Click here to subscribe today or Login.
Luzerne County officials may seek court approval to borrow $20 million so human service agencies can continue operating in light of the state budget impasse.
The state now owes the county $22 million in reimbursements dating back to July for services provided by the Children and Youth, Aging, Mental Health and Drug and Alcohol departments, county Budget/Finance Division Head Brian Swetz told the county council Tuesday.
Six of 11 council members voted to introduce the ordinance, although additional approvals would be required to proceed. The council will hold a mandated public hearing on the borrowing before its final vote next week. Approval from a county Court of Common Pleas judge also is needed because the loan would be to cover unforeseen expenses.
County Councilman Rick Morelli was among those who voted to advance the proposed borrowing but said he also wants to discuss and consider another option of shutting down human service agencies in light of the state budget crisis. Morelli said he does not support a shut-down but said council colleagues who oppose borrowing must face the alternative.
“If we don’t want to borrow money, we have to say what else we’re going to do,” Morelli said.
County Chief Solicitor C. David Pedri said Montgomery County has stopped covering human service expenses, while several other counties and school districts are considering loans.
According to published reports, Montgomery County officials announced last week they would no longer fund human services because the four-month budget impasse had drained the county’s reserves. The state owes that county more than $30 million.
Luzerne County has no reserve and has reached a point where debt repayments, vendor payments and payroll expenses for other departments will be impacted without a loan, Swetz said.
Swetz projected the county has access to around $15.8 million — $11.15 million in the bank, $3.5 million that can be temporarily borrowed from various county agencies and around $1.1 million in anticipated revenue from non-state entities.
As of Tuesday, the county’s estimated expenses through Dec. 31 are $34.8 million, including $15.8 million in debt repayments due on or before Dec. 15, $4.7 million in bills to vendors, $10.8 million for four remaining payrolls and $3.5 million for health care and utilities, Swetz said in an email to the council.
Swetz said the estimated interest rate on the loan would be 2.5 percent, and he stressed the county would immediately repay the loan upon the receipt of state funds.
However, county Councilman Stephen A. Urban pointed to a chart attached to the proposed borrowing ordinance that estimated the county would be charged 10 percent interest on the loan and stretch out payments over a decade, resulting in a total repayment of $32.3 million through 2025 in both principal and interest.
“Are you trying to snow me?” Urban asked, noting he’d also like to hear more about the option selected in Montgomery County.
Pedri said the county’s outside financial adviser, Public Financial Management, believes the borrowing will be 2.5 percent but included the higher percentage as a precaution. Swetz assured Urban the loan would be repaid as soon as the money comes in.
When will that happen?
Human Services Division Head David Schwille said he heard estimates ranging from days to weeks after a budget is passed but said he hasn’t received any communications from the state about the matter.
The council sought feedback from Phyllis Mundy, a former local state representative who serves on the Area Agency on Aging Advisory Council and was at the meeting to urge county officials to address a lack of non-union raises and other concerns in the aging department.
Mundy said she’s not optimistic the state funding will materialize soon because she was with state Gov. Tom Wolf Tuesday, and he has received “push-back” from state legislators about a proposed budget deal.
Pedri said the county can recoup a portion of its expenses on borrowing fees and interest on borrowing for at least some of the human service departments.
Councilwoman Kathy Dobash criticized the administration for waiting until now to propose the borrowing, saying she and others inquired about the potential financial impact several times in recent months.
Councilman Stephen J. Urban questioned why legislators are not holding emergency sessions to resolve the budget stalemate and said citizens should urge them “to get back to Harrisburg and do their job.”
In other business Tuesday, a council majority did not support Dobash’s proposal to reprimand county Manager Robert Lawton for failing to follow the 2016 proposed budget submission format spelled out in the county’s home rule charter.
Councilman Harry Haas said he already voted to proceed with the search process for a new manager and questioned the need to “castigate the man on a weekly basis ad nauseam.” He accused some of trying to “score more political points and grandeur” and said the repeated discussions about Lawton are “disrupting the daily business of the county.”
Morelli said he has publicly discussed his disagreements with some of Lawton’s actions but voted against the proposal, saying he is “not a vindictive person.”
Dobash said she and her work colleagues must follow requirements to remain employed, and she expects the manager to do the same.
Stephen A. Urban voted for the reprimand, saying action is needed when the county’s top manager is not following the charter. He said he heard feedback from citizens during recent campaigning who believe home rule is a “joke” and question why “11 people can’t get it together” stopping the manager from spending more than he is budgeted. He said he does not always criticize Lawton and believes he’s “done some good things.”