Pa. legislature expands gambling, borrows $1.5 billion to balance budget. Will Gov. Wolf sign?

Pennsylvania Budget
Gov. Tom Wolf delivers his budget address for the 2017-18 fiscal year to a joint session of the Pennsylvania House and Senate in Harrisburg, Pa., Tuesday, Feb. 7, 2017.

HARRISBURG — Three months, three weeks, and five days past deadline, Gov. Wolf has a plan for a balanced budget.

The question now for the Democratic governor: To sign or not?

The revenue bills approved this week by the Republican-controlled legislature in the hope of ending the state’s stubborn budget impasse contain few of the big-ticket policy and tax changes Wolf wanted, namely a new tax on natural-gas drilling companies.

In the end, the package that did pass — the spending blueprint in June and the funding proposal this week — also includes items he sought, such as $100 million more for public schools and $30 million more for early childhood education.

Wolf will have 10 days from the time the bills land on his desk to decide what to do. And on Thursday, the governor signaled he would not rush a decision. Instead, he continued his administration’s aggressive push for a natural-gas severance tax — something he has advocated since his 2014 campaign, but some legislators have resisted.

“I am calling on the House Republicans to get back to work, finish the job, get us that severance tax,” Wolf told reporters during a stop at Philadelphia’s 30th Street Station, citing the primary roadblock in the Capitol to enacting the tax. “I don’t understand why it’s a heavy lift at all.”

Earlier this year, Wolf proposed a 6.5-percent severance tax on natural gas production while giving the drilling companies credit for what they already pay in impact fees. His administration said the plan would have raised just under $294 million this fiscal year. The Senate narrowly passed a plan that included a severance tax, among other new levies, but its proposal faltered in the House.

The revenue package that eventually cleared both chambers relies heavily on borrowing and dipping into special state funds for projects ranging from transportation to environmental cleanup — though it was not immediately clear which funds would be raided.

It also calls for a major expansion of legalized gaming in the state. The gambling bill, pushed through the Republican-controlled legislature this week in less than 24 hours, is estimated to bring in $200 million this fiscal year and less in future years.

It is one of the cornerstones in a plan that also involves borrowing $1.5 billion, to be repaid with proceeds from the landmark settlement with tobacco companies; taxing the sale of fireworks; and applying the state’s 6 percent sales tax to goods sold on online marketplaces such as Amazon.

The state House approved the gambling bill Thursday morning after hours of debate.

Supporters have argued that the bill allows the state to collect money on forms of unregulated gambling that already occur. Opponents have expressed concern about the way an expansion would affect communities and the speed with which the latest bill cruised through the legislature. Republican and Democratic leaders both said there were parts of the bills they would change if they could.

“I would prefer to do it other ways, but this is what we can get done, and we got it done,” said House Minority Leader Frank Dermody (D., Allegheny). He added later: “I’ve got to believe that there’s a limit as to how much we’re going to achieve from gaming, and I don’t know whether we’ve reached that or not. I guess we’re going to see.”

Majority Leader Dave Reed (R., Indiana) said the passage of the last budget bill opened the way for representatives to work on other issues when they return in November.

Gambling expansion had been a sticking point as legislators struggled to close a deficit that was more than $2 billion. They passed a nearly $32 billion spending plan July 1 but couldn’t agree on how to pay for it. The prolonged impasse led to a credit downgrade last month.

This latest gambling bill allows for the creation of 10 “mini-casinos” around the state, which could operate between 300 and 750 slot machines and 30 table games. Licenses for the mini-casinos would be auctioned off, first to current casino operators in Pennsylvania. Generally, the casinos could not 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 also legalizes some online gambling and permits truck stops to have five video-gaming terminals, or slots-like machines.

The gaming bill easily passed the Senate without debate Wednesday night. It encountered some opposition in the House, when some representatives tried to postpone a vote, arguing they hadn’t had enough time to read the 939-page bill.

When they reconvened about 8:30 a.m. Thursday, some representatives continued to express concern about whether the bill had been properly vetted.

Rep. Madeleine Dean (D., Montgomery) said she feared some language in the bill was “faulty,” noting among other things that she worried there were loopholes in the provision that allows video-gaming terminals at truck stops.

Reading two sections of the bill, she said, left her with “more questions than answers” and raised her fears that the bill could “cause more harm than good.”

But after more than two hours, debate halted, and the chamber voted, 109-72, to approve the bill, putting its fate in the governor’s hands.

Staff writer Andrew Seidman contributed to this article.

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