By Chris Palmer

In a major blow to Gov. Wolf's agenda, the state House on Wednesday soundly rejected his proposal to increase funding for Pennsylvania schools through tax hikes, creating more uncertainty about how or when the state's 99-day budget impasse would be resolved.

The measure, which sought to raise the personal income tax and impose a new levy on natural-gas drilling, was defeated 127 to 73. It needed 102 votes to pass.

The rejection clouds the future of the budget for Wolf, the first-term Democrat who for months has said the state's budget needed a significant infusion of new revenue.

Speaking on the House floor before the vote, Rep. Bill Adolph (R., Delaware), said Republicans had sent Wolf a consistent message during budget negotiations: There was not enough support for hiking broad-based taxes like the personal income and sales tax.

"It's taking too long to get in touch with reality," said Adolph, who chairs the House Appropriations Committee.

But some Democrats said they agreed with Wolf's stance that new revenues were necessary to close what he has called a $2 billion structural deficit.

"One thing you can't declare victory about is a need for more money," Rep. Dwight Evans (D., Philadelphia) said to his GOP colleagues on the floor. "You may differ in how to get there, but you recognize there's a need for new money."

It was not immediately clear what Wolf's next move would be, or when the two sides might return to the negotiating table.

On Tuesday, the governor offered one of his first major concessions during the state's three-month budget standoff, backing off a demand to raise the state sales tax from 6 percent to 6.6 percent.

But he was still calling for a personal income tax hike, from 3.07 percent to 3.57 percent, and wanted to impose a new 3.5 percent tax on natural gas drillers.

House Majority Leader Dave Reed (R., Indiana) said Tuesday that a no-vote on Wolf's proposal should indicate that significant new levies should be taken off the table.

"At some point, we've got to vote somebody off the island -- and if it's got to be broad-based tax increases, so be it," he said.

The state has been operating without a budget since June 1, halting payments to non-profits and school districts that rely on state aid. Last week, Wolf imposed a hiring freeze and travel restrictions on state offices.

(c)2015 The Philadelphia Inquirer