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Pennsylvania House OKs new cash package to backfill deficit

| Tuesday, Oct. 17, 2017, 10:00 p.m.
The state Capitol in Harrisburg.
The state Capitol in Harrisburg.

HARRISBURG — Pennsylvania's Republican-controlled House of Representatives advanced its latest deficit-financing proposal Tuesday night that revolved around elements the House previously had rejected in a protracted budget standoff with the Senate and Democratic Gov. Tom Wolf.

The proposal passed the House within a couple hours of being unveiled and had the support of House Republican and Democratic leaders. In a 102-88 vote, the bill garnered the minimum number of votes necessary to pass and was met with circumspection by Senate GOP leaders and Wolf.

It is built around borrowing $1.5 billion against Pennsylvania's share of the 1998 multistate tobacco settlement — with interest, payback would cost more than $2 billion over 20 years — and a grab bag of tax increases that is projected to yield as much as $140 million in a full year.

During floor debate, Rep. Kate Harper, R-Montgomery, called it “a conglomeration of several bad ideas” and said she would vote against it. Rep. Tony DeLuca, D-Allegheny, called voting for it “the right thing to do” instead of cutting crucial programs.

The budget fight is now in its fourth month. Lawmakers on June 30 overwhelmingly approved a nearly $32 billion budget bill, but without a plan to fully fund it after the state government suffered its biggest cash shortfall since the recession.

In many ways, Wolf has moved on from the House's gyrations. Two weeks ago, Wolf began exploring borrowing avenues without the involvement of lawmakers, declaring that he was finished waiting for House Republicans to produce a plan to fill a projected $2.2 billion deficit.

Until Tuesday, the House had rejected any sort of tax increase or borrowing, even trying to label a $1 billion borrowing plan it passed in September as “selling” an asset.

Both Wolf and Senate GOP leaders would only say they would look at the bill, while Wolf's office continued to press for a severance tax on Marcellus Shale natural gas drilling, something House GOP leaders have fought.

Amid the standoff, the House is holding up $650 million in aid to Penn State, the University of Pittsburgh, Temple and Lincoln universities and the University of Pennsylvania's veterinary school.

Meanwhile, the credit rating agency Standard and Poor's lowered its rating on Pennsylvania's debt and Wolf has postponed payments for lack of cash or gotten short-term cash infusions from the Pennsylvania Treasury to pay bills on time.

The Senate in July approved a roughly $500 million tax package that Wolf supported. The package included a Marcellus Shale tax and $1.25 billion in borrowing against tobacco settlement cash, but the House rejected it.

The House plan would extend the state sales tax to purchases in online marketplaces and fireworks, while scaling back the net operating losses businesses can carry over if, as expected, the state Supreme Court invalidates the current carry-over law in a pending case brought by Nextel Communications.

Waiting in the wings were other bills to siphon $500 million from off-budget programs, including mass transit and environmental cleanups, and authorize another major expansion of casino-style gambling in hopes of raising millions of dollars from license fees and bigger gambling losses.

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