Pennsylvania has finally earned itself the distinction of being the only state left without a budget in place.

At odds are Governor Ed Rendell and the Senate Republicans. Governor Rendell wants to increase the personal income tax and expand the existing taxes, as well as creating new taxes. In addition, the governor would like to expand the gambling laws to allow video poker and gaming tables throughout Pensylvania, to increase gambling revenue. In a nutshell, Governor Rendell plans to tax us into prosperity. 

Senate Republican leaders, Dominic Pileggi, Joe Scarnati and Jane Orie continue to hold the line on refusing to increase taxes on Pennsylvanians, during one of the worst economic recessions of our times. Instead, they continue to articulate that the Commonwealth, like most Pennsylvania families, must tighten it’s belt by cutting irresponsible spending and bringing pet projects and over-bearing bureaucracy to an end.

For an excellent article on the subject, visit Free Republic.

The Pennsylvania House of Representatives voted 195-3 to pass Senate Bill 850 this afternoon. The bill now goes to Governor Rendell, who is expected to line-item veto all but the items essential for the Commonwealth to pay it’s employees and vendors.

Several Republican representatives were quick to note that a number of state employees are paid under line items that are likely to be eliminated by the governer. They also noted that the continuing budget impasse is having adverse effects on Commonwealth funded programs, and some programs may have to cut back or even discontinue services until funding is received. Some programs at immediate risk are daycare centers, MH/MR services, and PHEAA funding for college-bound students.

If Governor Rendell is true to his word, the Payless Paydays for state workers should come to an end in 5-7 days. Whether the governor and legislature can agree to a responsible budget, without taxing Pennsylvanians into poverty, remains to be seen.

For more info and updates, visit Nana’s House and Floor9.

Update @ 5:00 pm:
Rendell stated during a news conference that he will sign SB 850 tomorrow morning, August 5. He further said that he expects the Pennsylvania Treasury Department to work through the weekend to ensure that state employees are paid early next week.

The Pennsylvania House of Representatives voted 187-11 today to “position” Senate Bill 850 for a final vote tomorrow, August 4. If it passes tomorrow, Governor Rendell is expected to use his line-item veto to pare down the bill, leaving only items necessary for the state to pay it’s employees and vendors. Once the bill is signed into law, state employees should receive their paychecks, including retroactive pay within a week.
For more coverage, visit Nana’s House.

 

Lawmakers met with Governor Rendell again today, Sunday, August 2, for two hours, with still no progress in bringing the Democrat and Republican leaders closer to an agreement. Democrats presented a 13-page “must-have” list to Republican leaders, that would require around $1.6 billion in new taxes.

“It didn’t move us closer to a resolution,” Senate Majority Leader Dominic Pileggi, R-Delaware told reporters afterward. “In some ways, some of the positions they took made it more difficult for us to come to a resolution.”

Republican leaders are determined to avoid increasing income or sales taxes with their $27.1 billion budget proposal (Senate Bill 850). The Republican budget would tap into reserve funds and cut spending, forcing the government to “live within it’s means.”

The Democrats’ $29.1 billion budget proposal (House Bill 1416) involves a .5% personal income tax hike during one of the worst economic downturns in recent history.

Tomorrow, Monday, August 3, Democratic leaders are expected to approve Senate Bill 850, as-is, and send it to the governor. Rendell has announced that he will line-item veto all items that are not required for the Commonwealth to do business and sign the resulting “skeleton budget” into law. This will give Rendell authority to pay state employees and vendors. Counties, municipal governments, schools, and other programs will not receive funding under this skeleton budget. Since the skeleton budget is not a stop-gap measure, the Commonwealth would have the ability to pay it’s employees and vendors for the remainder of the fiscal year. If enacted, the skeleton budget would prevent further claims from unpaid state workers under the Fair Labor Standards Act. The Commonwealth is currently under investigation by the U.S. Department of Labor for violating the FLSA, by not paying it’s employees at least the minimum wage.

In another development during the budget stalemate,House Minority Leader Sam Smith, R-Jefferson, announced that his party is supporting a $27.5 billion budget proposal submitted by Rep. Nick Kotik, D-Allegheny, a leader of a group of conservative Democrats. Smith’s office helped craft the proposed budget amendment, which will not rely on any new broad-based taxes, such as personal income or sales taxes.

On Thursday, House Appropriations Committee Chairman Dwight Evans recessed the Special Budget Conference Committee, after a midday call from Governor Rendell. Little progress had been made towards negotiating an agreement.

Today, Governer Rendell held a closed-door meeting with Senator Dominic Pileggi, Senator Jake Corman, Senator Joe Scarnati, and Representative Evans at his official residence. Senator Pileggi described the meeting as “productive”, but with no progress towards resolving the budget stalemate. Pileggi said that another meeting with the governor would probably occur Sunday.

Primary factors influencing the budget impasse:
Democrats are calling for tax increases and a budget in excess of $29 billion. Republicans are holding the line on taxes and propose a $27.1 billion budget.

It remains to be seen if Governor Rendell will uphold his promise on Monday to request that House Majority Leader Todd Eachus approve Senate Bill 850, so that he can line-item veto all items that are not essential to the operation of the state government, thereby leaving a ‘skeleton’ budget, allowing the state to pay it’s employees and vendors. School districts and municipal governments would still receive no funding until the final budget is resolved.

Another issue facing the Rendell administration is the ongoing investigation by the U.S. Department of Labor. Today, an additional 33,000 state employees received no paychecks, which could eventually cost Pennsylvania’s taxpayers billions in liquid damages under the Fair Labor Standards Act (FLSA).

In the meantime, while 77,000 state employees continue to report to work to provide services to Pennsylvanians, despite receiving no pay, members of the House of Representatives and Senate are still collecting their per diem salaries, and their staff members are being paid, as well.

Governor Rendell stated in a news conference today that if the Budget Conference Committe cannot reach an agreement by Sunday, he will request that the House of Representatives approve Senate Bill 850. He was quick to clarify that this would not be a stop-gap budget, but rather the bulk of the Commonwealth’s operating expenses for the next year.

The governor stated that he will line-item veto all items, except for essential state government services. This will allow the Commonwealth to pay it’s employees and vendors. The governor clarified that this was not a final budget, but a measure to allow the state to continue operations, while a final budget is crafted by the committee. He reminded the committee members that he expects them to meet every day, until the budget impasse is resolved.

If the state begins operating under the altered version of Senate Bill 850, county and municipal governments will not receive funding for state-mandated programs, nor will funding be released for education or other programs.

Governor Rendell stated that if he were to sign Senate Bill 850 on Tuesday, August 4, state employees may not receive their paychecks on Friday,  August 10, but should receive the full amount due by the following Monday or Tuesday. Employees due to be paid this Friday, July 31, are facing the first Commonwealth pay day in which they would receive no pay.

For more coverage on the Pennsylvania Budget Impasse, visit Nana’s House and Floor9.

Embattled Pennsylvania Governor, Ed Rendell, announced yesterday that he is examining ways to restore “general government operations” as the two sides remain far apart on a budget:

“The employees would get paid, our vendors would get paid. We’d be able to keep open all of the facilities that are in danger of closing. And I think it is time to do that, and I’ve got to find a proper and appropriate vehicle to do that.”

I suspect that the governor fears repercussions from the U.S. Department of Labor’s investigation of the Commonwealth for violating the Fair Labor Standards Act (FLSA), by not paying employees at least the minimum wage. Thousands of state workers flooded the DOL with calls on July 24, after they were only paid for 2 days work for the 80-hour/ 2-week pay period. These were the final wages earned before July 1, when the Commonwealth lost the ability to pay it’s bills.

Previously, Governor Rendell and House Democrats had blocked Republicans’ attempts at introducing a stop-gap budget. Now that the Commonwealth is under federal investigation, it appears that they may attempt to find a way to pay the employees, to avoid further violations of the FLSA… and for good reason. One of the remedies available under the FLSA is to order the payment of all back wages plus an equal amount in liquid damages. Furthermore, the Secretary of the DOL can seek injunctive relief to include double the amount in damages or triple the amount in damages if the violation is willful. In addition, the DOL may impose fines upon the perpetrator.

The U.S. Department of Labor’s Wage & Hour Division has initiated an investigation of the Commonwealth of Pennsylvania, after it has been accused of violating the Fair Labor Standards Act (FLSA). The Commonwealth failed to pay at least the federal minimum wage to it’s employees whose pay date fell on July 24, 2009, due to the budget impasse. Additionally, unless the issue is resolved quickly, employees whose pay date falls on July 31, 2009 will receive no pay on that date, either.

A recording on the U.S. Department of Labor’s Wilkes Barre office phone line states that all affected Commonwealth employees who did not receive at least the federal minimum wage are covered by the investigation and do not need to file individually.

A call to Governor Rendell’s office was met with the response that, “He’s following the Commonwealth Court ruling from last summer, stating that he can’t pay the state employees until a budget is passed.”

One of the remedies available under the FLSA is to order the payment of all back wages plus an equal amount in liquid damages.
In other words, the Commonwealth could be ordered to double-pay every state employee who missed a paycheck.
Let’s do the math…

If there are roughly 38,500 employees in a bi-weekly pay cycle (There are 2 bi-weekly cycles that are opposite each other, so a group gets paid every week. Total number of state employess is about 77,000. We will assume for the illustration that the number of employees in each group is approximately equal.)

x $2000 average bi-weekly salary (actual average is probably greater)

= $77 million per week (or $308 million per month) in possible liquid damages, that the Commonwealth could be ordered to pay it’s employees by the U.S. Department of Labor!  That’s in addition to their regular pay!!!

There has been much speculation from the Rendell administration that the FLSA does not apply to them. Here’s an excerpt from the U.S. Department of Labor’s website:

“The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.”

Clearly the FLSA does apply the the Commonwealth of Pennsylvania… Governor Rendell and his allies need to put their egos and pet projects on the back burner and pay the state employees, before they destroy what’s left of Pennsylvania’s already-strained economy.

Check back for more updates…