Pennsylvania Still Doesn't Have a Budget

by | June 22, 2015

By Angela Couloumbis and Chris Palmer

With 10 days until a new fiscal year, the Wolf administration and the GOP-controlled legislature will have to pull the equivalent of a college cramming session to meet the deadline to enact a state budget.

The two sides have met behind closed doors for months, with little obvious progress on the issues that have dominated Capitol discourse: property-tax reform, liquor privatization, and a fix for skyrocketing pension costs.

By last week, the only agreement between the Democratic governor and Republican legislative leaders was the size of the budget gap -- $1.2 billion. The brass ring will be figuring out how to plug it.

The talks, by all accounts, have been civil but frustrating, as ideological differences at the negotiating table -- which can be stripped down to a purely Democrat-vs.-Republican divide -- run deep.

So deep that the GOP is discussing sending its own budget plan to Wolf by the June 30 deadline instead of building on the one he presented in the spring.

"Philosophically, there are fundamental differences between the Senate Republicans and Gov. Wolf," said Drew Crompton, a top lawyer for Senate Republicans. "We don't believe we need the broad-based tax increases that the governor proposed, and we are going to work on numbers to show that the excessive taxes and some of the spending is not necessary to meet the core functions of government."

For Wolf, the stakes are high. How he fares at the negotiating table could set the tone for how the legislature treats him for the rest of his term.

The governor, who still commands high public approval ratings, has had no qualms slapping back at Republicans. He contends they are responsible for the status quo -- which the public voted against by electing him. And he has said he wouldn't be surprised if the talks stretch well into the summer.

"Having a budget on time is less important to the governor than having a budget that includes substantive solutions to the issues the people of Pennsylvania care about," Wolf spokesman Jeff Sheridan said Friday. "That is what he was sent here to do."

Wolf's nearly $30 billion budget plan calls for a major shift in how, and how much, state residents pay in taxes. It would increase the sales and the personal income tax, and use that new money to reduce property taxes. It would also impose a new tax on natural gas drilling to boost public education funding.

Republicans have balked at the proposal, contending it will hurt middle-class taxpayers, cost the state valuable jobs in one of its most promising industries, and fail to address what they say is among the biggest reasons for the rise in expenses: public employee pensions.

Wolf wants to borrow money to help pay down some of the state's pension debt, and pay it off by using money from liquor "modernization" proposals, such as expanding Sunday hours for state-run stores.

Republicans want to change benefits for new employees, and require existing ones to pay more into the system to keep theirs at current levels.

Both Democrats and Republicans say there have been good discussions on pension fixes, though neither side would elaborate.

Liquor privatization is a different matter.

Last week, it emerged as a potentially dangerous wedge between Wolf and House Republicans, notably Speaker Mike Turzai (R., Allegheny), according to sources with knowledge of the talks.

Turzai wants to sell off both the wholesale and retail operations of the state's Liquor Control Board. Wolf adamantly opposes the idea. Finding a middle ground has been elusive.

"It's going slowly, there is no question about that," said House Minority Leader Frank Dermody (D., Allegheny). "But we are still talking. . . . A lot can happen in 10 days."

Steve Crawford, a lobbyist and former chief of staff to Gov. Ed Rendell, said he was not surprised negotiations have been difficult. He said Wolf likely sees himself as having a mandate to boost education funding after his 10-point victory last fall.

At the same time, Republicans -- who in the same election added to their majorities in both chambers -- believe they have a mandate to tackle priorities such as pension reform and liquor privatization.

Donna Cooper, another onetime top Rendell aide, said even in the years lawmakers knew one another well, budget delays were expected -- and sometimes helped.

"People need to get it right," said Cooper, who now heads a youth advocacy group. "And if they need a couple of extra weeks, or even a couple of extra months, I think that's the better path than to shove anything down people's throats or get into veto fights."

In a study released three years ago, researchers at the Institute of Public Affairs at Temple University found that between 1961 and 2006, Pennsylvania's governor and legislature took, on average, 33 extra days after the deadline to reach a budget. Ten other states had average delays that matched or exceeded that rate.

The factors that consistently led to late budgets in Pennsylvania were the same ones now in play: a need for more money, and a divided government.

As a result, "I think everybody's sort of anticipating that there's going to be a late budget this year," said Joseph P. McLaughlin, the institute director.

Though not uncommon, there are consequences in Pennsylvania for failing to pass a budget by June 30. A protracted impasse can affect the state's ability to pay its bills. Crawford said he thinks that both sides understand the stakes this year, and that most in Harrisburg are willing to absorb the effects of a prolonged showdown if it means eventually agreeing on major policy priorities.

If nothing else, he is prepared to be spending a good deal of time -- with others -- in the Capitol. "I took my summer vacation in March," he chuckled.

(c)2015 The Philadelphia Inquirer