Senate GOP Confronts No-Tax Package in 80-Day Budget Fight

The Senate's Republican majority was divided over going along with the House's GOP-penned plan.

The Pennsylvania Senate returned to Harrisburg on Monday, Day 80 of an increasingly ugly budget stalemate, as senators began picking apart the House's no-new-taxes plan and raising questions about whether huge parts of it are realistic.

The Senate's Republican majority was divided over going along with the House's GOP-penned plan, as lawmakers grapple with how to resolve state government's largest cash shortfall since the recession, now a projected $2.2 billion gap in a $32 billion budget.

After a two-hour closed-door meeting in the Capitol, Republican senators said they will seek changes to the House GOP's plan, saying it would worsen the state's long-term finances. Senate Republicans also say the House GOP plan to borrow to plug part of the deficit is unduly expensive, and it otherwise has holes of hundreds of millions of dollars in it.

Top Senate Republicans continued to make the case to find hundreds of millions of more dollars for the budget — such as a tax increase of some sort — to give the deficit-riddled state government the ability to pay its bills farther into the future.

"Where we're at financially is not good," said Senate President Pro Tempore Joe Scarnati, R-Jefferson, the chamber's ranking senator. "We're out of money. I don't know by any means you can put lipstick on that or spin that any way to make it look better or sound better. But we're out of money and we've never been in this position before, being out of money."

The deficit is making itself felt, nearly three months into the fiscal year.
On Friday, Democratic Gov. Tom Wolf's administration said it had to delay $1.7 billion in payments, without enough in tax collections coming in to pay every bill on time. It is the first time the state has ever had to take such a step, state officials say.

Wolf said in a statement Monday evening the state has little time to get a responsible budget package in place before it faces a downgrade to its battered credit rating. Following a weekend phone call with top lawmakers, he said he believes a compromise deal is possible in the coming days.

Wolf has authority to spend, under the nearly $32 billion budget bill lawmakers overwhelmingly passed June 30, despite projections that it would be badly out of balance.

Since then, lawmakers have fought over how to pay for it.

Leaders of the House and Senate's GOP majorities largely agree on borrowing a large amount of the cash the state needs, a practice frowned on by public finance professionals. GOP leaders are also counting some $200 million in one-time license fees from another expansion of casino gambling that lawmakers haven't even approved.

They disagree over a tax increase.

A bipartisan group of senators in July backed a $500 million-plus tax package that hits utility customers and natural gas production. Wolf backed that approach. But the House GOP rejected that, and instead wants to siphon approximately $630 million from off-budget programs, including accounts for environmental protection and mass transit.

Every House Democrat voted against that plan, and Wolf opposes it.
Senate Republicans said Monday that just $140 million of that amount is actually available, and not otherwise committed.

Senate Republicans also raised questions about the House GOP plan to "sell" a revenue stream for up to 10 years in exchange for an upfront payment of $1 billion. The effective interest rate to finance it would be higher than a traditional borrowing scheme, Senate Republicans say.

House Republicans have not cited a prior example of such a deficit-financing plan and could not estimate how much it would cost taxpayers.

Meanwhile, going along with the House's no-new-taxes package, over the objections of Democrats, would ensure that Democrats block casino gambling legislation, Scarnati said. That would leave another $200 million hole in the GOP's deficit-patching strategy, Scarnati said.

Copyright AP - Associated Press
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