HARRISBURG, Pa. (AP) – State government began operating Tuesday under a $31 billion election-year spending bill that nevertheless lacks the tax collections to sustain it for the entire fiscal year, and lawmakers say they are scrambling to fix that before it draws a lawsuit or bond downgrade.
Tuesday was expected to be crucial in determining whether the tax-averse Legislature controlled by huge Republican majorities will pass a tax increase to fully fund the spending bill and help shore up the state government’s deficit-riddled finances.
Neither the House nor the Senate had returned to voting session by mid-afternoon Tuesday amid closed-door wrangling over hundreds of pages of budget-related legislation and open disputes about taxes and Republican efforts to pave the way for the creation of more charter schools.
“There’s still some issues out there that we’re trying to work through,” said House Majority Leader Dave Reed, R-Indiana. “You always have issues that are still going to be out there until the moment you’re ready to go.”
At midnight Monday, the spending bill became law after negotiations proved fruitless, and Democratic Gov. Tom Wolf decided not to stand in its way. Tax collections are projected to fall hundreds of millions of dollars short of funding it, while nearly $600 million in aid to Penn State, Temple, Pitt, Lincoln and Penn remained in limbo in the House.
Top lawmakers said Monday evening they were working to produce a revenue package that Wolf would accept. They hope that will put a quick end to legal questions over how the state can operate on an unbalanced budget and the potential that it could draw another downgrade of Pennsylvania’s battered credit rating.
Senate Republican leaders told their rank-and-file members that negotiators had come to an agreement. No details were given, and work was still to be done, senators said Monday evening.
Credit ratings agency Standard & Poor’s took note that Pennsylvania was embarking on its 2016-17 fiscal year without a balanced budget and swiftly warned of a downgrade to the state’s credit rating.
Closed-door revenue discussions had revolved around a $1.3 billion package that relies heavily on a $1-per-pack cigarette tax increase, to $2.60-per-pack, and an expansion of casino-style gambling that would make Pennsylvania the fourth state to legalize internet gambling.
However, the House and Senate do not see eye to eye on sprawling gambling legislation, and Wolf has clashed with House Republican leaders over their push to tap off-budget state programs as a one-time source of stopgap cash.
The Wolf administration maintains that it is constitutional to allow the spending bill to become law and suggested that the state constitution makes the Legislature, not the governor, responsible for ensuring that spending bills are funded.
Reed said he had some concerns about the legality of the bill. There is precedent from a 1932 court ruling under which legally mandated expenses are protected, but discretionary programs must be reduced by the same share across the board, Reed said.
“If we don’t get a revenue package done here probably in the next 24 hours or so, I think that becomes a legitimate discussion,” Reed said.
Even if lawmakers pass a revenue package, it is not clear whether it will eliminate a fiscal year deficit projected at $1.8 billion by the Legislature’s Independent Fiscal Office.
Budget negotiators agreed to fund state prisons and several Medicaid lines at more than $300 million below what the Wolf administration had recommended would be necessary to cover costs. That leaves open the possibility of significant cost overruns.
The spending bill that became law at midnight Monday allows the administration to cover Medicaid cost overruns by temporarily borrowing from the Workers’ Compensation Security Fund, which provides claim payments for workers whose insurance company was liquidated.
Copyright 2016 The Associated Press.
