PA Legislature Limits Debt

Member Group : PA Manufacturers' Assn.

General Assembly Lowers State Borrowing Limit While National Debt Keeps Climbing

The General Assembly trimmed the debt ceiling of a capital building program that had become one of the worst-kept secrets in Harrisburg as a funding source for pet projects. Merely reducing the debt in the Redevelopment Assistance Capital Program (RACP) would be reason enough for applause, especially when you compare it with the dithering in Washington over the national debt.

Perhaps more significantly, the legislation, HB 493, now on Governor Corbett’s desk, reforms RACP by establishing a very public, precise matrix behind the projects that are awarded grants.

PMA Executive Director David N. Taylor said that House Floor Leader Mike Turzai (R-Allegheny) and bill sponsor Matt Gabler (R-Clearfield) deserve special praise for ensuring that the bill would make it to the Governor’s desk. There were only two dissenting votes in the House (Matt Bradford, D-Montgomery and Steve Santarsiero, D-Bucks) and unanimous support in the Senate.

"As Floor Leader Turzai said, ‘this is the first reduction in the debt ceiling for the redevelopment capital assistance program in its history,’" Taylor said. "It may be the first debt limit reduction in the history of Pennsylvania state government."

The website of the Governor’s Budget Office defines RACP as a grant program designed for the acquisition and construction of regional economic, cultural, civic, and historical improvement projects. No one would argue with the intent.

But over the past 15 years two things happened that tinged the program with suspicion. First, the RACP debt ceiling increased by billions. It was $1.2 billion in 1999, but in 2005 it soared to $2.65 billion, and then to $4.05 billion in 2010.

Unfortunately, the process of awarding the grants became increasingly political.

"When we increased the debt ceiling, the deal was that each caucus would have $50 million to decide what projects to fund and the Governor would get the rest," said one legislative source. "It was entirely up to them what to do with the money."

At the time, then Governor Ed Rendell argued that the state’s credit rating remained high and the projects created jobs statewide. But at the end of his administration some questioned the increasing debt limit and his awarding funds to projects similar to the Arlen Specter Library in Philadelphia and the John P. Murtha Center in Johnstown.

HB 493 incorporates little-noticed changes made over a year ago by the Corbett Administration starting with RACP grants awarded in April 2012.

The Governor’s Press Secretary, Jay Pagni, said that under the changes a system of metrics has to be followed. The changes instill competition into which projects are funded. In addition, business plans and realistic figures on the number of jobs created are required. There is also a greater emphasis placed on the project being shovel-ready.

"Some projects never left the waiting list after being approved by the General Assembly," Pagni said. "In some cases, the state would award an initial grant to a project what wasn’t close to being ready. The state was still on the hook for the money."

Under the new system, a project is removed from consideration after ten years and must receive legislative approval before being placed back on the waiting list.

As of this past summer Pennsylvania carried approximately $2.75 billion in RACP debt. The commonwealth’s total outstanding debt stands at approximately $10.4 billion.

In Other News

National Debt Limit Is Suspended Until February

The General Assembly’s vote to reduce the debt of a capital projects program is even more commendable considering what happened to the national debt limit – nothing. After weeks of political stalemate between President Obama and a polarized Congress, the federal government now has no debt limit until the arbitrary date of February 7. Read more…

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