Pa. legislators face tough budget decisions

Gov. Corbett , in a shift, isn't ruling out a tax increase. But first, he says, employee pensions must be addressed. MATTHEW HALL / Staff Photographer
Gov. Corbett , in a shift, isn't ruling out a tax increase. But first, he says, employee pensions must be addressed. MATTHEW HALL / Staff Photographer
Posted: June 16, 2014

HARRISBURG - When legislators return to the Capitol on Monday, they will have just two weeks left to figure out two things: how to close a gaping budget deficit, and how to do it without damaging their reelection chances.

With the clock ticking fast down to the June 30 deadline to pass a state budget, the GOP-controlled legislature and Gov. Corbett appear nowhere near reaching an agreement on the best way to close a budget gap ranging between $1.2 billion and $1.5 billion.

And the disagreement is fundamental: Should the state plug the budget deficit by imposing new taxes or raising existing ones? There have been discussions lately in legislative circles - and even within the governor's office - about a tax on natural gas extraction and, possibly, an increase in the cigarette tax.

The stakes for finding a swift resolution are high. Corbett, battling years' worth of low public-approval ratings, faces a tough reelection battle in the fall. All 203 seats in the House are up for grabs, as are half of the 50 seats in the Senate, where the Republican hold on the majority is not insurmountable.

A protracted budget battle is hardly the image the governor's office or legislators want to leave with constituents as they prepare to ask them for their vote come November.

Corbett, for his part, has publicly signaled he is prepared to blow the June 30 deadline to get what he wants in the budget.

"I can't guarantee when this budget is going to get done," the governor said in a brief interview with reporters last week. "I don't guarantee anything."

Corbett said he understands this is a tough budget year, "but we need to get certain things done."

Picture is bleak

In describing the state's financial picture, tough may not be a strong-enough word.

This fiscal year has been one of the worst for revenue collections in more than a decade, state officials have said. Tax collections are about $600 million behind projections, a shortfall that will morph into a $1.2 billion hole in Corbett's proposed $29.4 billion budget for the fiscal year that begins June 30. That is because he will have to reduce next year's projected revenue by the same amount.

The revenue picture is so bleak that the once-dreaded T word is openly being discussed in budget talks. And for Corbett, at least, agreeing to a tax (the T word) increase would represent a significant political and policy leap, given that he ran for governor in 2010 on a strict no-tax-hikes pledge.

Corbett has said only that he would consider a tax if the legislature makes changes to tamp down the skyrocketing cost of public employee pensions.

Beyond that, the governor has been mum on what kind of tax increase he would support, although several legislative Republicans said privately they have heard administration officials discussing a 10-cent increase in the state's cigarette tax, which currently is $1.60 per pack.

Another option, supported by Democrats and, increasingly, a number of Republicans in the Senate, particularly from the Philadelphia suburbs, is a new tax on the extraction of natural gas from the Marcellus Shale.

Sen. Edwin B. Erickson (R., Delaware) has a bill that would impose a 4 percent tax on drillers, which he said would raise roughly $400 million in the next fiscal year.

"I think it has a pretty good chance," Erickson said last week, adding that the alternative to not raising new revenues is painful cuts.

And painful cuts in an election year could be politically dangerous, particularly for Corbett, whose low public-approval ratings stem back to austerity cuts he made in in his first budget, particularly to public schools and social services.

To tax or not

For the coming fiscal year, the governor has proposed a big financial boost for public schools. It would be nearly impossible to fulfill that promise without a significant infusion of revenue.

Even if Corbett shifts his position and agrees to raise taxes, he will have to contend with Republicans in the House who have taken increasingly staunch conservative positions on policy in recent years.

Steve Miskin, spokesman for the House Republicans, said a tax increase "is not something we are advocating right now."

Still, Miskin said, the House would welcome raising revenue from privatizing the state's retail and wholesale liquor operations. The Senate is considering a much less aggressive liquor-privatization proposal but so far has not been able to muster the votes for it.

Sen. Vince Hughes of Philadelphia, the ranking Democrat on the Senate Appropriations Committee, said last week that polls have shown the public supports imposing a new severance tax and increasing the cigarette tax.

He had this message for his tax-weary Republican colleagues: "They can be mature and adult, and be responsive to the wishes of the people in Pennsylvania and their constituents."

He added: "Good policy is good politics."

717-787-5934 @AngelasInk

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