- Associated Press - Monday, June 26, 2017

HARRISBURG, Pa. (AP) - Pennsylvania lawmakers returned to the Capitol on Monday with five days left to pass an on-time budget and no firm agreements on how to address state government’s biggest cash shortfall since the recession.

Democratic Gov. Tom Wolf has kept a low profile, while leaders of the House and Senate GOP majorities reported no deal between themselves on a spending plan or a strategy to pay for it.

The 2017-18 fiscal year begins Saturday and few, if any, lawmakers expect this year’s budget plan to make any headway toward clearing up Pennsylvania’s long-term deficit. Senators said they expect a spending plan to pass before Saturday, but - like last year - legislation to pay for it could follow later in July.

Rating agencies will be watching: The state’s penchant for patching up deficits with one-time maneuvers has left its credit rating among the lowest of states.

Senate Republicans say they need $2.2 billion just to balance a bare-bones plan produced by House Republicans. It passed the House in early April. With top Republicans against a tax increase, Senate Republicans are considering scrounging much of the $2.2 billion by borrowing it.

Borrowing to pay for ongoing operations is typically “a last resort-type of mechanism” that states use to temporarily tide over their finances, said John Hicks, the executive director of the National Association of State Budget Officers.

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SPENDING

The Senate Republicans have yet to unveil a spending plan.

The $31.5 billion no-new-taxes House Republican plan would cut overall spending next year by a little under 1 percent, after allowing for $234 million to patch up a current-year shortfall. It would order up belt-tightening across state agencies and programs, including prisons and social services. It would eliminate funding for the state sentencing commission, juvenile and adult probation and intermediate punishment treatment.

Senate Republicans have said they would boost spending slightly above the House plan. In February, Wolf proposed spending $32.3 billion, or about $1 billion in new spending including cash to shore up the current year’s books. He also proposed a $1 billion tax package to help foot the bill.

Wolf has warned that the House plan would put about 1,500 state employees out of work, with prisons in line for the deepest job cuts. The Department of Military and Veterans Affairs said the House budget will force more layoffs, lengthen wait times to process applications for benefits, require the shutdown of services for veterans and hurt its ability to adequately train 20,000 National Guard members.

The House budget also would halve funding for the Department of Conservation and Natural Resources, which manages state forests and parks. The state could tap additional money it gets from allowing natural gas drilling on state land, although a court decision last week raised questions about whether such a diversion is legal.

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GAMBLING

House Republican leadership has pushed for a broad expansion of gambling to help fill the cash gap. That would include expanding casino-style gambling to websites, airports, bars and off-track betting parlors. It also would allow online lottery games and reinstate a requirement that casinos pay millions to host communities.

The Senate has agreed with much of that, but balked at the legalization of slot machine-style video games in bars, truck stops and other liquor license holders. Supporters say allowing the machines in bars would raise roughly $350 million a year by taxing the gambling losses. But Wolf’s Department of Revenue has told lawmakers that allowing gambling in so many new locations would inflict losses on revenue the state gets from the Pennsylvania Lottery and licensed casinos, and that setting up regulatory systems could take a year or more.

As a compromise, top Republicans have discussed approving gambling at bars in counties that do not host a casino, senators said Monday.

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LIQUOR

Republicans are considering shifting the payment of taxes on the sale of alcohol to the retail level from the wholesale level, a move they say would raise an extra $200 million to $300 million from consumers.

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BORROWING

Senate Republican leaders have eyed borrowing a one-time lump sum against future revenue from Pennsylvania’s share of the landmark 1998 multi-state settlement with tobacco companies.

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