Signs of a deal nearing on Pa.'s budget

HARRISBURG – For the first time in weeks, there are signs of hope that the state's nearly three-month-long budget stalemate could be coming to an end.

House Majority Leader Dave Reed (R., Indiana) emailed his members Thursday night saying that talks over how to fund the state's $32 billion spending plan have been "positive and productive," and that leaders expect to share a proposal with them next week.

"Not knowing what next week will bring, it may be a good idea to pack for a long week," Reed said in the email.

The Senate also scheduled a surprise return to the Capitol on Monday, signaling that a deal could be close.

It was the first glimmer of hope in weeks, coming after the Wolf administration had delayed payments to Medicaid service providers and as counties and school districts began planning for the possibility of a return to the anxiety and funding cuts they endured two years ago during a nine-month budget stalemate.

Credit rating agency Standard & Poor's this month also downgraded the state's bond rating, citing the prolonged fighting over a revenue plan.

Representatives of Republicans who control both legislative chambers would not release details, saying they were still being ironed out.

Three legislative sources, however, said the plan would likely rely on borrowing and gambling expansion as its main sources of revenue — but would abandon the long-discussed and hard-fought push to impose a new severance tax on natural gas drillers.

It would also likely seek to avoid new taxes on consumer bills for electric and telephone service.

"Our priorities are and have been to maximize non-tax revenues and deal with the issues and concerns you have brought to us," Reed said in his message to House members.

J.J. Abbott, spokesman for Gov. Wolf, said "work continues" on the budget, but noted that there were "significant meetings" this week between the administration and legislative leaders.

Though popular with voters, the severance tax has long been a source of deep disagreement in the Capitol. Anti-tax Republicans believe it will hurt an industry that has created jobs and other opportunities, while Democrats and more moderate GOP lawmakers counter that the industry has not been properly taxed.

The issue carries political overtones too. Gov. Wolf, a Democrat, supports a severance tax and made it a key platform in his campaign. He is up for reelection next year and his stance on a new drilling tax is bound to be a talking point for his opponents.

In fact, it already has. One of his potential opponents, Sen. Scott Wagner (R., York) this month told a conservative group in York that he urged a key House Republican to block the tax.

The reason: "Because if that happens, the governor is going to get reelected."

Wagner campaign manager Jason High on Friday said the senator was not implying that the tax should be killed for political reasons. Wagner, said High, has long thought a severance tax is bad public policy.

For Wolf, the passage of a severance tax would be a political win, but late Friday, it appeared increasingly unlikely it would happen.

In June, a $32 billion spending plan passed both houses of the legislature and Wolf allowed it to become law without his signature. But legislative leaders could not initially agree on a revenue package to pay for it, and negotiations have proceeded in fits and starts.

The disagreement over how to fund the budget has largely centered on whether to raise taxes in Pennsylvania. Republicans who control the House of Representatives have eschewed a plan backed by Senate GOP leaders – and Wolf – that called for a mix of borrowing and new or increased taxes, including a new levy on companies that drill in the Marcellus Shale.