Revenue puzzle in pieces day before spending bill deadline

The Associated Press

HARRISBURG — Negotiators in Pennsylvania’s nine-day-old budget stalemate signaled that they were having difficulty reaching agreement Sunday on a deal to scrounge more than $2 billion to patch up the state government’s tattered finances.

Closed-door talks in Pennsylvania’s Capitol came a day before Democratic Gov. Tom Wolf’s midnight Monday deadline to make a decision on the main appropriations bill in a $32 billion budget package. Wolf stayed out of sight over the weekend.

With the Legislature led by anti-tax Republican majorities, those discussions have centered on another big expansion of gambling in the nation’s No. 2 commercial casino state and borrowing roughly $1.5 billion against future revenues from Pennsylvania’s share of a landmark 1998 multistate settlement with tobacco companies.

Friction on Sunday revolved around Wolf’s insistence that lawmakers produce $700 million to $800 million in reliable revenue, such as tax increases, to help the state avoid another downgrade to its battered credit rating.

House Majority Leader Dave Reed, R-Indiana, told rank-and-file Republicans that an agreement was close Sunday afternoon. But he also suggested to reporters that Wolf should start thinking about which parts of the spending bill to veto because Republicans were not willing to meet his demands.

“The administration has consistently said they need more revenue than some of the options that we provided and we, basically, at least from a House perspective, reached the extent of what we’re willing to offer,” Reed told reporters Sunday afternoon.

Senate Minority Leader Jay Costa, D-Allegheny, said Wolf wants more money that can be counted on every year, rather than one-time cash infusions that will not avoid another credit downgrade, Costa said.

“The governor wants recurring revenue,” Costa said. “A sufficient amount of recurring revenue to meet the bond-rating issue has not been presented yet.”

Negotiators have said little publicly about their private discussions, particularly about what sort of tax increases were under discussion.

Wolf has steadfastly pushed a tax package he frames as making corporations pay their “fair share,” including slapping a production tax on drilling in the Marcellus Shale, the natural gas reservoir that made Pennsylvania the nation’s No. 2 natural gas state.

Senate Republican leaders have acknowledged that some sort of tax increase will likely be part of a final package, but have not said exactly what they were considering, or how much.

“We’re trying to be as creative as possible,” said Senate Majority Leader Jake Corman, R-Centre.

Pennsylvania has struggled with an entrenched post-recession deficit, and credit downgrades in 2012 through 2014 have left it with among the nation’s lowest credit ratings. The $1 billion-plus shortfall in the just-finished fiscal year was state government’s biggest since the recession.

The House held a brief session Sunday and the Senate remained in session Sunday, largely as a sidelight to the private budget discussions.

Signing the entire appropriations bill — it packs about $31.4 billion for the current fiscal year and $400 million that will go on the books of the last fiscal year — or letting it become law on its own would be unconstitutional without the funding to underwrite it, Reed said.

“I don’t think the responsible thing to do would be just to let that budget become law,” Reed said.

Legislation carrying approximately $600 million in aid to Penn State, Pitt, Temple, Lincoln and Penn awaited the passage of a revenue package.

The fiscal year began July 1. Without a signed budget plan in place, the state has lost some of its spending authority, although the Wolf administration has said it anticipated no program or service interruptions, at least through Monday night.

For the second straight year, the Legislature sent an on-time, bipartisan spending bill to Wolf, but with no plan to pay for parts of it.

Last year, Wolf let the plan become law without his signature when the 10-day signing period expired — despite questions about whether the move was constitutional — and lawmakers delivered a $1.3 billion funding package three days later.