Pa. budget strategy dares lawsuit, bond downgrade
HARRISBURG — Pennsylvania state government began operating Tuesday under a $31 billion election-year spending bill that nevertheless lacks the tax collections to sustain it for the entire fiscal year, and lawmakers say they are scrambling to fix that before it draws a lawsuit or bond downgrade.
Tuesday was expected to be crucial to determining whether the tax-averse Legislature controlled by huge Republican majorities will pass a tax increase to fully fund the spending bill and help shore up the state government’s deficit-riddled finances.
At midnight Monday, the spending bill became law after negotiations proved fruitless and Democratic Gov. Tom Wolf decided not to stand in its way. Tax collections are projected to fall hundreds of millions of dollars short of funding it, while another nearly $600 million in aid to Penn State, Temple, Pitt, Lincoln and Penn remained in limbo in the House.
Top lawmakers said Monday evening they were working to produce a revenue package that Wolf would accept. They hope that will put a quick end to legal questions over how the state can operate on an unbalanced budget and the potential that it could draw another downgrade of Pennsylvania’s battered credit rating.
Senate Republican leaders told their rank-and-file members negotiators had come to an agreement. No details were given, and work was still to be done, senators said Monday evening.
Credit ratings agency Standard & Poor’s took note that Pennsylvania was embarking on its 2016-17 fiscal year without a balanced budget and swiftly warned of a downgrade to the state’s credit rating.
Closed-door revenue discussions had revolved around a $1.3 billion package that relies heavily on a $1 per-pack cigarette tax increase, to $2.60 per pack, and an expansion of casino-style gambling that would make Pennsylvania the fourth state to legalize internet gambling.
However, the House and Senate do not see eye to eye on sprawling gambling legislation, and Wolf has clashed with House Republican leaders over their push to tap off-budget state programs as a one-time source of stopgap cash.
The Wolf administration maintains that it is constitutional to allow the spending bill to become law, and suggested the state constitution makes the Legislature, not the governor, responsible for ensuring that spending bills are funded.
House Majority Leader Dave Reed, R-Indiana, said he had some concerns about the legality of the bill. There is precedent from a 1932 court ruling under which legally mandated expenses are protected, but discretionary programs must be reduced by the same share across the board, Reed said.
“If we don’t get a revenue package done here probably in the next 24 hours or so, I think that becomes a legitimate discussion,” Reed said.