Gov. Wolf on House Republicans: 'I'm not going to play their games anymore'

HARRISBURG — Saying he was fed up with the inability of House Republicans to finish work on balancing the Pennsylvania budget, Gov. Wolf on Wednesday said that he will borrow more than $1 billion against the state's liquor revenues.

"Too many Republicans in the legislature are focused on the 2018 elections — they'd rather see me fail than Pennsylvania succeed," the Democratic governor said at a news conference in the Capitol. "I'm not going to play their games anymore."

The shift in tone raised the prospect of a long fall of recriminations and increasing anxiety for schools, local governments, and others who depend on state funds.

Wolf said the House should immediately pass an extraction tax on natural gas production from the Marcellus Shale — a measure he believes will help end the state's more than three-month-long budget stalemate. GOP leaders' refusal to consider a shale tax shows that they are beholden to special interests, the governor said.

In the last week, Wolf and legislative leaders had met in private to craft a tentative revenue package to fund the budget that included a mix of borrowing, an expansion of gambling, and new or increased taxes.

But House Republicans failed to muster enough support for two of their leadership's own proposals to raise new dollars: expanding the sales and use tax to storage facilities and warehouses, and imposing a new 5 percent tax on hotel stays.

Barring a realistic revenue plan, the governor said he must "draw a line in the sand" and borrow money to help close the $1.5 billion deficit in last fiscal year's budget. That money, he said, would be paid back using revenue from the state's Liquor Control Board.

The governor also signaled he would take other steps to whittle away at the remaining portion of the state's overall $2 billion deficit, without giving specifics. He did say he did not intend to lay off state employees or hurt public education funding.

Still, several worried legislators noted that the breakdown in talks Wednesday means that the state-related universities that receive about $600 million in state funding — Temple, Lincoln, Pitt, and Penn State — would be left in limbo.

House Majority Leader Dave Reed (R., Indiana) on Wednesday said the blame lies with Wolf and Democrats in his chamber, who he said were unwilling to put up votes for compromise measures that would help end the state's budget stalemate.

"We were willing to go to the mat today to complete this process, but we've got to have a willing partner," said Reed. "The party of the governor does at some point have to actually vote with the governor."

Reed later added: "It seems to me that once again some folks can't keep up their end of the bargain, and they looked for the easiest way to get out of town. … If I can't take people at their word, then I don't know how I can negotiate with them."

Wolf and the Republican-controlled legislature have been struggling for months to agree on a revenue package to fund the state's $32 billion budget and close the deficit. GOP House members have been the holdouts on several key proposals to balance the budget, while Wolf has banded together with the Republicans who control the Senate.

As the impasse has dragged on, the administration has been forced to take out a line of credit to pay its bills and delay some payments. The state was also slapped with a credit downgrade last month by the credit-rating agency Standard & Poor's, which will make borrowing more expensive.

On Wednesday, House Democrats tried unsuccessfully to force discussion on a controversial severance tax on drilling companies. The measure has long been a sticking point in negotiations, with supporters arguing that drillers haven't paid their fair share in taxes, and opponents saying they fear a tax would have a damaging impact on jobs in the state.

Wolf had included such a tax in his initial budget proposal earlier this year, and a scaled-down version of it passed the Senate this summer. But Republican leaders in the lower chamber — at least one of whom, Speaker Mike Turzai (R., Allegheny), is a potential challenger to Wolf in next year's election — have blocked it at every turn.

Boos and other exclamations erupted on the floor at various points Wednesday while House members debated whether to even discuss a severance-tax bill that had been introduced by Rep. Kate Harper (R., Montgomery) and that had lingered in committee.

Harper's bill, as initially introduced, would have imposed a volume-based tax on companies that drill in the Marcellus Shale, but it had been amended to simply rename a fee already paid by drillers instead of imposing a new tax. Some members hoped the Democrats' actions could at least spark discussion on the issue.

Harper argued Wednesday afternoon that the time for that conversation was overdue.

"What are we afraid of? Can't we just discuss it?" she asked.

The discharge resolution failed by a vote of 115-83.