October 22, 2015 / 9:49 PM / 2 years ago

Pennsylvania's budget gridlock hits schools, seniors

* Largest senior service provider saving cash for food, staff

* School districts borrowing millions to stay open

* Governor, lawmakers still deadlocked

By Hilary Russ

NEW YORK, Oct 22 (Reuters) - Pennsylvania’s largest service provider to senior citizens is running out of money and time, as the state’s new Democratic governor and Republican-led legislature still cannot agree on a budget.

“I‘m saving the little bit of money we have to pay staff and food. I can do that probably for a couple more months,” said Holly Lange, Chief Executive Officer of Philadelphia Corporation for Aging (PCA).

Pennsylvania, whose 2016 budget was due 113 days ago, has the dubious distinction of being only one of two U.S. states, along with Illinois, without a current budget.

But even Illinois - the worst-rated state in the nation - is at least paying out education funding to schools.

“We feel completely isolated,” said Joseph Gorham, superintendent of the Carbondale Area School District, of Pennsylvania’s political stalemate. “It just doesn’t seem at this point that they understand quite how desperate we’ve become.”

The Pennsylvania logjam puts the state’s most vulnerable - school kids, seniors, disabled, and the homeless - in the firing line, as some of their care relies on state funds that have not been released.

“Everyone has been feeling the pinch in some way, and it’s going to get worse the longer the situation goes without a budget,” said Steve Robinson, spokesman for the Pennsylvania School Boards Association.

For example, Carbondale’s schools, in northeastern Pennsylvania, were down to $11,000 cash last month, but have since received local tax revenues that should last through mid-November. Still, by then they will owe nearly $2 million in deferred pension contributions and payments to charter schools.

Altogether, Pennsylvania school districts have borrowed at least $410 million to pay for operations during the impasse, said state Auditor General Eugene DePasquale.

“We don’t see any settlement any time soon,” DePasquale said. “You’re getting close to a breaking point” in mid-November for the poorer districts that are more reliant on state aid.

The current deadlock is partly over how to pay for increased education funding. Democratic Governor Tom Wolf ousted one-term Republican Governor Tom Corbett in November by promising to restore education aid with income tax hikes and a new tax on natural gas extraction.

Republicans struck down Wolf’s spending plan and disagreed with his fix for underfunded public pensions. They passed a stop-gap budget, but Wolf vetoed it on Sept. 29.

The gridlock has left a $2 billion state budget deficit unresolved and prompted Moody’s Investors Service to revise its outlook on Pennsylvania’s Aa3 credit rating to negative on Oct. 16.

Republican leaders say Wolf is holding Pennsylvanians hostage to his tax proposals. Wolf says Republicans failed to find meaningful ways to close the deficit or restore education funding.

Whoever is to blame, the PCA and other service organizations are being left in the lurch.

The nonprofit has 700 staffers to provide services of its own throughout Philadelphia city and county, and it contracts with 200 other providers of senior services, home care and adult day care. PCA supplies about 5,000 hot meals per day at senior centers, and another 4,000 daily home meal deliveries.

The PCA depends on about 70 percent of its funding from state sources, mostly lottery revenues. It has exhausted its borrowing power with a recent $14 million line of credit that allowed it to pay contractors in July and August. However, they have not been paid for September.

Even if it could borrow, that might be difficult, since the delay in state payments contributed to Moody’s Oct. 8 downgrade of PCA’s 2001 municipal bonds by four notches to junk at Ba2.

The state will eventually release funding to PCA, Lange told Reuters. “But in the meantime it’s a struggle and I‘m concerned that some of the services will not be available for the vulnerable seniors.” (Reporting by Hilary Russ in New York; Editing by Daniel Bases and Diane Craft)

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