- Associated Press - Monday, May 16, 2016

HARRISBURG, Pa. (AP) - Pennsylvania lawmakers still fatigued from a record budget standoff with Democratic Gov. Tom Wolf may not get much of a break from the partisan battles as the start of the new fiscal year approaches.

Both chambers of the Legislature resume session in Harrisburg on Monday, with six weeks for Wolf and Republican majorities in the House and Senate to iron out sharp differences over taxes and spending for the 2016-17 fiscal year, which starts July 1.

The fall election campaign looms for most incumbents, and no one in the Capitol seems to want a repeat of the stalled approval of a final 2015-16 spending plan that was resolved only last month.

Despite lawmakers’ talk of an improved relationship and optimism about the process ahead, negotiating positions at this point suggest the coming weeks could be rocky.

Wolf has proposed a $33.3 billion spending plan, an 11 percent increase over the Republican-crafted $30 billion budget package that Wolf let become law without his signature to end the stalemate. It did not, he has said, fix a long-term deficit that has damaged Pennsylvania’s credit rating or do enough to help public school systems that had the nation’s biggest funding disparity between wealthy and poor districts.

Big increases for public schools, pension obligations, human services and prisons would drive up the spending, under Wolf’s proposal.

To fund it, Wolf has proposed a $2.7 billion tax hike that rests primarily on an 11 percent increase in the state income tax to 3.4 percent. Taxes on natural gas production, casino gambling, insurance premiums, tobacco products, movie tickets and basic cable television service also would rise.

Wolf’s press secretary said the governor remains committed to finding more money. But Republicans have not committed to a tax increase of any sort for Wolf’s new proposal, and say they are working now with the Wolf administration to find ways to save money and blunt cost increases.

House Speaker Mike Turzai, R-Allegheny, said he is aiming for spending growth of about 2 percent, or about $600 million. Meanwhile, Senate Majority Leader Jake Corman, R-Centre, said an overhaul of the state’s major public sector pension system benefits should come first before a tax increase.

“I’m trying not to draw lines in the sand, but we’re certainly not interested in doing any revenue without pension reform,” Corman said.

Turzai said he wants a dedicated source of money - even if it is a tax increase - to pay off a just-approved bond that would fund the state’s school construction commitments. He also said the state must hold down rising costs for pension and debt obligations.

“You can’t keep asking for additional revenue for increasing debt service if you’re not going to do something to lower the debt service increase,” Turzai said.

The 2016-17 deficit is estimated at $1.8 billion by the Legislature’s independent fiscal agency, and this year’s tax collections aren’t providing much help. Collections at the end of April were running $122 million over estimate, or less than 1 percent over last year, according to the Department of Revenue.

Wolf’s spokesman Jeff Sheridan said the governor is “willing to have that conversation” about Republicans’ proposed pension system changes, which revolve around replacing part of the traditional pension benefit for future state and school employees with a 401(k)-style benefit. But Wolf also is adamant about increasing state support for public schools, Sheridan said.

“The governor wants to work with Democrats and Republican leaders to accomplish investing more,” Sheridan said.

Wolf had agreed to a Senate Republican pension proposal last year, but the House rejected it in December, marking the third straight year that a governor-supported pension bill had stalled. House and Senate Republicans have unresolved differences about many aspects of pension legislation, and Corman said Republicans will seek other concessions from Wolf in exchange for a spending increase on public schools.

In any case, decades of history suggest Wolf’s pursuit of a major election-year tax increase may not succeed. And it’s unclear whether anything has changed since last year, when Wolf proposed a multibillion-dollar tax increase. Every cent of it ultimately went down to defeat in the House.

Republicans eventually opted for a budget balanced with about $1 billion in reserves or postponed payments. Some Republicans say that if no deal is in sight by late June, they may be able to sway enough Democrats to pass a veto-proof budget package.


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