Budget agreement careens toward collapse

HARRISBURG - The tentative budget agreement between Gov. Wolf and the Republican-controlled legislature veered toward collapse Saturday, leaving the state in fiscal limbo and with no clear way out.

The breakdown occurred after the House of Representatives resoundingly defeated a proposal to rein in the skyrocketing cost of the state's two pension funds. As lobbyists on both sides of the issue worked the hallways in the Capitol, the House voted 149-52 against a plan that would have placed new state workers and public school employees into a hybrid pension system.

The bill was considered a key piece of the $30.8 billion deal, and without it, the rest of the agreement crumbled.

A visibly frustrated Wolf, speaking shortly after the vote, said he still believes the deal can be salvaged. He did not say how.

"It is a compromise and it is the product of a lot of good people working across the aisle to get it done," the Democratic governor said in a brief news conference. "This is not over. We still need a budget. And we need it now."

House Republicans, however, had a different plan for how to proceed, further spiking the sense of political chaos in the Capitol.

Majority Leader Dave Reed (R., Indiana) said his chamber will begin considering a temporary budget, known as a stopgap plan, to free up critical state funds. Some school districts have warned they may not be able to open after their winter break if a budget is not approved.

But Wolf and Senate Republicans both swiftly nixed that idea.

Senate Majority Leader Jake Corman (R., Centre) called it irresponsible, and challenged the House to devise an alternative budget to cover the whole fiscal year.

But, he warned, without pension changes, he and his fellow Republicans will not approve any new revenue for boosting funding for public schools - the centerpiece of the legislature's tentative agreement with Wolf.

"We could have had everything today," said Corman. "We could have walked through the door, had a major accomplishment, had a budget that sustained us for the future . . . Instead they walked away from it. It's unbelievable to me that they would do that."

The House had been scheduled to be in session Sunday, but canceled it Saturday evening. The Senate is tentatively scheduled to come in Sunday.

Hoping to break the state's six-month budget impasse, the House had returned to the Capitol Saturday to vote on several bills, including one that would have made changes to the state's two big pension funds.

Had the pension bill been approved, the chamber could have then moved to consider other pieces of the budget agreement, namely, whether to raise the state sales or the income tax to pay for more funding for public education being sought by Wolf.

That plan quickly fell apart, even though Wolf has said he has the votes to push through a tax bill.

Republicans have fought the Democratic governor for months over proposals to hike taxes. And Democrats have chafed at supporting a plan to rein in the skyrocketing cost of public employee pensions.

Those tensions were on full display Saturday.

The pension bill that failed would have restructured benefits for state government and public school employees.

New employees would have received both a traditional pension benefit based on their salary and years of service - although less generous than what current workers get - as well as a 401(k)-style plan with a 2.5 percent employer contribution.

Pension benefits for current employees would have remained largely the same, although the plan would make some changes to the way they receive benefits.

During floor debate, Rep. Kate Harper (R., Montgomery) acknowledged it wasn't "a perfect bill."

But she said doing nothing would only lead to continuing property tax hikes statewide.

"I've been here a few years, and I have yet to see a perfect bill," said Harper. "I'm still waiting. But this bill helps us get a handle on our gigantic pension problem."

The bill had been opposed by unions that believed it would rob workers of financial security for their retirement, while failing to make a dent in helping the state immediately raise new dollars to close its budget deficit.

Democrats, who have been lobbied hard by opponents of the bill, were unanimous in opposing it.

As for Republicans, many voted against it because they did not believe its proposed changes were aggressive enough.

"The whole House Democratic caucus abandoned the governor," Corman told reporters. "I've never seen that happen. And half of the Republican caucus abandoned their leadership."

House Minority Leader Frank Dermody (D., Allegheny) said in an interview that he had made it clear that Democrats in the chamber did not support the bill as it was written, and had recommended changes that could result in his party's members crossing over to vote for it.

He said he was told by Republicans that Democratic votes were not necessary to push it through.

"It's frustrating for all of us," Dermody said. "We are trying to get this done - and I thought we were well on our way to get it done."

The state has been operating without a budget since July 1.

Without a budget blueprint passed into law, the state cannot send critical funds to counties, school districts and nonprofits providing social services to both children and adults.

acouloumbis@phillynews.com

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