Pa. Senate Republicans look to forgive interest on state loans to help counties, Head Starts

Republican leaders in the state Senate said Tuesday they plan to introduce legislation to forgive the interest payments on Treasury loans designed to help county governments and Head Start providers weather Pennsylvania’s budget impasse.

“They should not be penalized because of what is happening here in Harrisburg,” state Senate President Pro Tempore Kim Ward, R-Hempfield, said in a phone interview.

State government is three months late in adopting a budget, cutting off state funding to counties, Head Start providers and school districts across the state, many of which depend on state money for operations.

Last week, state Treasurer Stacy Garrity announced plans to lend up to $500 million to county governments and Head Start providers feeling the strain of the budget impasse.

Money for the Budget Bridge Loan program is coming from the Treasury’s $21.3 billion Liquid Asset Pool investment fund. County governments and Head Start providers will be eligible to borrow up to 25% of their state budget appropriations from last fiscal year.

Entities will be required to pay back what they borrowed, plus 4.5% interest, within 15 days of receiving state funding after the budget impasse ends. Garrity said she was required by state law to charge the interest.

That would translate to combined interest payments of up to $22.5 million.

“Here we are, we are holding money that should be in the coffers of these organizations and we’re getting interest on that money,” Ward said. “I don’t think it’s fair to then turn around and charge interest on (loans to) these organizations.”

Ward, along with Senate Majority Leader Joe Pittman of Indiana and Appropriations Chair Scott Martin of Lancaster, said they plan to introduce legislation in the Republican-controlled Senate to forgive the interest payments on the Treasury loans. It would then need to pass the Democratic-controlled House and be signed by Democratic Gov. Josh Shapiro.

In a statement, Shapiro spokeswoman Rosie Lapowsky said, “Funding critical services across the Commonwealth can only happen if State Senate Republicans stop playing politics and come back to work, find agreement with the State House and send a budget to the Governor’s desk.”

Lapowsky said Shapiro introduced his budget proposal 238 days ago. Since, the Senate has been in session just 29 days, she said.

“There is no excuse for their inability to pass a budget with $11 billion sitting in the bank — it’s past time for them to do their jobs and send a budget to the Governor’s desk for signature,” Lapowsky said.

A spokeswoman for House Democrats did not respond to messages.

“I applaud Senate leaders for taking action to ensure that critical service providers can continue to deliver assistance to Pennsylvania’s most vulnerable groups without the added burden of interest costs,” Garrity said in a statement Tuesday.

“The bottom line is that these groups should not pay interest on what is essentially their money already if a budget would have been passed on time,” added Garrity, R-Bradford County, who the state GOP has endorsed to run for governor in 2026.

As of Tuesday afternoon, Armstrong County and eight Head Starts had expressed interest in the Budget Bridge Loan program, according to Garrity’s office.

The strain of the budget impasse is taking a toll on Armstrong County.

Among cuts, the county was expected to close seven of its nine senior citizen centers and furlough eight workers at the shuttered centers. The county also plans to furlough workers and reduce service in the county’s Area Agency on Aging and Children, Youth & Family programs. Payments to foster families who take in children will stop until the impasse ends.

“Even what we’re doing is still probably not enough. We’re trying to squeeze everything we can everywhere we can,” Armstrong County Commissioner Anthony Shea said.

Shea said county officials are working to determine how much money they will need to borrow to get through the rest of the calendar year.

“I would be thrilled if it was no interest,” Shea said of the proposal to forgive the interest payments on the Treasury loans.

As for having to pay interest on a state loan borrowed because the state hasn’t been able to adopt a budget, Shea said, “That’s like insult to injury.”

Westmoreland County has said it will furlough 125 workers beginning Oct. 13 in a move that officials project will save the county about $100,000 in payroll costs every two weeks. State funding makes up about $104 million of Westmoreland’s $452 million budget.

Commissioner Doug Chew, R-Hempfield, thanked Garrity, Ward and Pittman for “coming to the aid of Pennsylvania counties.”

While Chew said Westmoreland County is “looking at all of our borrowing options that can act as a stopgap,” he thought the Treasury loans, if approved with loan forgiveness, could “make it possible for us to bring back our workforce and run with full efficiency much sooner.”

Chew added: “If the Democrat-controlled House would take up the stopgap budget measure sent over by the Senate, Pennsylvania counties could get back to work while budget negotiations continue.”

Commissioner Ted Kopas, D-Hempfield, had a different take.

“Sen. Ward is trying to be the hero of a crisis that she created. She can’t have it both ways,” Kopas said. “While the (interest forgiveness proposal) would certainly be helpful for counties, this is yet another distraction from the real work of passing a comprehensive budget.”

Kopas said the county almost certainly will need to borrow money to get through the impasse and is considering its options.

“There is nothing, short of a miracle or the county hitting the Powerball this weekend, that could prevent the furloughs from happening,” Kopas said.