Pa. Capitol's 'B' word for solving budget woes: Borrowing

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Gov. Wolf (center) with Senate Majority Leader Jake Corman (right) and House Majority Leader Dave Reed.

HARRISBURG — With two days until the deadline to pass a state budget, Gov. Wolf  signaled on Wednesday that he could be willing to borrow more than $1 billion to help balance the state’s books.

Speaking to reporters after a bill-signing outside the Capitol, Wolf characterized a portion of the state’s steep cash shortfall as “a onetime gap.” He said he was open to borrowing as long as the GOP-controlled legislature also comes up with ways to raise new dollars to prevent future deficits.

When asked how much that onetime gap was, the Democratic governor said it was between $1 billion and $1.5 billion.

“For that one time, I’m comfortable,” Wolf added when asked what he would be comfortable borrowing, although he avoided a firm dollar amount.

Wolf’s comments were the first signs that budget negotiators are seriously considering a significant loan to solve the state’s $1.5 billion shortfall in this fiscal year.

Senate Republican leaders last week confirmed that they were discussing borrowing against money that flows annually into a state fund set up as part of the landmark 1998 multistate settlement with tobacco companies.

“We want to do as little as possible, obviously,” Senate Majority Leader Jake Corman (R., Centre) has said.

Until Wolf’s remarks, no one would put a ceiling on it.

On Wednesday, House Republican spokesman Steve Miskin would say only that his caucus was open to learning more about the idea of borrowing to balance the budget. But he said members had not seen a proposal or come to a conclusion about its merits.

“It’s hard to say yes and it’s hard to say no when there’s actually nothing in front of you,” he said.

Wolf has said repeatedly that he does not want the budget to rely on one-time fixes. The $32.3 billion proposal he unveiled in February called for a mix of new revenue and savings through consolidating various state departments. He did not propose borrowing money to cover state expenses.

That idea was first floated this month by Senate Republicans as word spread through the Capitol that there were still major disagreements over other plans to raise new dollars.

Republicans, who control both legislative chambers, have rejected the idea of hiking the personal income or sales taxes — two proposals that would raise the kind of money needed to plug the state’s seemingly chronic shortfalls.

Disagreement over those tax hikes led to the infamous nine-month budget impasse in Wolf’s first year in office.

Instead, the legislature this year has focused on plans to generate new revenue through expanding gambling and, possibly, further privatizing sales of wine and liquor.

On Wednesday, budget negotiators continued to scramble to smooth out disagreements and meet the Saturday deadline for a new budget, but much of the action remained behind closed doors.

And unlike in the last two years, Wolf and legislative leaders haven’t been holing up in offices around the Capitol for hours on end in an effort to strike a deal.

Corman has said all sides are close to an agreement on how much to spend next year: roughly $31.9 billion. He’s also said he believes the legislature can work through the week to send Wolf a spending bill by the start of the new fiscal year Saturday.

But whether lawmakers can come up with a revenue bill by 12:01 a.m. Saturday remains the key question mark. Corman told the Associated Press on Wednesday that he does not believe the entire budget package — which includes a number of budget-related codes for school, welfare, and other spending — can be in place by the start of the new fiscal year.

Last year, when the legislature failed to send Wolf a balanced budget by July 1 — one that included plans both for spending and how to pay for it — Wolf let it lapse into law without his signature.

Despite the time crunch, Wolf said on Wednesday that he was optimistic.

“I hate to sound like a Polyanna, but this is my third budget and I really think there is a nice tone,” he said. “I think we’re really trying to work together and be constructive here. And we all are on the same page when it comes to recognizing what we have to do here. This is much better than either of the two budgets that preceded.”