Corbett attempting to change capital fund borrowing
The state should reduce the heavy borrowing that has been spent on thousands of projects statewide, including more than 300 in Allegheny County alone, says Gov. Tom Corbett, seen in an April photo.
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HARRISBURG -- Many Pennsylvanians depend heavily on credit cards, borrowing for home repairs, vacations and sometimes even for food and clothing.
Since 1986, the state government, under both Democratic and Republican leaders, has done much the same thing when paying for major capital construction projects around the state.
It has borrowed $4.8 billion, all of which has to be paid back in coming years. The debt ceiling started at $1.2 billion but has been raised six times over the years.
But now, Gov. Tom Corbett argues that it's time to reduce the heavy borrowing that has been spent on thousands of projects statewide, including more than 300 in Allegheny County alone, such as new stadiums for the Pirates and Steelers, libraries, the Downtown Cultural District, the National Aviary and others.
- Heinz Field: $75 million
- PNC Park: $75 million
- Cultural District: $21 million
- Heinz History Center: $9 million
- Pittsburgh Children's Museum: $9 million
- August Wilson Center for African American Culture: $9 million
- Redevelopment of U.S. Steel plant sites in McKeesport and Duquesne: $7 million
- St. Clair Hospital emergency room: $3 million
- Heinz Hall: $2.5 million
- South Shore riverfront park: $2.4 million
- National Aviary: $1.3 million
- Jewish Community Center: $1 million
The borrowing program is called the Redevelopment Assistance Capital Program, or RACP in legislative shorthand. Over the past 25 years, it has ballooned from an initial $400 million -- obtained by selling bonds to investors -- to $4.8 billion.
Of that, $3.4 billion has been spent around the state, leaving $1.4 billion in reserve. Last week, state budget Secretary Charles Zogby, a top Corbett lieutenant, said it's time for change.
The redesign of RACP includes new rules about what projects will and won't be financed and a limit on annual borrowing of $125 million per year. He even gave it a new name, the Pennsylvania Economic Growth Initiative.
To get funding, a project must be "shovel-ready," meaning able to break ground within one year, he said. Projects that involve "maximum private investment" also will have priority.
By reducing how much is spent each year, less additional money will have to be borrowed, which "will allow us to retire old debt instead of saddling it onto our children," Mr. Zogby said.
Now -- before a program gets capital assistance -- there will be "a merit-based selection process that focuses public investments on projects that have a clear, positive economic impact for the state and local communities, with a priority on attracting and retaining jobs," Mr. Zogby said.
He said the changes are part of Mr. Corbett's "insistence on positioning Pennsylvania to better compete in a global economy."
While RACP projects have been high-profile in communities around the state, they also have played a major political role in legislative leaders' efforts to round up votes in the Legislature.
To actually get state financing, a project has to pass two hurdles. First, it must get on the overall list, which doesn't happen unless the legislative sponsor has supported leaders' positions on key issues, including the annual budget.
But even when it gets on the list of thousands of projects, it still takes a governor's signature to release the state funding. Here again, political loyalties and support on key issues play a major role concerning which projects get the state debt funding.
Rep. Mark Mustio, R-Moon, supported the change in RACP. He said the state's ailing fiscal condition "demands serious debt reform. The rapid expansion of the RACP debt ceiling ... has made this program completely unsustainable."
Matthew Brouillette, leader of a conservative think tank called the Commonwealth Foundation, described RACP as an "ineffective corporate welfare program" and said he would like to see it "eliminated completely."
But given political realities, he added, "Gov. Corbett's reforms will help curtail some of the program's major abuses and slow the growth of state government debt."
Bill Patton, a spokesman for House Democrats, said the "annual borrowing cap could limit the program's effectiveness."
He contended that RACP funding "always was merit-based and competitive, so there is nothing new in that regard."
During the 2010 gubernatorial campaign, when Mr. Corbett was elected on a promise of lower spending and no tax increases, "RACP became a political football," Mr. Patton said. "But thousands of people have good jobs today at facilities that would not have been possible without it."
First Published June 11, 2012 12:00 am