Pennsylvania's Ugly Budget Fight Nears Unsatisfying End

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Oct/29/2017

HARRISBURG, Pa. — The Pennsylvania House of Representatives had passed an aggressive, bipartisan gambling expansion bill an hour earlier when Democratic Gov. Tom Wolf's top budget adviser walked by the chamber's Democratic leader in the Capitol's ornate rotunda.

"Thank you," he told Minority Leader Frank Dermody, D-Allegheny.

It was perhaps the most polite thing said about Pennsylvania's ugly budget process and a Frankenstein-like assortment now sitting on Wolf's desk: The gambling bill, a $140 million tax package and a $1.5 billion borrowing measure to bail out the state's finances.

There were no celebratory news conferences for the borrowing and gambling, no flood of credit-taking and no visible elation.

Despite their distaste for the legislation, lawmakers said it puts the state on sound financial footing for the foreseeable future after fighting persistent deficits since the recession.

This year's projected deficit was particularly acute — $2.2 billion, driven largely by Pennsylvania's biggest post-recession shortfall.

The legislation props up a $32 billion bipartisan spending package, and could ease whatever fiscal challenges emerge ahead of next year's election, when voters decide on Wolf's re-election bid, plus contests for most legislative seats.

Wolf hasn't said whether he will sign the bills, hundreds of pages of legislation that flew through the legislature last week after a monthslong stalemate pitting Wolf, Senate Republican leaders and Democratic lawmakers against the House Republican majority's huge conservative bloc.

Everyone had reasons to dislike the package.

"When you're dealing with difficult budgetary decisions, you're never going to be left with the good versus the bad," said House Majority Leader Dave Reed, R-Indiana.

Top House Republicans declared a victory of sorts, saying they had fought off higher taxes, in particular a severance tax on Marcellus Shale natural-gas production that had isolated them in the Capitol.

There was no celebration by Wolf, top Senate Republicans or Democratic lawmakers, who had, to some degree, unified around a bigger tax package, including a Marcellus Shale tax.

But blocked by House Republicans, the scale of the borrowing and gambling legislation grew. In the end, finishing the stalemate was its own victory.

"Being done had a lot of value, and so we moved forward with it," said Senate Majority Leader Jake Corman, R-Centre.

Asked how the governor felt about the budget process, his office released a statement that took a swing at House Republicans, saying their opposition to a severance tax "has revealed the worst of Harrisburg."

House Speaker Mike Turzai — the Allegheny County Republican who is considering a bid for governor — insisted it would damage western Pennsylvania's economy.

The process blew four months past the July 1 start of the fiscal year.

The state had spending authority under a bill that lawmakers overwhelmingly approved June 30.

By and large, lawmakers gave Wolf the spending he had sought — a modest increase for public schools, a robust boost for pre-school programs, more resources to fight opioid addiction and a big injection of money into services for the intellectually disabled. Helping was the easing of long-term cost pressures in prisons and Medicaid.

Paying for it was another matter.

In mid-July, House Republicans abruptly retreated from discussions over raising taxes and embarked on a two-month, twisting-and-turning path to produce their own no-new-taxes plan.

Along the way, Wolf and the Senate fought off House GOP efforts to siphon cash from mass-transit agencies and environmental-cleanup programs and impose spending cuts on prisons and county-run social services.

The state struggled to make payments on time and got slapped with a costly credit downgrade.

Ultimately, Wolf won approval of just a fraction of the $1 billion tax package he initially had proposed.

The tax package now on Wolf's desk could produce just enough cash to finance the cost of the borrowing — more than $2 billion, including interest, over 20 years — and lawmakers estimate the gambling bill will provide another $200 million per year from casino license fees and taxes on higher gambling losses.

Wolf was never enthusiastic about borrowing or expanding casino-style gambling. But Republicans preferred it over a tax increase and, to boot, the gambling bill was packed with pet provisions to bring cash to legislators' districts.

That left Wolf little choice — and it is why Wolf's budget secretary thanked Dermody.

"He understands he's got some more money," Dermody said. "The budget secretary likes to have money."

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