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A 'get out of town' budget appears inevitable, lawmakers say

WHP

Lawmakers faced with Pennsylvania state government's biggest cash shortfall since the recession are bracing for what they call a "get-out-of-town budget."

Put another way, there is little expectation in the Capitol of bringing long-term balance to the state's tattered finances before lawmakers depart for their traditional summer break from Harrisburg.

Gov. Tom Wolf, a Democrat, and leaders of the Legislature's huge Republican majorities have been absorbed with major pension and gambling legislation until recent days, virtually ensuring that a budget package will be hashed out in rushed, closed-door negotiations.

With just two weeks before the July 1 start of the 2017-18 fiscal year, ideas on how to inject more money into the state's threadbare bank account have begun flying around the Capitol in earnest. One concept raised by Senate Republicans is borrowing a one-time lump sum against cash from Pennsylvania's share of the landmark 1998 multi-state settlement with tobacco companies.

For now, top Republican lawmakers are sticking to talking publicly about what they can do to avoid a budget-balancing tax increase, while rank-and-file lawmakers worry about what kind of result will emerge from a slapdash budget.

"I don't know what kind of magic you have to have to pull something out at the last minute," said Sen. Don White, R-Indiana.

To some extent, partisan differences are narrower than in many years that Pennsylvania has had divided government because of the relatively austere, $32.3 billion budget that Wolf proposed in February.

And while Wolf's administration has criticized the cuts in the House's $31.5 billion counterproposal as too severe, Wolf also has asked little from lawmakers this year after House Republicans stared down his ambitious first budget proposal through a record-long stalemate.

A get-out-of-town budget will leave problems to fester, some lawmakers worry.

That includes school districts squeezed by rising pension costs, a school funding system that harbors wide disparities between wealthy and poor districts and a Department of Environmental Protection so wracked by years of budget cuts that the federal government is threatening to revoke some enforcement powers.

It also includes worries that Pennsylvania's economy is floundering.

"Everybody understands the problems," said Sen. John Yudichak, D-Luzerne. "There's no sneaking up on us. It's a question of the solutions."

Years of deficits — driven by sluggish tax collections, rising human services costs and making good on delinquent pension payments — have cost Pennsylvania credit rating downgrades, leaving its bond rating among the lowest of states. Attempts to fix it by pinching pennies, expanding casino-style gambling, increasing tobacco taxes and liberalizing wine and liquor laws have produced consistently disappointing results.

Budget makers knew they built some risky expectations into this year's budget. But a severe lag in tax collections caught them by surprise.

Republican leaders are tight-lipped about how they expect to find the money to balance the budget. Senate Republicans say $2.2 billion is necessary to fund a House Republican spending plan built on belt-tightening and cuts in some of the costliest services in state government, including prisons, social services and medical care for the poor.

Wolf early on ruled out raising sales or income taxes, avenues he pursued in his first two budget proposals. Instead, he suggested a $1 billion tax package he billed as closing loopholes and making corporations pay their fair share. That included his third straight year of proposing a tax on Pennsylvania's Marcellus Shale natural gas production, plus imposing the sales tax on computer services and warehousing.

All of that — plus his proposals to raise the minimum wage, charge municipalities for free state police coverage and restructure the corporate net income tax — has generated little interest from Republicans.

For their part, House Republicans are pressing for revenue through an aggressive legalization of more gambling and selling more wine and liquor licenses. Senate Republicans are considering narrower gambling proposals, in addition to borrowing.

And while top Republicans have yet to test support for a tax increase among GOP rank and file, some Republican lawmakers see no way to scrape up $2.2 billion without one.

"This budget is going to be difficult," said Sen. Bob Mensch, R-Montgomery. "And any solution is going to involve pain."

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