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Gov. Wolf to let unbalanced spending bill become law

| Monday, July 10, 2017, 10:51 a.m.
Senate President Pro Tempore Joe Scarnati, R-Jefferson, walks through the Pennsylvania Capitol after a meeting with House Majority Leader Dave Reed, R-Indiana, in Harrisburg, Monday, July 10, 2017.
Steph Chambers | Tribune-Review
Pennsylvania Gov. Tom Wolf has until midnight on Monday, July 10, to sign a state spending bill or veto it, or it will take effect automatically.

HARRISBURG — For the second straight year, Democratic Gov. Tom Wolf will let a state budget bill become law despite being badly out of balance as he presses Pennsylvania's Republican-controlled Legislature to approve a tax package big enough to avoid a credit downgrade.

Wolf's decision came in a statement Monday, after the collapse of down-to-the-wire negotiations and hours before the nearly $32 billion spending bill was to become law without his signature at midnight.

In a statement, Wolf — who had stayed out of sight since Friday — said he hoped lawmakers could come together in the coming days to responsibly balance a budget with a projected $2 billion hole in it.

“Our creditors and the people of Pennsylvania understand a responsible resolution must take real and necessary steps to improve Pennsylvania's fiscal future,” Wolf said.

In the 10 days after lawmakers sent it to his desk, Wolf had the power to sign it into law, veto it or strike out some of the spending.

Wolf's move left questions about the constitutionality of the budget bill and how long it will take Pennsylvania's divided government to produce an agreement to pay for it.

Looming is the potential for another downgrade to a credit rating already damaged by Pennsylvania's failure to deal with an entrenched post-recession deficit.

An approximately $2.2 billion revenue package is necessary to resolve the state's largest shortfall since the recession and a projected deficit in the fiscal year that began July 1, budget negotiators say.

Wolf had found more common ground with Senate leaders in recent weeks, and House Majority Leader Dave Reed, R-Indiana, sharply attacked Wolf on Monday evening as being absent on leadership and negotiating in bad faith.

Reed said Wolf should have stripped some spending from the budget bill if he was unwilling to go along with two House GOP demands: allowing thousands of bars and truck stops to operate slot machine-style video gambling terminals and privatizing more of the state-controlled wine and liquor store system.

“Look, there's two sides to credit problems,” Reed said. “One is not just more taxes, one is less spending.”

The Senate also had opposed those House GOP proposals, and critics said they promised little immediate help and even long-term harm to the state's finances.

The revenue package under construction in closed-door negotiations was to rely primarily on borrowing and involved another big expansion of casino gambling in the nation's No. 2 commercial casino state.

Wolf rejected Republican plans that leaned more heavily on one-time cash infusions, and pressed Republicans to support a larger package of tax increases, top lawmakers say.

Wolf had sought $700 million to $800 million in reliable, annual revenue, such as tax increases. House Republicans had been unwilling to offer a tax package even half that size, Democrats say.

Top senators said tax increases under discussion involved basic cable service, movie tickets, bank profits, telephone service and electric service. Another element of a proposed budget deal, designed to save money, would give the state the option to shut down unprofitable wine and liquor stores and transfer the stock to a nearby beer distributor to be sold there.

Wolf has pushed Republicans to agree to a production tax on natural gas drilling in the Marcellus Shale, his third straight year of doing so. Pennsylvania, the nation's No. 2 natural gas state, is the only large natural gas-producing state that does not tax the product. Top Republican lawmakers have rejected that, despite its support from most Democrats and moderate Republicans.

Without a signed budget plan in place, the state has lost some of its spending authority, though the Wolf administration has said it anticipated no program or service interruptions, at least through Monday night.

Last year, the Legislature sent an on-time, bipartisan spending bill to Wolf, but with no plan to pay for parts of it.

Wolf let the plan become law without his signature when the 10-day signing period expired and lawmakers delivered a $1.3 billion funding package three days later.

Both the House and Senate were expected to return to session Tuesday. It was unclear, however, whether Republicans could even pass a budget-balancing revenue plan without help from Democratic lawmakers, who have backed Wolf.

Stuck in the Legislature along with a revenue legislation were measures carrying approximately $600 million in aid to Penn State, Pitt, Temple, Lincoln and Penn.

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