The state could repay counties and school districts for their interest costs tied to borrowing to pay their bills during the state’s four-month budget impasse.

A group of House Democrats introduced legislation this week to reimburse the interest costs of short-term loans. The state treasurer launched a program providing loans to counties, preschools and social service agencies. The budget deal included a provision allowing agencies that took out Treasury loans to get their interest waived.

Sixty-two organizations took out more than $42 million in loans through the Treasury program.

However, the budget deal included no provision to reimburse schools, government agencies and related groups that rely on state funding and were forced to take out loans from other lending institutions.

House Bill 2079 would change that.

The legislation, introduced on Wednesday by Rep. Sean Dougherty, D-Philadelphia, would require the Budget Office to administer a reimbursement program to cover interest costs from impasse-related loans. Twenty other House Democrats signed on as cosponsors.

More than $5 billion in school funding and $500 million in funding for nonprofits were frozen during the budget impasse and not delivered on time.

More than two dozen school districts reportedly took out loans during the impasse, including the Philadelphia School District, which borrowed more than $500 million to pay bills during the budget standoff when state funds were not flowing.

Westmoreland County borrowed approximately $11.63 million through the Treasury loan program.

In three other counties, the boards of commissioners voted to borrow funds, but it’s not clear how much they ended up borrowing, according to the County Commissioners Association of Pennsylvania. Officials said they have no clear data on how many counties took out loans but they were able to identify a handful of counties in which the commissioners voted to authorize borrowing during the impasse.

Cambria County approved an $8.5 million loan from AmeriServ Bank at a fixed interest rate of 4.49%, with no prepayment penalty and minimal fees. County officials indicated the funds would be drawn down only as needed and that the full amount may not be used once the impasse is resolved. In addition, the Lycoming County commissioners voted to take out a $10 million Tax and Revenue Anticipation Note and in Lackawanna County, the commissioners authorized borrowing up to $5 million through Fidelity Bank with an estimated interest rate of approximately 6%.

Officials with both the Pennsylvania School Boards Association and the County Commissioners Association of Pennsylvania said they support the legislation.

Kyle Kopko, executive director of the county commissioners group, told CapitolWire/State Affairs that reimbursing the interest costs would be a welcome step but it won’t allow counties to fully recoup the money they lost or were forced to spend during the impasse.

“It’s important to keep in mind that even if a county did not take out a loan, they likely lost interest revenue on their reserve funds. Many counties relied on reserve funds to bridge the funding gap due to the budget impasse,” he said. “For counties that took out loans, that means they lost interest revenue on their reserve funds, and then had to pay interest on loans. Not everyone understands those financial ramifications of the budget impasse.”

The bill was referred to the Appropriations Committee, suggesting the measure could be fast-tracked for a vote by the whole chamber. The House has only three session days scheduled this month — Dec. 15-17.