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Pa. budget chief warns of little wiggle room to narrow gaping state deficit

| Thursday, Dec. 19, 2013, 12:01 a.m.
Justin Merriman | Tribune-Review
Charles Zogby, Secretary of the Budget in the Office of the Governor, speaks with the Tribune-Review's editorial board on Tuesday, Dec. 4, 2012.

State officials project a $1.2 billion to $1.4 billion hole in the budget next year, challenging Republican Gov. Tom Corbett and lawmakers to pull off the toughest balancing act of his administration.

Budget Secretary Charles Zogby held his midyear budget briefing on Wednesday, saying that though Pennsylvania is on pace to end the year in balance, it faces significant hurdles in 2014-15. The $1.4 billion figure factors in growth in the budget's 2,000 line items under law and without new spending.

“I think everybody knows it's going to be a tough year,” House GOP spokesman Steve Miskin said.

In previous years, the Corbett administration cut 2,788 state employees and reduced administrative-related costs by $437 million. Three budgets in, there's less to wring out of the $28.4 billion spending plan.

“You just don't have those to fall back on,” Zogby said. “The list of options becomes shorter, in terms of costs and efficiencies.”

The state is obligated to increase its contributions to its two pension funds by $610 million next year. That will eat most of the projected $835 million in revenue growth. The state has a “very significant” $300 million loss in federal dollars used for Department of Public Welfare programs.

Opposed to broad-based tax increases — a commitment on which Corbett is campaigning for re-election — the administration is looking for ways to cut costs and drive revenue. High on Corbett's priority list is addressing pension costs.

“The governor believes we absolutely have to undertake reform to keep these huge increases from happening,” Zogby said. “The status quo is unacceptable.”

Lawmakers in the GOP-controlled Legislature examined pension reform proposals, though none gained majority support. A plan Corbett favored last year would have cut about $180 million by limiting what the state and school districts contribute toward pensions and reducing benefit costs for hires.

House Appropriations Minority Chairman Joe Markosek, D-Monroeville, blamed the tough fiscal times not on pensions but on cuts to corporate taxes, such as the capital, stock and franchise tax Corbett planned to eliminate.

“The governor is trying to make employee retirement benefits a budgetary issue,” Markosek said. “However, his $1.2 billion in business tax breaks have exacerbated the state's current fiscal situation.”

House Democrats have ideas on how to raise $1.5 billion in revenue, including $334 million from a severance tax on natural gas drilling.

Miskin said House Republicans are open to new revenue drivers. In the fall, the state legalized small games of chance at bars and taverns, which could inject as much as $156 million into the general fund, aides estimate.

Legalizing keno, a numbers-based guessing game played on electronic terminals, has broad support in the Senate.

Corbett presents his budget address on Feb. 4. Lawmakers have until July 1 to pass a balanced budget.

Jay Pagni, Corbett's spokesman, said the governor will weigh his priorities against the ability to pay for them as he develops his budget, though he would not elaborate.

Last week, Senate Democrats presented proposals to establish $1.1 billion worth of new revenue and annual savings. That includes expanding Medicaid under the Affordable Care Act for a gain of $400 million in state money offset by federal funds; modernizing hiring and pricing laws at the Pennsylvania Liquor Control Board to gain $125 million; and expanding taxes on smokeless tobacco to gain $36 million.

Senate Minority Leader Jay Costa, D-Forest Hills, said the plans would drive enough revenue to continue to invest more in education and human services programs.

Lawmakers, he said, should examine all revenue options, except for broad-based taxes.

“We need to look under every rock and every stone,” Costa said.

Melissa Daniels is a Trib Total Media staff writer. Reach her at 412-380-8511 or mdaniels@tribweb.com.

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