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State budget talks drag into early days of the new fiscal year

Written by Marc Levy/The Associated Press | Jul 6, 2017 3:29 AM
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FILE PHOTO: The state Capitol building in Harrisburg. (AP Photo/Matt Rourke)

(Harrisburg) -- Negotiators were almost finished writing compromise legislation to expand casino-style gambling in the state, a top senator said Wednesday, as legislative leaders labored in private five days into the fiscal year over how to cover the state government's biggest post-recession shortfall.

Senate President Pro Tempore Joe Scarnati, R-Jefferson, said the gambling legislation was a step toward raising $2.2 billion to fill a shortfall from the just-ended fiscal year and prop up a deficit-riddled budget package for the new fiscal year.

Scarnati would not say what would be in the gambling legislation, although proponents maintain that license fees and taxes on new streams of revenue could provide tens of millions, if not hundreds of millions, of dollars.

Scarnati suggested that provisions that had stalled the legislation in recent weeks -- such as allowing slot machine-style gambling terminals in thousands of bars and truck stops -- would be left out.

The Legislature's anti-tax Republican majority leaders, including Scarnati, have refused to bring any sort of tax increase to a floor vote, including a tax on Marcellus Shale natural gas production. Scarnati left the door open to the question of whether a tax increase would be part of a final revenue package.

The shortfall is the latest turn in Pennsylvania's struggle with an entrenched post-recession deficit.

Top Republicans say they are considering borrowing most of the money to fill the gap, up to $1.5 billion against future revenues from Pennsylvania's share of a landmark 1998 multistate settlement with tobacco companies.

The scale of long-term borrowing being eyed to prop up the state's general operations is unheard of, say current and former state officials. But borrowing to cover the past year's shortfall is justified given the success in fighting cost pressures, Scarnati said.

"I can make the argument that doing one-time borrowing to clear out previous deficits makes sense, as long as we have a balanced budget going forward," Scarnati said.

Lawmakers are projecting a reversal of years of cost growth in prisons, thanks to a shrinking inmate population, and in Medicaid's reimbursements for medical care, in part by dialing back growth projections and increasing an assessment on insurers that administer the program.

Besides gambling, negotiators are exploring how to raise more money from the sale of alcoholic beverages.

One avenue involves selling more private-sector wine or liquor licenses, while another involves shifting the payment of taxes on the sale of alcohol to the retail level from the wholesale level, a move projected to raise an extra $200 million to $300 million from consumers.

The Capitol was quiet this week as top lawmakers talked privately outside. The House scheduled a Friday session, raising the possibility of voting sessions through the weekend.

Lawmakers last week passed the main appropriations bill in a $32 billion budget package, giving Democratic Gov. Tom Wolf 10 days to sign it or veto it. After midnight Monday, it would become law without his signature if he does nothing.

Wolf has not said what he will do if lawmakers don't agree before then on how to raise the money.

In the same situation last year, Wolf let a spending bill become law without his signature, despite questions about whether the move was constitutional. Three days later, lawmakers delivered a $1.3 billion funding package that revolved around a cigarette tax increase.

The fiscal year began Saturday. Without spending legislation signed by Wolf, the state has lost some of its spending authority, although Wolf's administration said it anticipated no program or service interruptions, at least through Monday night.

Hanging in the balance this year is roughly $140 million in casino revenue that flows annually to counties and municipalities that host casinos.

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