- Associated Press - Saturday, March 26, 2016

HARRISBURG, Pa. (AP) - In the days after Democratic Gov. Tom Wolf finally put a stake in the Pennsylvania budget impasse that has captured the Capitol for more than a year, his office wasted no time in publicizing three analyses by financial firms that delved into what it means for the state’s future. The reviews were anything but positive.

The administration late this week highlighted reports from Moody’s Investors Service, Standard & Poor’s Ratings Services and PNC Financial Services Group that each, in different ways, found much to criticize in how Pennsylvania policymakers have been doing their jobs.

Wolf has often spoken about how the state’s borrowing costs are rising because of its budgetary approach, and the reports suggested more of the same could be in the works.

Moody’s grudgingly allowed that “the very act of appropriating funds for the commonwealth to operate for a full fiscal year represents an improvement,” the faintest of praise, before a warning about what lies ahead for the nation’s sixth-largest state.

“The approved budget relies on nearly $1 billion of one-time measures to balance the budget, does not include a pension contribution at the fully actuarially required level and casts no light on the government’s ability to reach compromise on its long-term fiscal challenges,” Moody’s wrote.

The budget conclusion “only brings to the fore a likely new stalemate over the budget … and ongoing questions over the state’s progress toward structural balance.”

S&P analysts said the state’s outlook is “negative” in part because lawmakers in the Republican-dominated General Assembly “pushed difficult financial decisions to the fiscal 2017 budget,” and its deadline is currently just a little over three months ahead.

“The magnitude of the projected budget gap,” which the administration estimates at $2 billion for next year, “is not insurmountable, in our view, and is not tied to tax base fundamentals. Our negative outlook rather reflects our view that he state’s fiscal issues lie in lack of political will to solve them in a timely manner,” they wrote.

If it continues to see “weakened fiscal stewardship,” S&P said it will likely consider downgrading the state, but if Pennsylvania does cut its long-term structural deficit and improves financial management, the state’s outlook could be improved to “stable.”

PNC said there are no indications the state is heading in the right direction.

“We do not expect the budget to come close to solving Pennsylvania’s fiscal pressures, including its structural budget gap, which is sizeable and growing,” PNC said. “Without broader policy changes, Pennsylvania’s structural deficit will worsen.”

The budget impasse pitted Wolf, in his first year as governor and holding his first-ever elective office, against an increasingly conservative Republican Legislature emboldened after expanding their already considerable margins in both chambers.

Wolf’s position has been that for years, the GOP’s budgetary approach has been short-sighted and unrealistic, resulting in underfunded schools and an annual scramble to find one-time sources of revenue to reach balance.

Republican leaders appear caught between members who feel that some sort of revenue increase may be necessary and enough anti-tax sentiment to create serious doubts about whether there’s any tax plan that can get out of their caucuses and into the floor for votes, particularly during an election year. They have explored new gambling revenues and selling the liquor stores to avoid broad-based taxes, and Wolf has signaled flexibility on the specific mix of taxes, but even the “framework” that fell apart late last year had no tax specifics.

Despite the rhetoric, there’s reason to believe anti-tax intransigence can change quickly - the state’s $2 billion-a-year increase in gas taxes and motorist fees supported by the business community was enacted in 2014 by Republican Gov. Tom Corbett, at a time when both legislative chambers held solid GOP majorities.

Wolf’s decision to let the Republican-crafted budget become law without his signature this weekend produced sighs of relief throughout government. For Pennsylvanians watching from the sidelines, they’ve been more like sighs of disgust.

Both the House and the Senate will return to session April 4, and face a soft deadline of June 30 to pass a 2016-17 state budget. What they’ll produce is anybody’s guess.


Mark Scolforo covers state government for The Associated Press in Harrisburg. Reach him at mscolforo@ap.org or follow on Twitter: @houseofbuddy.


This story has been corrected to show the gas tax and motorist fee increase was enacted in 2014, not 2013.

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