Pa. Dems: House Republicans are holdouts in budget stalemate

HARRISBURG — As the state's budget impasse drags on, House Republican leaders appear to be emerging as the holdouts in talks.

Top legislative Democrats said Tuesday that House GOP leaders presented a counterproposal Tuesday that doesn't contain many of the items that had been under consideration just days ago.

Specifically, they said Republicans have retreated from talks over finding reliable sources of revenue as part of a package to pay for the nearly $32 billion spending plan the legislature passed hours before the July 1 start of the new fiscal year. Instead, they're back to insisting on raising new dollars solely through a mix of borrowing, gambling expansion, liquor privatization, and onetime revenue sources.

"Now there are no recurring revenues," Senate Minority Leader Jay Costa (D., Allegheny) said of the House Republican proposal, calling it a drastic drop from the roughly $300 million in recurring revenue discussed in talks as recently as last week. "I view that as a retreat from where they were previously."

Costa and House Minority Leader Frank Dermody (D., Allegheny) said four out of the five parties involved in budget negotiations have been close to an agreement on the revenue package, but that House Republicans have refused to sign off on it.

Tuesday's setback, Costa said, could soon leave Gov. Wolf with little choice but to start cutting spending to bring the budget into balance.

Pennsylvania's Constitution requires a balanced budget. Without a revenue package, the budget remains out of balance, raising questions about whether the state can legally spend money.

State Treasurer Joe Torsella, a Democrat, warned last week that if legislators don't quickly approve a responsible revenue package, the state could run out of money to pay its bills as soon as next month.

Two sources familiar with negotiations attributed the latest setback in talks to House Speaker Mike Turzai's  taking a lead role in negotiations.

They said Turzai (R., Allegheny), a fiscal conservative who's seriously considering a run for governor, abruptly shifted the House Republican position this week, rejecting any tax hikes to deal with the state's fiscal problems. One of the items under consideration in budget talks has been reinstating a gross receipts tax on natural gas sales, which would be paid by households that use natural gas.

Other options have included tax increases for basic cable, telephone, and electric service.

"At the eleventh hour, he decided there should be a different way for how to pay for the budget," said one of the sources, who wasn't authorized to speak publicly. "He wants more borrowing, more gaming, and more liquor [privatization]. All I can say is, that conversation was very different from where we were last week."

In an interview with reporters late Tuesday afternoon, Turzai pushed back on the notion that he's shifted course. He said that the House passed numerous proposals months ago to raise new money — and that none of them included tax increases.

"The House as a body has passed expanded gaming and wine and spirits [privatization] legislation that provides significant revenue for a budget," said Turzai, later adding: "We've been talking about a no-tax increase budget since April."

Adding to the uncertainty Tuesday, Senate Republican leaders, after a lengthy meeting with House Republicans, sent rank-and-file senators home. They had called members back to the Capitol in hopes of closing a deal this week.

Senate Majority Leader Jake Corman (R., Centre) said his chamber will spend the next few days vetting the House GOP proposal.

"I'm not giving up," Corman said. "That's why we're here."

Though he said he expects the Senate will be called back into session by Monday, if not sooner, he was careful not to commit to any aspect in the House Republican proposal.

Costa said next week could provide a turning point.

"I think by then if we're not at a place where it looks like there's movement, then I think there may be some tough choices that have to be made by us and by the administration going forward," he said.

Dermody put it this way: "There is going to be pain if this doesn't happen. There are significant programs that will not be funded."