Mike Wereschagin of The Caucus, an LNP Media Group watchdog publication based in Harrisburg, wrote last week of an accounting mechanism used by state budget officials to enable spending beyond what the Pennsylvania Legislature authorizes — despite clear language in the state Constitution prohibiting unauthorized spending. It’s called Ledger Five, and it’s one more example of our commonwealth’s broken budgeting system.
The opening paragraphs of Wereschagin’s article on Ledger Five are too good not to quote here in full.
“Bit by bit — or, rather, million by million — Pennsylvania’s budget has been expanding beyond what the Legislature initially authorized,” Wereschagin wrote. “During just the last five fiscal years, 20 departments spent almost $1.5 billion beyond what the House and Senate appropriated in their annual budgets, according to state records. Most of that flowed through an obscure section of the state’s bookkeeping system called the nonbudgeted ledger, also known as the more mysterious-sounding Ledger Five. And mysteries about it abound.”
To be honest, how our state government operates often leaves us mystified. But, as head-scratchers go, Ledger Five is in a class of its own.
Its existence was news to us. But then, even lawmakers familiar with the appropriations process have claimed not to know it exists.
As Wereschagin explained, Ledger Five is a “catch-all for spending that doesn’t fit in the state’s other accounts. ... That extra spending gets locked in when appropriators use the new, higher annual spending as their baseline for the next year’s budget.”
Ledger Five doesn’t cause the growth in extra spending. It’s the vehicle through which extra money is spent.
“More than $112 billion has flowed in and out of the ledger since the beginning of fiscal year 2014-15, state records show. Almost half of that — more than $50 billion — flowed through the ledger during the nine-month budget impasse in 2015-16,” Wereschagin reported.
So we’re not talking about pittances here. We’re talking about billions.
This is insanity.
And, in the view of some Republican lawmakers, it may be illegal.
“If we were a publicly traded company, we’d all be in jail,” York County state Rep. Seth Grove said. “Enron’s got nothing on us.”
(If you don’t remember the Enron scandal, kids, look it up. It was a doozy.)
During the nine-month budget impasse of 2015-16, the commonwealth “had no legislative permission to spend from its general fund,” Wereschagin wrote.
It was hindered by Article II, Section 24, of the state constitution, which states: “No money shall be paid out of the treasury, except on appropriations made by law and on warrant issued by the proper officers.”
But an earlier budget impasse had yielded a state Supreme Court ruling that offered a contrary directive.
Six years before, state employees had been ordered to continue working through a budget impasse even though they wouldn’t be paid until it ended.
The American Federation of State, County and Municipal Employees sued the state government and won. As Wereschagin explained, “The state Supreme Court ruled the federal Fair Labor Standards Act requires the state to pay its employees even if the Legislature hasn’t given it any such authority.”
He continued: “Fast forward six years, to the most recent impasse, and the state was stuck between that ruling and Section 24 of the state constitution. Officials had to pay their workers, but they couldn’t use their normal budgets because those budgets didn’t exist.”
They recorded the spending in Ledger Five instead. And after “the impasse ended, the Legislature back-filled the unbudgeted spending by ... well, putting it in the budget,” Wereschagin wrote.
But Ledger Five is not just used during budget stalemates.
“Every year, departments spend more than the Legislature allots them because of federal or judicial requirements,” Wereschagin wrote.
Most of that unbudgeted spending is done by the Department of Human Services on services it has no choice but to provide.
“The commonwealth has a federal mandate to provide these services. Even if the lines are underfunded, we must pay the rates mandated by the federal government. If a senior or a disabled individual comes to be served, we don’t have the ability to turn them away,” Democratic Gov. Tom Wolf’s spokesman, J.J. Abbott, told Wereschagin.
Republican state Rep. Frank Ryan, of Lebanon County, described Ledger Five as “the pituitary gland of the entire state system.”
He was referring to the pea-sized gland that regulates vital body functions.
We’d prefer that state budgeting was analogous to the operations of the human brain — with its capacity for reasoning and planning.
According to Wereschagin’s reporting, Republican efforts to curtail human services spending have led to the increased use of Ledger Five. Wary of appropriating money that the Department of Human Services would find ways to spend, the Republican-controlled Legislature tightened the purse strings.
But, as Wereschagin noted, “the General Assembly can’t legislate demand for aid. That’s a consequence of economics, illness and, sometimes, just plain bad luck. And when someone needs help, federal law says they don’t have to wait until the next fiscal year to get it.”
He added: “There’s still that pesky state constitution, though. Article II, Section 24 says what it says.”
So what happens is this: After a budget is passed, and unauthorized money is spent, the governor files a supplemental budget request.
This brings to mind the expression, “It’s better to ask for forgiveness than permission.”
But, in truth, it’s not better. As Wereschagin points out, the process of readjusting legal spending levels to match actual spending “gets far less scrutiny than the initial budget debate, when negotiations eclipse everything else going on in the Capitol.”
The budgeting process ought to be transparent, from start to finish. And it ought to be realistic, so obscure workarounds like Ledger Five aren’t necessary.
Surely on this much, Republicans and Democrats can agree. If only they could agree to do something about it.