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Why Pennsylvania's Governor Hasn't Signed a Budget in 3 Years

For the second year in a row, Gov. Tom Wolf will allow the state's budget to become law -- with no way to pay for it yet.

By Steve Esack

For the second year in a row, Gov. Tom Wolf will allow the state's budget to become law -- with no way to pay for it yet.

Late Monday afternoon, Wolf said he would allow the $32 billion budget to lapse into law without his signature, having waited for the Legislature to send him the necessary bills that spell out how it can be spent and where the money will come from.

"In the coming days, it is my hope that the General Assembly will come together to pass a responsible solution to balance our books," Wolf said. "There are many options available to balance the budget in the long-term, like those I presented earlier this year. Our creditors and the people of Pennsylvania understand a responsible resolution must take real and necessary steps to improve Pennsylvania's fiscal future."

It was Wolf's third budget. He hasn't signed any of them. The first budget, 2015-16, was locked in a nine-month stalemate with the Republican-controlled Legislature. Last year, the budget slipped into law without his signature.

The Democratic governor's latest decision came less than eight hours before the midnight deadline for him and the Legislature to agree on how to pay for the state's budget bill approved by lawmakers on June 30. The constitution gives the governor 10 days to sign, veto or allow a legislatively approved bill to lapse into law.

The Legislature did not give him the necessary enabling legislation that allows the administration to spend the budget money. The enabling legislation is a series of tax, fiscal, school, welfare and administrative codes for various departments and programs. The enabling legislation also was expected to include bills to expand gambling and loosen liquor sales in some way.

Lawmakers have been unable to agree on those bills in large part because they have declined to raise taxes or cut programs to cover the estimated $2.2 billion deficit. Wolf has asked for tax increases on some business practices and the natural gas industry but not taxes on workers or consumers as he's sought in other years.

On Sunday, Wolf rejected a revenue package presented by Republican House and Senate leaders. His rejection was partly due to a recent credit report that warned the state could be hit with an extra $20 million in annual borrowing costs on bonds due to a protracted deficit. Wolf wanted the severance tax; legislative leaders turned him down.

The state cannot borrow its way out of its deficit or pass enough gambling and liquor bills to do so either, said House Minority Leader Frank Dermody, D-Allegheny.

"You saw what the rating agencies said, they're going come in here to downgrade our credit again because we have not been balancing our budgets with real revenue," he said.

The deficit includes $1.5 billion from the 2016-17 fiscal year that ended June 30 and an estimated $700 million for the new fiscal year that expires June 30, 2018.

To reduce that deficit without raising taxes, the House plans to withhold votes on bills that would provide a combined $609 million in funding to Temple, Penn State and Lincoln universities, the University of Pittsburgh, Thaddeus Stevens College of Technology and the University of Pennsylvania's veterinary school, said Steve Miskin, spokesman for House Republican Caucus.

The figure represents the state's entire contribution to the schools.

The House also plans to borrow $200 million from a surplus account controlled by the Pennsylvania Professional Liability Joint Underwriting Association, a state-created nonprofit that provides medical liability insurance to health care professionals and entities that cannot get it on their own.

It's not the first time the Legislature has attempted to borrow money from the malpractice fund. It tried to do it in the last fiscal year, resulting in a federal lawsuit filed in U.S. District Court in Harrisburg. The lawsuit caused the Wolf administration to not tap those funds in the 2016-17 fiscal year. It remains to be seen whether the transfer can take place with an active lawsuit.

In allowing the budget to become law, Wolf can put all or some of the money into "budgetary reserves," which means a mid-year spending freeze could occur if the revenue package does not fully materialize in the Legislature.

The constitution says budgets must be balanced. Then again, no one raised formal complaints last year when Wolf started spending before the Legislature finished the code bills without adopting a gambling expansion bill that was supposed to bring more revenue. The lack of a gambling bill made the 2016-17 deficit grow. Wolf also did not freeze spending during the fiscal year when revenues came in far below expectations.

Earlier in the afternoon, Senate Majority Leader Jake Corman, R-Centre, described the budget developments as "moment by moment." Republican senators have been told they could remain in Harrisburg until Wednesday or Thursday, he added.

The package includes a plan to borrow about $1.5 billion to be repaid with proceeds from the state's annual allotment of money it receives from a legal settlement with tobacco companies. The package also includes about $800 million in estimated new revenue, including a bill to expand gambling options in the state.

Gambling expansion was controversial from the start. The House wanted to legalize up to 40,000 video slot machines in bars and truck stops as part of the expanded gambling bill. The Senate did not, preferring only to legalize online wagering, fantasy sports and allow the state lottery to sell tickets online.

The bill emerging in talks would spread gaming to the internet and give the state's dozen casinos first dibs on running 10 small satellite slots parlors spread across the state. It also would add a 1 percent tax on the 54-percent levy charged to casinos' slot machine revenue. It would eventually sunset a controversial tax, known as a host fee, that municipalities had collected until the state Supreme Court struck it down last year.

As of Monday, seven states that operate on July1-June 30 fiscal years had not passed full budgets, according to the National Conference of State Legislatures.

(c)2017 The Morning Call (Allentown, Pa.)

Caroline Cournoyer is GOVERNING's senior web editor.
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