A new borrowing option has been presented to the Luzerne County Council to avoid mass layoffs and defaulting on an $8.5 million debt repayment.
The challenge: a majority of the county council must approve it, and someone who voted against the last borrowing must agree to put the new proposal on the table for a vote on Tuesday, according to the council’s bylaws.
County Chief Solicitor C. David Pedri told the council the state is willing to sign an agreement pledging to directly pay a lender any state reimbursements owed to the county.
“After numerous revisions, the Commonwealth through this agreement has agreed to pay the FULL OBLIGATION permitted by law of any borrowing authorized by County Council,” Pedri said in a communication emailed to the council.
The agreement would eliminate any chance of the state funding coming back to the county and being misdirected for other purposes.
After a council majority rejected the borrowing, state Sen. John Yudichak, D-Plymouth Township, reached out to the governor’s office about the county’s “dire situation,” Pedri told the council. The intervention sparked negotiations between the state budget office and Pedri about the agreement.
Council Chairwoman Linda McClosky Houck sent Pedri’s proposal to her council colleagues Friday evening.
“Council’s voice has been heard in Harrisburg, and the Commonwealth’s Office of the Budget came to the table with Council at the urging of Senator Yudichak,” she wrote.
The proposed solution stemmed from many hours of negotiation between Pedri and the state, she wrote.
“In this proposal the Commonwealth is involved in the borrowing and agrees to pay the full obligation — including interest — of such borrowing when the budget impasse is resolved and funds are released,” McClosky Houck said.
Councilman Harry Haas, who provided the sixth vote needed to defeat the last borrowing of up to $20 million last Tuesday, said Friday he would be willing to reconsider a loan if the county isn’t stuck with fees or interest payments.
Haas said state officials should absorb any costs because they created the county’s crisis by failing to pass a budget since July 1, delaying $22 million in state reimbursement owed through the end of November.
“I’m open to a solution, but we can’t be on the hook for a single cent,” Haas said.
The county Court of Common Pleas must approve the borrowing if it is passed by the council, Pedri said.
The administration said several prospective financial institutions have reached out to the county expressing interest in providing a loan.
County officials are trying to prevent mass layoffs, service cuts and defaulting on an $8.5 million debt repayment due Dec. 15 because the state owes the county $22 million in reimbursements that racked up since the July 1 state budget impasse.
A county council majority unexpectedly voted 6-5 Tuesday to reject the borrowing of $20 million to compensate for the loss of state funding.
All county operations are now at risk of shutting down because the administration has been keeping Children and Youth and other primarily state-funded human service agencies operating since July 1 using money needed for payroll, debt repayments and bills in other departments.
Defaulting on the loan repayment may allow lenders to demand immediate repayment of more than $100 million that had been loaned to the county, magnifying the county’s financial troubles, officials said.
The administration has identified funds that can be temporarily borrowed from segregated accounts within county government to cover most, if not all, of the Dec. 11 payroll in addition to next week’s pay. No money has been found to cover bills beyond that.
Managers have compiled layoff lists as a precaution.