizations running in the interim.

Late budgets for the Keystone State have become routine in recent years, but the latest didn’t seem that daunting, initially.

“Everybody kind of thought in the back of their minds that this was going to be an extremely difficult budget because of the perspective of the two sides, but I don’t think anybody could have predicted that we’d be sitting here, now in the fourth month after the constitu­tional deadline, without a budget,” said Brinda Penyak, deputy director of the County Commissioners As­sociation of Pennsylvania (CCAP). “That was far-fetched in anyone’s imagination.”

Penyak greeted news of the start of earnest negotiations with cautious optimism.

“It’s the first ray of hope we’ve seen in a while,” she said. “It’s good news, but it’s tentative. It’s pretty clear the sides are closer than they have been, but while the details are being worked out, there isn’t anything we can rely on.”

One of the state association’s major priorities in the process is to keep the state from deferring payment of a one-quarter of child welfare services for one year. Coun­ties are already subject to nearly two dozen new mandates that, while they have increased child safety, have caused call volumes and caseloads to increase dramatically.

On the public radio program Smart Talk in mid-October, Lan­caster County Commission Chair­man and CCAP President Craig Lehman said the two sides have been stubborn in their positions, to a worrisome extent.

“You’d always see incremental progress in coming toward a budget agreement so things will move forward,” he said. “I am not aware of any progress (this time).”

Lancaster County told its human services providers in April and May, well ahead of the end of the state’s fiscal year, that it would not be able to pay for services after July 1.

“All providers are continuing to provide services,” said Chief Clerk Andrea McCue. “But we’re really getting to a critical point now because some providers are going back for their second or third line of credit,” she said. “We have had some smaller providers tell us they’ve maxed out their own personal credit cards to pay staff and aren’t paying themselves. They’re trying to keep things going, but they’ll have to stop accepting new patients or reduce their hours to keep their doors open.”

That will likely mean service interruption for people who rely on the service providers.

“In many cases, there is no ‘Plan B,’” McCue said. “If we don’t have these providers to provide these services for us, we won’t be able to provide them. The county’s not in business to provide those services.”

As of Oct. 15, Berks County’s social services operations were $7 million in the hole, and the county’s cash reserves as of Nov. 9 were more than $15 million lower than at the same point a year before, county COO Carl Geffken said.

North of the state capital, Har­risburg, social services in Juniata, Mifflin and Huntington counties are on their last legs because Juniata Val­ley Developmental and Behavioral Services, the provider for all three counties, is running out of money.

“If nothing changes in the very near term, the director said, they’ll be forced to shut their doors as of the middle of this month,” said Juniata County Administrator Jim Bahorik.

Counties have varied in their ap­proaches. Some have cut down on travel. Others, like Wayne County, have scaled cutbacks with respect to the size of businesses they owe, for instance paying 50 – 60 percent of invoices to larger providers, versus 85 – 95 percent to smaller providers.

Tioga County’s location, in the Marcellus formation, has given the county a fortunate financial position — debt free in 2014 and able to give loans to its area agency on aging and human services department.

“Compared to most counties, we’re in pretty good shape,” said Commissioner Roger Bunn. “We’ve received $20 million since 2012 in extraction fees and that’s let up keep our core responsibilities without borrowing money. We had $5 million we hadn’t spent yet, so we’re keeping things afloat for a few months, until this is over.”

They’re holding off on tak­ing care of additional programs, though.

“There are some things — a battered women’s shelter, some early childhood programs — we’d like to help but they’re not core services we’re mandated to provide,” he said.

Allegheny County has $40 mil­lion of its own money it is using to support its smaller providers, the kind that can’t get loans to keep their operations going.

“Agencies aren’t getting paid unless they’ve given our director of human services reason to believe they would otherwise go out of business,” said Finance Director Mary Sorka. “We’re spending about $2.5 million a month keeping the smaller operations afloat. If their sole client is Allegheny County, they’re obviously having trouble right now.”

Even though the stalemate is mainly affecting human services, county-wide measures are shoring up finances in the meantime. No non-essential purchases or new hires.

“Whether that department is state funded or not, we’ve requested that all departments comply with that,” she said.

Every Child, a Pittsburgh-based nonprofit that provides foster care, in-home family preservation servic­es, has done more than $400,000 of work for Allegheny County, without being paid. Between 45-55 percent of the organization’s revenue comes from its purchase-service contracts with the county. The organization took out a $100,000 low-interest emergency loan from local Bridge­way Capital, but Executive Director Laura Maines said it’s not relieving the accumulating stress.

“It’s the equivalent of putting your finger in a dike,” she said. “After four months, it’s really add­ing up.”

The long-term scars from the impasse will likely transform social service providers.

“The next time around, if I’m able to hold on to some cash, I’m going to squirrel it away to keep the doors open next time, rather than reinvest it into technology, efficiencies, new programs, new ideas,” Maines said. “Our sector is becoming risky because of what is happening with the state. We can’t be the best customers because we won’t be able to pay on time. We’re slow to pay vendors, but we also know that ripple effect will hurt them too.”

Repayment of loans to get providers through the impasse also worried Maines.

“Those interest payments mean part of our budget will not be going to our mission, it won’t be serving the vulnerable citizens of Pennsylvania,” she said. “It’s going to pay debt.”

The state association is hoping to get provisions in the budget to compensate counties for the expenses they incur during the stalemate while maintaining ser­vices, either interest forgone paying for service, interest due on loans or late-payment fees.

“We want the state to make the counties whole,” Penyak said.

With no clear idea when the budget will be resolved, counties and their human service providers are trying to stretch their available money and hope their message reaches the leadership in the Gener­al Assembly. Wolf recently enacted his own state travel ban, which Maines said, when combined with other budgetary clamps for the Legislature, will give the state officials a taste of what everyone else is dealing with. In some ways, the continuity of service has kept the crisis from taking on a larger narrative.

“We beg borrow and steal to do our jobs (but we keep doing them) and it takes a while for people outside the social service bubble to feel the pain of a budget im­passe,” she said. “If this goes into December, we’re all collectively going to start looking at what we can do without, how can we reduce services to stay open. It’s a scary thought because you’re serving such a vulnerable population, and it’s not like they have very many options beyond us.”

Penyak said there’s been some ideas could lead to a compromise, including opening up new revenue sources like Internet gambling and privatizing the state-run liquor stores, but Wolf and the Republican leadership remain far apart.

On Smart Talk, Lehmen echoed that.

“You’d always see incremental progress in coming toward a budget agreement so things will move forward,” he said. “I am not aware of any progress (this time).”

Maines, though, saw the new governor’s approach reducing the sense of urgency.

“In 2009, at least (then-Gover­nor Ed) Rendell kept the legislators in Harrisburg,” she said. “This year, they didn’t pass the budget, then everyone went on vacation in August. The state didn’t feel the same pain this time that the coun­ties and their providers are feeling.”

Even when the budget, which is a collection of dozens of resolutions, passes, it will be weeks before counties will actually see the money.

“We’re working with the ad­ministration to make that happen as fast as possible,” Penyak said.

Once the budget passes, the individual state departments will then send their allocations to the state treasury, which then go to individual counties.

“As it stands now, even if the budget passed today, counties wouldn’t actually see that money for a few weeks.”