Last 2 weeks to approve Pa. budget, major issues unresolved

- Democratic Gov. Tom Wolf and the Republican-controlled Legislature are heading into the final stretch to approve an on-time budget.

The 2016-17 fiscal year begins July 1.

But numerous issues remain outstanding, including how much to spend and whether taxes should go up to pay for it.

The coming two weeks will put in sharp relief whether a spirit of cooperation that's propelled major legislation forward in recent weeks will endure, or whether budget negotiators are simply avoiding tough decisions.

The House is up first to pass a budget package, and Republicans are considering increasing cigarette taxes and expanding casino-style gambling.

But Wolf wants more money for public schools, and Democrats say it'll take more than a cigarette tax increase and a gambling expansion to cover a projected $1.8 billion deficit.

The coming two weeks will put in sharp relief whether a spirit of cooperation that's propelled major legislation forward in recent weeks will endure, or whether budget negotiators are avoiding tough decisions that have divided them.

A look at some major topics:

   SPENDING

   The House is up first to pass an appropriations bill, but negotiators there are reporting no agreements. In February, Wolf proposed a spending increase of $3.3 billion, or 10 percent, to $33.3 billion. That included a two-year, $550 million increase for public school instruction and operations -- lawmakers approved $200 million of that already -- and the elimination of what Wolf has called "smoke and mirrors" to balance rising costs for pension obligations, health care and prisons.

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   TAXES

   Discussion about a tax increase is revolving around increasing excise taxes on cigarettes, although the House has made no proposal public. Republicans otherwise have refused to consider a tax increase on income or sales. Wolf proposed a $2.7 billion tax package, anchored by higher taxes on income, sales and tobacco products. On cigarettes, Wolf proposed raising the per-pack tax to $2.60, from $1.60. Wolf also has proposed a new tax on Marcellus Shale natural-gas production -- 6.5 percent of value -- but Republicans have shown no support for it.

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   DEFICIT

   In January, the Legislature's Independent Fiscal Office estimated that the 2016-17 fiscal-year deficit would hit $1.8 billion. Balancing it year after year with one-time stopgaps has cost Pennsylvania five credit downgrades since 2012 by the three major rating agencies. Another Band-Aid budget could prompt a sixth downgrade. On May 20, Moody's Investors Service said failing to fix shortfalls "would apply downward pressure on the commonwealth's rating."

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   SCHOOLS

   Wolf has sought to close a huge funding gap between Pennsylvania's wealthiest and poorest school districts. Federal data from 2012 showed that Pennsylvania harbors the nation's most inequitable education system. Public school advocates say putting $150 million a year in extra money into a new school funding formula, like this year, will take over 20 years to fix the inequities. Adding $400 million each year would solve it in six to eight years, they say.

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   GAMBLING

   House Republicans are looking to an expansion of casino-style gambling to help cover the deficit, but they are trying to sort out whether there is enough support for an expansion and, if so, what kind. Its prospects in the Senate are unclear.

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   PENSIONS

   The House passed legislation designed to pare back the traditional pension benefit for future state government and public school employees, and Wolf is pledging to sign it. It is projected to save $5 billion on roughly $200 billion in pension obligation payments over the next 30 years. However, Senate Republicans do not see eye-to-eye with the House on the bill. That has ramifications for the budget: Senate Republicans are vowing to block a tax increase without pension legislation becoming law.

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   HIGHWAY DOLLARS

   A growing amount of money from fuel taxes and motorist fees increased under a 2013 law designed to shore up Pennsylvania's highways and bridges is getting diverted to the Pennsylvania State Police. Under the state constitution, motorist fees and fuel taxes are strictly for highway construction, repair and safety. Those dollars now underwrite two-thirds of the state police's budget, but some lawmakers suspect the dollars are being used unconstitutionally.

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   WINE SALES

   Wolf signed legislation this month to allow sales of wine to-go at private-sector establishments for the first time. It spurred predictions that the bill's more flexible rules around state-owned liquor stores will help generate approximately $100 million more annually for the state treasury. There are differing figures on how many licensees could sell wine. The Pennsylvania Liquor Control Board estimates that figure at between 11,000 and 12,000; the author of the legislation, Sen. Chuck McIlhinney, estimated it to be close to 14,000, including "dead" licenses that counties could auction. 

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