Talks over Pennsylvania budget deadlock take unexpected turn

Associated Press

HARRISBURG — Efforts to end Pennsylvania’s 18-day stalemate over how to pay for a $32 billion budget took an unexpected turn Tuesday when House Republican leaders abruptly retreated from discussions over raising taxes to help stitch together the state government’s threadbare finances.

File Photo: Gov. Tom Wolf

The new stance left Democratic Gov. Tom Wolf further away from an agreement to settle his third budget and more clearly facing the prospect of having to set at least $1.5 billion aside to balance the budget bill he let become law last week.

With state government grappling with a long-term deficit, Wolf has viewed some sort of tax increase as being necessary to avoid a downgrade to Pennsylvania’s battered credit rating he inherited in 2015.

Still hung up in the Legislature are measures carrying about $600 million in aid to Penn State, the University of Pittsburgh, Temple and Lincoln universities and the University of Pennsylvania’s veterinary school.

House Speaker Mike Turzai, R-Allegheny, delivered the message in a meeting with top Republican senators in the Capitol on Tuesday and said discussions had been positive. Later, Turzai suggested that no tax increase can pass the Republican-controlled Legislature.

“Neither the Senate nor the House has passed a tax bill,” Turzai said. “I can assure you there are very few, if any, tax votes in the House on either the Republican or the Democratic side.”

Turzai — who has all-but declared his candidacy to challenge Wolf’s bid for a second term in next year’s election — and leaders of the huge Senate Republican majority are now in the position of counting votes for a roughly $2 billion revenue package based largely on borrowing.

It would be rounded out by tapping into cash in off-budget programs and scrounging money from another big expansion of casino-style gambling and by privatizing more of the state-controlled wine and liquor store system, the approach preferred by Turzai.

The House GOP also advanced legislation last week that would require the Wolf administration to seek federal approval to impose new limitations on Medicaid benefits.

Senate Majority Leader Jake Corman, R-Centre, declined to discuss the proposal Turzai had delivered, but said Senate GOP leaders were reviewing it.

A spokesman for Wolf questioned whether Turzai’s plan could get through either chamber, while leaders of the House and Senate Democratic minorities warned that the new House Republican position is irresponsible and unrealistic.

“We’re going to have a credit downgrade for sure without recurring revenue,” said House Minority Leader Frank Dermody, D-Allegheny. “It’s not realistic. It doesn’t add up. It doesn’t solve this year’s deficit or, going into next year, the problems we face financially without recurring revenue.”

The House was not in session this week, and Senate Republicans sent the rank-and-file home Tuesday without any budget-related floor votes this week.

Wolf had acceded to some level of borrowing and a casino gambling expansion, along with a tax package of roughly $700 million to $800 million in annual recurring revenue, according to negotiators. He initially floated in February a $1 billion tax package that was ignored by top GOP lawmakers.

One element of that — slapping a new tax on Marcellus Shale natural gas production — remains a key point for Democrats at the bargaining table. Other taxes discussed included those on basic cable service, movie tickets, bank profits, natural gas utility service, electric utility service and telephone service.

Senate GOP leaders had been more flexible than House GOP leaders in negotiating with Wolf on a tax increase. In talks leading up to Tuesday, House Majority Leader Dave Reed, R-Indiana, had countered with a tax package of $200 million to $300 million, negotiators said.

Aside from that, House GOP bills to expand gambling and liberalize wine and liquor laws have been opposed by Wolf, most of the Senate and most House Democrats. Critics said they promised little immediate help and even long-term harm to the state’s finances.