Clock ticking on balanced budget

Legislators grappling with how to bridge multi-billion-dollar gap

The clock is ticking on Pennsylvania lawmakers grappling with the state government’s biggest shortfall since the recession to come up with the $2 billion-plus they say they need to balance a shortfall from the justended fiscal year and a projected deficit in the just-started fiscal year.

No agreements were reported Monday, three days after the Republican-controlled Legislature sent the main appropriations bill in a $32 billion budget package to the desk of Democratic Gov. Tom Wolf. Wolf has 10 days to sign the bill through midnight July 10, or let it become law without his signature. He has not said what he will do if lawmakers don’t agree before then on how to raise the money.

It is the second straight year the Legislature sent an on-time, bipartisan spending bill to Wolf, but with no plan to pay for parts of it. Last year, Wolf let the plan become law without his signature

when the 10-day signing period expired — despite questions about whether the move was constitutional — and lawmakers delivered a $1.3 billion funding package three days later.

The fiscal year began Saturday. Without budget legislation in law, the state has lost some of its spending authority, although Wolf’s administration said it anticipated no program or service interruptions, at least in the next 10 days.

Options being explored by lawmakers include borrowing, raising taxes, expanding casino-style gambling and selling more wine and liquor licenses.

Borrowing

Lawmakers and Wolf have indicated that they are willing to borrow up to $1.5 billion, the figure they say is necessary to plug what they call a one-time shortfall in the finances of the just-ended fiscal year.

The leading source of money they have identified is Pennsylvania’s share of the landmark 1998 multistate settlement with tobacco companies. That brings in about $350 million annually, although it is expected to shrink in the coming years, reflecting declining cigarette sales.

In the past fiscal year, most of the money — about 80 percent — went to fund hospital care, long-term nursing care and other services that traditionally were footed by the state’s main bank account, called the general fund. At a 4.5 percent interest rate over 20 years, the state would spend in excess of $2.2 billion to borrow $1.5 billion.

Gambling

Wolf has asked for $250 million in new money from gambling — in taxes or license fees — and for authorization

for the Pennsylvania Lottery to expand its sales and games to the internet to help boost the lottery’s flagging sales.

The chambers have agreed on the lottery legislation, but they have disagreed on other elements of gambling.

Primarily, House Republican leadership has pushed to allow up to 40,000 slot machine-style video gambling terminals in bars and truck stops across the state. They tout it as a big money maker for the state, flushing hundreds of millions of dollars into the bank accounts of establishment owners and the state and local governments. Critics — including Wolf’s Department of Revenue — counter that it is unlikely to raise money within a year and, when it does, it will cannibalize revenue from the casinos and lottery games that already feed cash to state programs.

Wolf is not a fan and, in any case, Senate leaders say there isn’t enough support in the chamber to pass such a bill.

Taxes

Wolf in February proposed a $1 billion tax package and a $25-per-person fee on residents of municipalities that receive free Pennsylvania State Police coverage because they lack their own local police force.

The tax package included a new 6.5 percent tax on Marcellus Shale natural gas production, the third straight year Wolf has sought such a tax. The perperson fee would raise $63 million annually to help reduce the potentially unconstitutional use of highway construction money to underwrite the state police coverage.

Liquor

House Republican leadership is pressing legislation to sell more privatesector wholesaling or retail licenses for wine and liquor.

Selling more of the licenses is projected to provide a one-time bump in revenue. However, the Senate has put the measures to the side, saying they are long-term money losers and shouldn’t be considered in the context of the budget.