State asked to pay interest
HARRISBURG — Some counties, social services providers and school districts that borrowed money to replace state subsidies held up by the 101-day budget impasse said Monday that they want the state to repay the interest.
They said repayment is a matter of basic fairness, and they plan to bring the issue up this week with Gov. Ed Rendell's administration.
Tom Gentzel, executive director of the Pennsylvania School Boards Association, said his organization will make the request after districts receive their overdue money.
"The question of interest on the money that was delayed is a really legitimate question," Gentzel said.
The state Treasury Department on Monday was processing around $3 billion in payments after Rendell signed a key appropriations bill that freed up the money on Friday.
Gentzel and others said they did not know exactly how much money counties, school districts and the private businesses and nonprofits that delivered social services borrowed during the July-October stalemate.
Tony Ross, president of the United Way of Pennsylvania, said he believes social service agencies may have borrowed enough to incur interest of $5 million to $10 million.
"These agencies maintained their commitment to the public without compensation for three months," Ross said. "They didn't say, 'We're not getting paid, we're not going to maintain our commitment to the public and the commonwealth."'
Rendell said Friday that he had not considered the matter, and when asked said it would depend on whether the state can afford it.
"I'm willing to take a look at it, but we'd have to know what the total was," he said.
In 2003, Rendell held up money for public school operations and instruction until Dec. 23 — partly in an effort to force lawmakers to authorize more education funding.
When the governor and legislators finally came to an agreement, they also approved $4.6 million to cover interest on money the schools borrowed to keep classrooms open.
In many cases, officials said, the school districts, counties and service agencies that recently had to borrow are ones that can least afford it — generally, poorer and smaller, with lower credit ratings and higher interest rates. In addition to those that owe interest on loans, others had to dip into reserves and thus lost interest on that money, officials said.
Doug Hill, executive director of the County Commissioners Association of Pennsylvania, said he plans to raise the issue when he meets with administration officials on Thursday to discuss payment schedules for the delayed state subsidies.
However, Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi, R-Delaware, said he was not aware that the governor's staff had raised the repayment issue in any budget discussions this time around.
"If it was going to be done, it almost certainly would have been done with the package that was done last week," Arneson said.
Jay Himes, the executive director of the Pennsylvania Association of School Business Officials, said his organization would not seek the state repayment of interest, given the state's multibillion-dollar, recession-driven shortfall.
