Pa. lawmakers to work into the weekend to resolve budget

HARRISBURG — Pennsylvania lawmakers will return to the Capitol for a rare weekend session as negotiators continue to try for an agreement on how to pay for this year's nearly $32 billion budget.

Both the House and Senate will convene Saturday as they race to figure out how to raise more than $2 billion in new revenue to cover the biggest budget shortfall since the end of the recession.

Last week, with hours to spare before the July 1 start of the new fiscal year, the Republican-controlled legislature sent Gov. Wolf a $31.99 billion spending bill — lacking the supporting legislation that spells out how to pay for it.

Wolf, a Democrat, has until the end of Monday to sign or veto the spending bill, or allow it to lapse into law without his signature. He has not said what he would do if no agreement is reached on a revenue package.

"I'm going to stay away from speculation," Wolf said Friday. "I'm continuing to negotiate, I continue to feel good about the way things are going, and I'm hoping we will have a budget very soon."

Saturday's session was forced after budget negotiators failed to reach an agreement during talks. "You are not going to have an agreement on anything until you have an agreement on everything," House Majority Leader Dave Reed (R., Indiana) said after Friday's session.

Gambling expansion remains a major sticking point. Republicans in the House and Senate have been mired in disagreement over whether to legalize up to 40,000 slots-style machines called video gaming terminals (VGTs).

Many House GOP lawmakers support allowing them in bars, taverns, restaurants, and other establishments with a liquor license, but a number of Republican senators have cited concerns over the scope of such an expansion. They have also said they worry it would cut into business at casinos, which send millions of dollars in tax revenue on their earnings into state coffers.

Wolf has not taken a position on legalizing VGTs. He has said only that he cannot support a proposal that would cannibalize the revenue stream from casinos or impact existing jobs.

Budget negotiators have also been discussing borrowing up to $1.5 billion to cover the budget shortfall in the fiscal year that just ended. The plan would call for paying back the loan using money that flows annually into a state fund set up after the landmark 2001 settlement with tobacco companies.

Among other things, the settlement fund supports tobacco use prevention and cessation programs, health research, health care insurance for the uninsured, and home and community-based services for older Pennsylvanians, according to a description by the Office of the Budget.

Another option on the negotiating table is further privatizing alcohol sales, including one proposal to allow beer distributors to sell wine and  liquor.

Hanging over budget talks Friday was the warning issued Thursday by Standard & Poor's, which said it was placing Pennsylvania on a negative "credit watch" that reflects the state's "eroding financial position and our view that there is a significant likelihood that the commonwealth will not enact a structurally balanced budget for fiscal 2018," according to a statement by the credit rating agency. A credit downgrade for Pennsylvania would raise the cost of borrowing money.

Karen Langley and Liz Navratil of the Harrisburg bureau contributed to this article.