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Wolf allows $32B Pa. budget to lapse into law

Legislators have been struggling to craft a package to pay for the next fiscal year's budget.

Gov. Tom Wolf delivers his budget address for the 2017-18 fiscal year to a joint session of the Pennsylvania House and Senate.
Gov. Tom Wolf delivers his budget address for the 2017-18 fiscal year to a joint session of the Pennsylvania House and Senate.Read moreMatt Rourke

HARRISBURG — For the second consecutive year, Gov. Wolf will allow the nearly $32 billion budget that the legislature sent to him to become law, though there is no plan for how to pay for it.

Monday's move again plunged the state into uncertainty, with questions swirling around whether the decision was constitutional and whether it will provide more fodder for a crushing credit downgrade.

For his part, the Democratic governor said he believes that just like last year, the Republican-controlled legislature will swiftly deliver a revenue package to his desk.

"In the coming days, it is my hope that the General Assembly will come together to pass a responsible solution to balance our books," Wolf said in a statement. "There are many options available to balance the budget in the long term, like those I presented earlier this year. Our creditors and the people of Pennsylvania understand a responsible resolution must take real and necessary steps to improve Pennsylvania's fiscal future."

It was clear late Monday that the legislature would not pass a revenue package by the 12:01 a.m. Tuesday deadline.

"We're just trying to keep hope alive here and get things done," Senate Majority Leader Jake Corman (R., Centre) said Monday afternoon of trying to reach a deal. "It's sort of a minute-by-minute, hour-by-hour development."

The House and Senate were expected to convene at 11 a.m. Tuesday. After that session is over, House GOP leaders said, they could send members home, possibly for several weeks, sparking worry of another lengthy impasse. In Wolf's first year in office, the budget stalemate dragged on for nine months.

Pennsylvania's constitution requires a balanced budget, but without legislation describing precisely what revenues will prop it up, the spending plan is incomplete.

House Minority Leader Frank Dermody (D., Allegheny) said he believes the governor will have to use budgetary reserves to spend money

"You can't spend what you don't have, what you haven't raised, and what you haven't provided for in real, recurring revenue that is acceptable," Dermody said after Wolf announced his plans.

State Sen. Vincent Hughes (D., Phila.) said he was heartened by the "tone and tenor" of discussions. But he acknowledged that a stalemate could cast doubt on the state's position and authority to spend money.

"I think right now we are in a good space, we are OK," he said. "But let's wrap this thing up."

Last year, Wolf took the same course of action and the legislature was able to deliver a revenue package to his desk within three days.

This year, negotiators are facing the challenge of closing a $1.5 billion shortfall in the fiscal year that just ended — the largest since the 2009 recession — and a projected $700 million deficit in the one that began July 1.

For weeks, talks have been mired in disagreement over proposals to expand gambling and, possibly, further privatize alcohol sales.

The idea of borrowing up to $1.5 billion also has been controversial because the state would pay back the loan using money that flows annually into a  fund set up as part of the landmark settlement with tobacco companies. The fund is to be used for tobacco-cessation programs, health research, health insurance for the uninsured, and home and community-based services for older Pennsylvanians, among other services.

In the budget he unveiled earlier this year, Wolf had proposed raising new dollars through a tax on natural gas extraction and expanding the  6 percent sales tax to services that are now exempt.

But Republicans, who control both legislative chambers, have rejected the idea of a new drilling tax and have refused to increase either the sales or personal income tax.

That has left lawmakers scurrying to cobble together other proposals that can generate dollars, turning over the last few years to gambling, liquor and other "sin taxes."

The $32 billion spending plan the legislature sent Wolf last week would increase funding for public schools, early childhood and special education, and services for the intellectually disabled.

It also includes a planned merger of the Department of Corrections and the Board of Probation and Parole, as well as savings from a proposed merger of the Departments of Health and Human Services.

House Majority Leader Dave Reed (R., Indiana) said early Monday evening that the governor, to be responsible, should have struck spending lines from that budget bill, given the lack of a revenue deal.

He also noted that Wolf has not actually signed a budget since he took office in 2015.

"If you can spend $32 billion a year without a governor three years in a row, I would question, you know, where's the leadership from that office," Reed said.

Last week, Standard & Poor's warned that 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.".

At midday Monday, State Sen. Scott Wagner (R., York), who wants to challenge Wolf in next year's governor's race, took a break from the action — or inaction — inside the Capitol to film a quick campaign ad, posted on Facebook, aimed at the governor.

Standing in the empty space outside the Capitol where the governor parks his Jeep, Wagner asked: "Where is Tom Wolf?"

"We're in there trying to balance and pass a budget for the state of Pennsylvania — well, where's the governor?" Wagner asked, adding. "I'm standing in his parking space, and he's not here."

The governor's office said that Wolf was in the Capitol early Monday, and left the building only for a short business meeting.

Wagner, too, was out of the Capitol earlier in the day — at a campaign event, according to his campaign's Facebook page.

Wolf's campaign wasted no time pouncing on what it described as Wagner's hypocrisy.

"Like a typical Harrisburg politician, Scott Wagner was out campaigning for a new job while refusing to do the job he was elected to do," state Democratic Party spokeswoman Beth Melena said in an email, adding: "Scott Wagner is the worst Harrisburg has to offer."