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Wolf touts 'largest cuts ' to state bureaucracy in history

HARRISBURG — Gov. Wolf on Tuesday unveiled a $32.3 billion spending plan for the next fiscal year that would close Pennsylvania's daunting deficit largely through cuts and agency consolidation, while shying away from the large-scale tax hikes that helped doom his past budget proposals.

Wolf's latest plan would use new taxes and fees to help raise nearly $1 billion to increase funding for public schools, drug addiction prevention, and other state programs. It does so in part through a new tax on natural gas drilling and a likely controversial $25-per-person fee in towns that rely on the state police for local coverage.

But gone this year were proposals for hikes in the state income or sales taxes. Instead, the first-term Democratic governor touted what he called "the largest cuts to, and consolidations of, government bureaucracy" in state history.

"Yes, some of these reforms involve gritting our teeth and tightening our belts," he said in a late-morning speech to the legislature.

The address formally launched the political and bureaucratic tangle that consumes Harrisburg each spring, and typically lasts until a budget passes – often after the July 1 deadline. This year comes with other wrinkles: the size of the projected deficit — $2.8 billion — and the Democratic governor's ability to find common ground with Republicans who may be weighing their own campaigns to unseat him next year.

His speech struck a notably more conciliatory tone than last year's, when Wolf introduced a budget while still locked in a historic impasse on the previous budget with the GOP-controlled legislature.

This time, he praised lawmakers for working with him last year to legalize medical marijuana and modernize the sale of wine and beer in Pennsylvania. He urged continued cooperation, saying, "The people who put us here want to see progress."

The GOP leaders responded with less bite, too — although some stated that they would reject some of Wolf's money-generating proposals and criticized the governor for not tackling the state's bank-breaking pension costs.

"The most telling part to me is what's not in this proposal," Senate Majority Leader Jake Corman (R., Centre) said minutes after the speech ended.

The reaction from some others was tempered. House Speaker Mike Turzai (R., Allegheny) called the plan more "realistic" than past proposals and signaled that budget negotiations could unfold more smoothly this year.

Wolf's budget blueprint for the fiscal year that begins July 1 would increase spending over this year's enacted $31.5 billion budget by about 2.5 percent. Not included in that number: an additional $230 million that Wolf and the legislature need to plug holes in the current year's budget books.

On the spending side of the ledger, Wolf's proposal would provide $100 million more in basic education funding, an additional $25 million for special education, $75 million more for early childhood education, and an $8.9 million boost for the 14 universities in the Pennsylvania State System of Higher Education.

The so-called state-related universities, including Temple, Lincoln and Penn State, would not receive any additional dollars.

In a nod to one of his signature issues, Wolf also called for $10 million to expand access to naloxone, which is used to revive drug overdose victims.

On the opposite side of the ledger, he proposed whittling the shortfall through what his administration said would be more than $2 billion in cuts, consolidations, savings and efficiencies.

He proposed merging the Department of Corrections and the Board of Probation and Parole into a new Department of Criminal Justice, as well as consolidating the Departments of Health, Aging, Human Services and Drug and Alcohol Programs into a single department.

Wolf is also pushing to cut a $30 million grant to the University of Pennsylvania's veterinary school; slash $50 million from school transportation aid because of what his administration said was declining fuel costs and fewer students being transported; and reduce tax credits by $100 million, although his administration would not say which ones might be impacted or by how much.

"There will have to be some belt-tightening, and I would think some programs we all care about will either be cut or significantly reduced," said House Minority Leader Frank Dermody (D., Allegheny). "So that's going to obviously cause some heartburn, but there's no easy way out of this."

Still, much of the controversy in Wolf's budget may stem from his revenue proposals. He called for raising new dollars by selling off unused state-owned property and leasing a landmark Harrisburg-area exposition hall to a private entity for an upfront payment - and then having it leased back to the state.

The budget also counts on $150 million in revenue from expanding gambling. This year's budget also banked on gambling expansion, but the legislature has failed to devise a plan to make it happen.

Another new proposal, likely to stir opposition from rural lawmakers, would raise $63 million by imposing the $25-per-person fee in municipalities that rely on state police instead of having their own police force. More than 65 percent of towns rely "to some degree" on the state police, according to the administration.

The governor is expecting that raising the hourly minimum wage to $12 - a proposal he has backed, but which the legislature has not - could increase state revenue by $95 million.

Wolf also revived another proposal that has repeatedly failed to win GOP support: He wants a 6.5 percent tax on natural gas drilling to raise just shy of $294 million. The tax would go into effect July 1.

Corman, the Senate majority leader, said his caucus would not support a new tax on drillers, who already pay a fee. He called the governor's drilling tax revenue estimates "wildly overstated," and said it amounts to a tax on "job creators."

Corman also said he was disappointed that the governor's speech did not address what Republican legislators call one of the state's most pressing problems: the rising cost of public employee pensions.

"The problem is right in front of us," he said.