Wolf budget decision looms amid stalemate over taxes

The Associated Press

Pennsylvania's 2016-17 fiscal year is in its second week with no spending bill having been enacted and no agreement over how to raise the revenues necessary to fund it.

This stalemate has emerged after Democratic Gov. Tom Wolf's first effort to get a budget resulted in a record-breaking impasse that took nearly 10 months to resolve.

In this AP file photo, members of the Pennsylvania House of Representatives debate the budget, Tuesday, Dec. 8, 2015, at the state Capitol in Harrisburg, Pa. (AP Photo/Matt Rourke)

The National Association of State Budget Officers says Pennsylvania is the only state without an enacted budget for part or all of the new fiscal year. On Tuesday, credit ratings agency Moody's warned that another ratings downgrade is possible if Pennsylvania doesn't get its spending in line with its tax collections.

Wolf gets main Pennsylvania budget bill, but tax issue looms

Where things stand:

Spending: On Wolf's desk is a roughly $31 billion spending bill. Wolf has until midnight Monday to act on it before it becomes law without his signature. Still awaiting a final vote in the House is legislation authorizing nearly $600 million for Penn State, Temple, Pitt, Penn and Lincoln universities. The overall package would increase spending by $1.5 billion, or 5 percent. If funding for capital projects, and supplemental spending approved for the just-finished fiscal year, are included, the spending authorization represents an increase of $1.7 billion, or almost 6 percent.

Deficits: Budget negotiators estimate that current tax collections will fall short of funding the spending package by more than $1 billion. A long-term state government deficit is projected by the Legislature's Independent Fiscal Office to hit $1.8 billion in the 2016-2017 fiscal year. It remained unclear how this year's budget package will affect that.

Public schools: Spending for public schools will rise by $200 million, or about 3 percent. However, the plan does little to fix a huge funding gap between Pennsylvania's wealthiest and poorest school districts. Federal data from 2012 showed that Pennsylvania has the nation's most inequitable education system. Lawmakers also haven't decided how to fund a bond that could be issued later this year to pay for the state's share of school construction projects.

Revenue: Negotiations revolve around increasing excise taxes on cigarettes by up to $1 per pack, from the current $1.60 per pack. Tax exemptions could be removed for other tobacco products, including smokeless tobacco, cigars, e-cigarettes and loose-leaf tobacco. Also possible is an increase on taxes on banks and an extension of the state sales tax to digital downloads of music and videos. House Republicans suggested borrowing money from a state-administered insurer of last resort for workers' compensation. Republicans otherwise have ruled out consideration of a tax increase on income, sales or Marcellus Shale natural-gas production.

Gambling: The House has passed legislation that would make Pennsylvania just the fourth state to allow casino-style gambling online. Republicans say it would generate $270 million in the first year, mostly through initial license fees, while Democrats say they expect $200 million from it. Its prospects in the Senate are unclear, and owners of the state's 12 casinos are at odds over it. Under the bill, casinos could offer slot machine-style games and table games on websites. Also, they could station slot machines in Pennsylvania's six international airports and at as many as 28 licensed off-track betting parlors.