State’s disaster funding unclear
Study: Pa. rainy day account holds $2M, not enough to keep gov’t running for a day
If ever there was a time to consider dipping into a rainy day fund, it would be after the rainiest day in recorded U.S. history.
When Hurricane Harvey struck Texas last month — dropping record-setting rain around Houston and killing dozens of people — government agencies rushed to collect funds for a lengthy recovery.
But while many other hurricane-hit states have had to dip into other pots or find short-term means to raise money, Texas has a backup: its $10 billion Economic Stabilization Fund.
States that save money with each fiscal year have a cushion in case of emergency, whether it’s a down year for revenue or a deadly natural disaster.
In Pennsylvania, where the Legislature has yet to approve funding for its 2017-18 budget,
that fund is practically nonexistent.
“I do think we need to keep one. A homeowner has a fund set aside in case their washing machine and their dryer both go out,” said state Rep. Judy Ward, R-Hollidaysburg. “Citizens would have a rainy day fund in case they get laid off from their job so they have a few paychecks set aside. … It’s important we have adequate funding.”
While Pennsylvania isn’t usually in the crosshairs of the country’s deadliest hurricanes, storms and natural disasters can still wreak havoc on the state. It’s unclear how much money would be available if such a storm struck tomorrow.
When things go south
Like dozens of other states, Pennsylvania technically keeps a so-called rainy day fund. Called the Budget Stabilization Reserve Fund, it can be used in case of disaster or when both chambers of the Legislature agree to in a two-thirds vote.
As of last month, the fund contained a little over $2 million — not enough to keep the government running for even a day, according to a study by the Pew Charitable Trusts. That’s down from recent highs of more than $1 billion in 2001, when it was tapped to balance the budget during a recession following 9/11. The fund was replenished with a balance of more than $740 million, which was drained after the 2008 economic recession.
The organization, which periodically releases reports on all 50 states’ funding situations, said it’s unclear when Pennsylvania would even theoretically tap into its reserves.
“Pennsylvania can appropriate from its Budget Stabilization Reserve Fund in the event of a ‘significant revenue shortfall,’ but the law provides no clarification of what ‘significant’ means,” the Pew review’s authors wrote.
That can raise concerns, especially in a state with its own fiscal problems, Jonathan Moody of the Pew trusts told WHTM last month.
“The same way that you would sleep easier at night if you had more in your savings account for the next time your car would break down, when a state has more in savings, they’re that much more prepared for when things would go south,” he said at the time.
‘Help each other out’
Each state handles emergency funding differently.
Texas enjoys the largest rainy day fund in the country, with billions on hand after a series of extreme ups and downs. The resource-rich state puts some of its oil and gas revenue into the pot, keeping it on hand for major budget shortfalls.
The money can also be used in case of a disaster if a large legislative majority approves.
When Hurricane Harvey struck, sinking huge swaths of land around Houston and drowning scores of people, it racked up an alarming price tag: nearly $200 billion, according to estimates shortly after the storm ended. Officials said it would take years for the region to approach its former conditions.
Texas Gov. Greg Abbott has said he prefers not to dip into the rainy day fund, instead shifting money from other state resources to cover the costs. In a state with a part-time legislature that meets only periodically, lawmakers would have to call a special session to take cash from the fund before 2019.
Private donations, insurance payouts and federal aid could help soften the blow in Southern states hit by severe weather, leaving state and local governments on the hook for far less. Some in Pennsylvania prefer to follow their example, pulling funds as needed from existing sources rather than drawing from a multibillion-dollar reserve.
“I don’t have that worry,” said state Rep. John D McGinnis, R-Altoona. “If the emergency is dire enough and the funding is necessary enough, I’m sure the partisanship (could resolve it). Look what happened with both Harvey and Irma. Down in Texas and Florida, it was ‘We’re on the same team, we can help one another out.'”
Pennsylvania has its own share of problems, however, even at the best of times. Lawmakers have yet to approve a funding package for a budget they passed nearly three months ago, and many have proposed dipping into smaller reserve funds to cover a revenue gap.
“I don’t think it’s a particular blessing,” McGinnis said of a large fund reserve. “I like a lean government. And I think that, actually, if you don’t have a rainy day fund, it should focus you better on being prepared.”
Help from Washington
For states that don’t keep large sums on hand, the federal government is always available as an ally of last resort. On Sept. 8, President Donald Trump signed a $15 billion aid package to help areas hit by Hurricane Harvey — a sum larger than the entire Texas backup fund.
While Congress overwhelmingly backed the fund, it stirred controversy as some Republicans accused the president of cutting an unfair deal with Democrats to raise the nation’s debt ceiling. The concerns echoed battles after Hurricane Sandy in 2012, when some Republicans from unaffected states — including some from Texas — opposed recovery spending as a wasteful addition to the national debt.
Between constant partisan battles and the recurring threat of a government shutdown, there is no guarantee sufficient federal aid will always be available to states hit by natural disasters. A particularly brutal hurricane season has stretched resources in many areas, including Puerto Rico, where Hurricane Maria shut down power to the entire island of nearly 3.5 million people last week.
If federal money wasn’t forthcoming or sufficient after a local disaster, the state would be left to pull cash from its own resources.
“People are always looking up the ladder, but at some point they may have to look back down the ladder,” Bedford County Emergency Management Director Dave Cubbison said.
Under Pennsylvania law, the governor can pull $5 million from other state resources if he declares a natural disaster or $20 million if he declares a so-called disaster emergency. More money can be transferred if the General Assembly agrees.
The Pennsylvania Emergency Management Agency is responsible for disaster planning and much of the immediate response, but it is unclear how far the agency’s resources would stretch in case of a massive, deadly disaster. Agency officials did not return messages seeking information.
“I don’t know for a fact, but I have to believe” the state is prepared for any eventuality, McGinnis said. “We’re paying these people, PEMA, a lot of money.”
‘Took us by surprise’
With lawmakers having trouble with even the day-to-day cost of state government, some have proposed replenishing the state’s rainy day fund in case of a future emergency.
At a public address last month, Gov. Tom Wolf expressed a desire to resume deposits to the fund during future fiscal years.
“If we get this budget, we’ll look at the balance sheet of the commonwealth. … We’re going to start to put money back in,” Wolf said. “That’s not smoke and mirrors but a real thing.”
Whether the Legislature is willing to set aside additional money is another matter. Pennsylvania often experiences flooding — especially when a spring thaw combines with heavy rainfall — but disasters are rarely enough to seriously impact the state budget.
Hurricanes have caused heavy damage, however: In 2006, Hurricane Ivan caused the Susquehanna River to break its banks and led to hundreds of millions of dollars in cleanup costs.
Similar events could happen again. In a widely covered online post when Hurricane Harvey hit Texas, Penn State University Professor of Atmospheric Science Michael E. Mann said rising sea temperatures had caused the hurricane to become more powerful and its flooding more intense.
Meanwhile, this hurricane season has already led finance experts to warn states that “pay-as-you-go” disaster recovery is a risky proposition, The Associated Press reported last week. A Montana lawmaker told reporters wildfires there “took us all by surprise,” blowing away the state’s disaster fund. Still, many in Pennsylvania argue that a dedicated pot of disaster money might never be used.
“Something would have to take us by surprise,” McGinnis said. “In our state, that’s possible but very unlikely.”