More borrowing, more gambling: How they're breaking budget impasse in Harrisburg

HARRISBURG — More borrowing, more casinos, and a few more taxes.

That is the solution the Republican-controlled legislature has devised to balance Pennsylvania's budget and break a stubborn stalemate that has hurt the state's financial standing and tested political alliances.

Lawmakers in both chambers worked late into the night Wednesday to approve key pieces of a long-overdue revenue package to fund the state's $32 billion spending plan and close a more than $2 billion deficit.

The overall deal relies heavily on borrowing and siphoning money from various state funds reserved for special programs.

It also includes a still-to-be-approved plan for a major expansion of gambling in Pennsylvania, including legalizing online gambling, authorizing 10 new "mini-casinos" around the state, and permitting so-called video-gaming terminals at truck stops. Late Wednesday, the Senate had passed the gambling bill and the House had started debating it, with most of the discussion centered on whether to postpone a vote on the matter so members could have more time to read the 939-page bill.

The debate was expected to continue Thursday morning.

Gov. Wolf has not endorsed the revenue deal and late Wednesday would say only that he would review it.

But Senate Majority Leader Jake Corman (R., Centre) signaled optimism earlier Wednesday evening: "This should bring closure to the budget."

Wolf has said he would be willing to sign off on up to $1.5 billion in borrowing as long as the legislature approved plans to raise significant new revenue for the cash-strapped state.

But aside from the gambling expansion, the revenue deal does not include any big-ticket money-generating taxes. Instead, legislators propose taxing the sale of fireworks and applying the state's 6 percent sales tax to more goods sold on online marketplaces.

What it doesn't include: a new tax on natural gas extraction that Wolf has pushed hard for and that the Senate approved earlier this year. GOP leaders in the House have refused to even allow a floor debate on it.

The legislature approved a $32 billion spending plan just hours before the July 1 start of the new fiscal year but did so without a plan for how to pay for it. Republicans who control both chambers have been fighting over a revenue plan ever since, with the key sticking point being whether to raise new taxes. The prolonged impasse led to a credit downgrade last month.

The issue of taxes, this year at least, had the effect of reshuffling political alliances in the Capitol. The Democratic governor  and Republicans who control the Senate found themselves in one camp, signing off on a number of revenue-generating tax plans, with House Republicans rejecting them at almost every turn.

"Hopefully, it will never happen again," Corman said of passing a spending plan without a way to pay for it. "I think pretty clearly we won't do spending without revenue again. I thought that was sort of a quick put-together, but it wasn't, so I'll take the heat for that one."

The deal, which emerged in recent days, is largely based on borrowing, allowing for a $1.5 billion loan that would be paid back using proceeds from the state fund set up after the landmark settlement with tobacco companies.

The gambling portion of the revenue plan would raise about $200 million in this fiscal year. It would allow for up to 10 new mini-casinos, which could operate between 300 and 750 slot machines and 30 table games. Licenses for the mini-casinos would be auctioned out first to current casino operators in Pennsylvania. The mini-casinos could not generally be located within a 25-mile radius of an existing casino, and municipalities would have the option to reject having one within their borders.

It would also allow casinos in the state to offer games online and gambling tablets at airports. Truck stops would be permitted to have up to five video gaming terminals — slots-like machines.

On Wednesday, the legislature pushed out other key bills needed to finish work on the budget. Among them was the education code, a wide-ranging bill that authorizes everything from education-related policies to how much each school district receives in state aid.

This year, it contains a controversial provision long sought by some conservative Republican lawmakers — and long fought by teachers' unions. It would allow school districts, if laying off teachers for economic reasons, to forgo seniority considerations and instead use teacher evaluation scores to determine who goes and who stays.

The governor's spokesman, J.J. Abbott, said only that the governor would review the legislation.

Also approved late Wednesday was $600 million in funding for the four state-related universities: Temple, Lincoln, Pittsburgh, and Pennsylvania State. The universities' money had been hanging in limbo for months. Some had raised concerns that the lack of funding, which is used to help lower tuition for in-state students, would lead to midyear tuition increases.

The University of Pennsylvania's School of Veterinary Medicine also was approved for $30 million in state funding over the objections of a group of conservative House members, who complained during floor debate that they didn't want to turn over public dollars to a school that is a sanctuary campus.

"You can't make this stuff up," tweeted Rep. Leanne Krueger-Braneky (D., Delaware), expressing exasperation over her colleagues' focus on the immigration issue.

"We are going to need a sanctuary for legislators who are about to lose our collective minds," Rep. Peter Schweyer (D., Lehigh) chimed in on Twitter.

Rep. Jordan Harris (D., Phila.) put it this way about the veterinary school during the debate: "It's a sanctuary. For dogs and cats and other animals."