State Lawmakers Increase Debt by 1.1 Billion

By Eric Boehm | PA Independent

HARRISBURG — Pennsylvania taxpayers will be on the hook to pay back $2.3 billion, after the state House approved a bill Wednesday to authorize more than $1.6 billion in new borrowing.

And some of that new borrowing will be directed toward a controversial program that effectively directs tax dollars to private development, while a plan to reform that practice is still waiting for lawmakers in the state Senate to act.

About $1 billion of the new borrowing will be used for public improvement projects, while the rest will be targeted for mass transit, bridge repairs and redevelopment projects included in the state’s Redevelopment Assistance Capital Program, or RACP.

“Contracts have been let and we have to pay the bills,” said Steve Miskin, spokesman for House Majority Leader Mike Turzai, R-Allegheny.

The bill was approved by the state Senate in June and will next go to Gov. Tom Corbett for his consideration.

The debt authorization measure does not identify specific projects to be funded with the new borrowing.  Instead, these annual authorizations provide cash flow to projects that are ongoing or have been authorized in other legislation.

“Failure to pass this could mean the suspension of those projects,” said Jay Pagni, spokesman for the governor’s Budget Office.

According to a fiscal note attached to the legislation, the new borrowing will cost more than $2.3 billion to repay over 20 years.  That breaks down to $115 million in debt service annually, assuming the state can borrow the full amount at an interest rate of 3.25 percent.

A fiscal note from the state Senate estimated that total repayment will exceed $2.4 billion, assuming a 20-year repayment schedule and a 4 percent interest rate.

At the end of the fiscal year on June 30, Pennsylvania held more than $9.5 billion in general obligation debt.  This year, the state budgeted nearly $1.1 billion for debt service payments — about 4 percent of the total state budget.

Pennsylvania also has more than $30 billion in outstanding debt in off-budget agencies and authorities, including $7 billion held by the Pennsylvania Turnpike.

State Rep. Seth Grove, R-York, was part of a bipartisan group that opposed the passage of the bill Wednesday.

“I think it’s critical that we look at the overall debt level in the commonwealth and start reducing that,” he said.

Grove said he hoped the state Senate would act before the end of the year to pass a bill capping debt spending on RACP projects.

The state House passed that legislation — House Bill 2175 — by a vote of 184-9 in March, but the bill has stalled in the state Senate.

The program directs borrowed funds to private projects statewide and has been criticized as a slush fund for lawmakers’ pet projects, including sports stadiums, shopping malls, convention centers, hotels, the new TastyKake factory in Philadelphia and the now-infamous Arlen Specter Library at Philadelphia University.

The reforms would reduce the debt ceiling for RACP from $4.05 billion to $1.5 billion over 20 years and would implement rules to require future RACP projects go through a more public approval process.

Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi, R-Delaware, said the reform bill remains under active discussion. Pileggi has been an outspoken supporter of the legislation.

Contact Boehm at Eric@PAIndependent.com and follow @PAIndependent on Twitter.