Official: 'Reality check' looms for Pa. budget

HARRISBURG - A top official with the outgoing Corbett administration and incoming Gov.-elect Tom Wolf agree on this much: The state will head into 2015 with a roughly $2 billion shortfall looming for next year's budget.

But while Budget Secretary Charles Zogby pointed to sluggish revenues and increasing costs, Wolf blamed it on Gov. Corbett's "failed ideology."

Their dueling briefings Wednesday offered a preview of what could be a rocky start for the new Democratic governor as he wrangles with a GOP-led legislature.

"I want to make sure there is agreement that I am inheriting a big problem," said Wolf, who will be sworn in next month. "Before we talk about solutions, we have to know what the problem is."

Zogby said Wolf's challenge - dealing with the fact that revenues are not keeping up with increases in the state's mandated costs - is not new. "The dynamic facing this new governor is no different than the dynamic [Corbett] has faced every year for the past four years," he said.

Zogby did warn that the legislature cannot avoid making tough decisions going forward, including on the rapidly rising cost of public employee pensions.

The latter was one of Corbett's signature proposals that failed to garner enough legislative support. Corbett also proposed privatizing the state's liquor stores, now run by the Liquor Control Board, as a way to generate money - but that proposal, too, failed to gain traction.

"You can't say no to pension reform, no to LCB reform, no to everything else, and no to taxes, and [then] balance the budget," Zogby said. "It's just not going to work."

Zogby said that barring major changes, only a tax hike or deeper cuts will bail out the state. "We've hit the wall in terms of what people in this building are willing to cut," he told reporters at his Capitol briefing. "Folks are in for a reality check."

Zogby's message continued the dour fiscal drumbeat that state officials have pounded for weeks.

Last month, the Independent Fiscal Office estimated a $1.85 billion shortfall for the 2015-16 budget and Treasurer Rob McCord said Pennsylvania was close to maxing out its borrowing power.

Corbett signed a $29 billion budget in July that was balanced with more than $2 billion in one-time spending, drawing down special accounts such as the lottery, tobacco, and oil-gas lease fund, and leaving Wolf with few options for stopgap funding in the coming year.

No sooner had Zogby wrapped up his briefing than Democrats pounced.

Sen. Vincent Hughes (D., Phila.), at a news conference with other top Democrats, called the state's financial situation "the capstone of a three-pronged failure."

"A failure financially, of running the Commonwealth of Pennsylvania, a failure to act in the benefit of our schools, and a failure to create employment opportunities for the people of Pennsylvania," Hughes said. "That is the reality we are in right now."

Later in the day, Wolf held a news conference in York with Montgomery County Commissioners Chairman Josh Shapiro, cochairman of his transition team budget task force.

Wolf, who served as revenue secretary under Gov. Ed Rendell, blamed the shortfall the "failed ideology" of his predecessor's administration and called Corbett's last budget "an orgy of one-time fixes" that is "untenable."

He repeated his campaign pledge to work with the legislature on a shale gas severance tax as a way of raising new revenue.

Beyond that, Wolf declined to say whether he would propose raising broad-based taxes.

Wolf's cash-generating proposals are sure to be a source of heated debate in the legislature, where Republicans captured even larger majorities in the House and Senate in last month's election.