The state of Pennsylvania is carrying north of $47 billion in debt, according to the Independent Fiscal Office, the seventh-most of any state in the country.
A bill to constrain at least one source of new debt passed in the state House of Representatives in May. Now, at the request of a pair of Democratic lawmakers, a new report from the IFO aims to pin down the effects of that legislation.
State Rep. Andrew Lewis, R-Harrisburg, this year introduced House Bill 880, which seeks to shrink the cap on the state’s Redevelopment Assistance Capital Program. Currently set at $3.25 billion, HB880 would shrink the cap by $100 million each year for five years starting in 2022. Lewis’s effort follows existing legislation that is lowering the cap by $50 million each year through 2021; combined with HB880, that would leave a cap of $2.65 billion in 2026.
The RACP “provides funding for the acquisition and construction of local economic, cultural, civic, recreational and historical improvement projects that cannot be primarily funded by other state programs,” the IFO wrote in its response to a request by state Reps. Jake Wheatley and Mary Jo Daley to look into the impact of HB880 if it passes. “The sale of general obligation bonds (backed by the General Fund) provides funds for the program, and qualified projects that receive awards are made at the discretion of the executive branch and then monitored as directed by statute.”
According to IFO data, the RACP has tended to be more popular during Democratic than Republican administrations in recent decades. During the administration of former Gov. Ed Rendell from 2003 to 2011, there were more than 1,600 grants awarded. But during the time of his Republican successor, former Gov. Tom Corbett, from 2011 to 2015, there were only 217 grants awarded.
Since Democratic Gov. Tom Wolf took office in 2015, 713 RACP grants have been awarded, the IFO stated, with a cumulative value of more than a billion dollars.
The IFO calculated that absent Lewis’s legislation, the RACP is projected to run up against the cap sometime around fiscal 2027-28. But if HB880 becomes law, that timeline is accelerated to fiscal 2024-25. At that time, the state would have to dial back the number of grants issued in order to remain under the cap.
The fiscal office noted that the actual issuance of debt typically trails far behind the announcement of grants.
“Grantees apply for periodic reimbursement by submitting formal payment requests to the [Governor’s Budget Office],” the IFO report states. “The initial payment request must include construction costs because the Commonwealth will not reimburse any costs until actual construction takes place. All requests require supporting documentation in order to gauge the progress and validity of costs, as well as Construction Monitoring Reports conducted by state-assigned consultants.”
“There's so many great things about the program and so many great RACP projects,” Lewis said. “But that debt ceiling was $400 million. And so they have ramped it up over the years, and during the Rendell administration it ballooned out of control. They raised it in eight years by billions of dollars, an average of $325 million a year.”
The IFO, in attempting to estimate the impact of the RACP grants, identified five categories of grants – economic development, educational facilities, health and public safety, historic and arts, and infrastructure and public works. The report showed that in recent years most grants have gone to economic development, which IFO economists found creates the most economic activity and jobs of the five categories.
But the IFO was reluctant to come up with a single return-on-investment for the RACP, noting that even within the five categories there was a wide variety of funded projects. Also, the IFO wrote, there’s no way to know which projects would have gone ahead anyway without RACP funding.
To Lewis, reducing the RACP cap is more about the state’s financial responsibilities than anything else.
“What this bill does is, it respects the taxpayers, and it says this: ‘These are your funds,'” Lewis said. “This money is your money that you're paying in taxes, and so we're going to respect those funds.”
HB880 is awaiting action in the Senate Appropriations Committee.