Tom Wolf delivering his first PA budget address in 2015. Credit: Screenshot

❤️ Love Philly? ❤️
Us too — let’s be friends.

Catch the Billy Penn newsletter in your inbox 6 days a week for need-to-know news in Philly.

The above photo is from Tom Wolf’s first budget address that came just weeks after he took office in Harrisburg. The first-term governor with no political experience must have felt confident. He’d just handily won election over an incumbent based on promises to increase funding for the state’s schools and tax natural gas drilling companies.

And it’s safe to say he was optimistic his campaign promises would come to fruition, despite rolling into Harrisburg as a Democrat facing a $2 billion budget deficit and Republican control in both chambers of the legislature.

Well, now it’s Oct. 14. The state budget is 106 days late. And Wolf’s tone has shifted to the defensive as he wrestles with Republicans over how this state makes money and how it should spend it.

“I’m not going to cave on this,” he told KDKA in Pittsburgh this week. “I can’t cave on this.”

Wolf and lawmakers in Harrisburg have not yet come anywhere close to an agreement on not only how state money should be spent, but how it should be brought in, causing one of the longest budget stalemates in years. Wolf is in favor of tax increases. Republicans who won election on not raising taxes in their districts are reluctant to vote for that.

“So each side thinks they have it,” said G. Terry Madonna, director of the Center for Politics and Public Affairs at Franklin and Marshall College. “And now it’s a classic situation for a deadlock.”

State agencies are starting to feel the fiscal pinch. School districts are, too, and some have threatened complete closure if a budget isn’t passed soon by lawmakers. But there’s also a sentiment in Harrisburg that legislators are facing little pressure from constituents to get something done. And so the battle rages on.

Here’s a breakdown of what’s at stake, and what’s next for the PA budget:

Give me an update on where this all stands.

Right now, it’s all about taxes. Wolf has spending priorities — like funding the schools, for example — that won’t get done without a cash infusion. When governments need money, they typically raise taxes. But his proposed 5 percent severance tax on Marcellus Shale companies wasn’t going to fly and a sales tax increase he wanted wasn’t looking so hot to Republican lawmakers either.

So last week, one of his tax packages was put forth in the House that conceded on a sales tax increase but still would have instituted a personal income tax hike and a 3.5 percent severance tax for the natural gas companies. The House shot it down, and pretty much everyone figured that would happen before it did. House Majority Leader Dave Reed (R-Indiana) told The Inquirer: “Sometimes you have to go through an exercise like this to actually just hold people’s feet to the fire.”

Now it’s back to the drawing board for legislators and Wolf, who entirely vetoed the first budget that state lawmakers approved and shot down a stopgap budget that would have served as a temporary spending plan so state-funded agencies could operate. What comes next is likely a number of different plans for the state to bring in revenue and, eventually, a compromise on taxes. But there still seems to be a fundamental disagreement of who needs to cave here.

Republican party chairman Rob Gleason said: “The ball seems to have flipped into [Wolf’s] court.”

And Sen. Vincent Hughes (D-Philadelphia) said: “The ball is in the Republicans’ court.”

Ha, balls. That sounds problematic. Who’s fault is all this?

Like anything else in politics, that’s going to depend on who you ask. Republicans and Democrats are both whining that the other side hasn’t made any concessions or really tried to compromise. Each party thinks the other isn’t being realistic about moving forward with serious conversations about passing a budget.

“Each side believes that they’ve got to hold firm for almost 100 percent of what they want,” Madonna said. “Each side has made some compromise though, and the other side doesn’t even recognize that they made a compromise.”

From the Office of the Governor, Wolf has ditched a proposed sales tax increase from 6 percent to 6.6 percent (in Philadelphia, the sales tax is already higher to fund the school district) and was willing to make concessions on certain parts of a pension overhaul package. Republicans were willing to come to compromise on a major tenet of what they wanted: Liquor privatization.

There seems to be one school of thought that thinks that this would be solved if Republicans gave Wolf some of his tax increases and, in exchange, he’d give them pension reform and would allow grocery stores to sell beer and wine. But Wolf hasn’t made any indication he’d go down that road.

“He’s obviously inexperienced in dealing with legislators,” Gleason said. “The CEO of the state needs to work harder to work with these people. It’s perfectly clear that they’re not going to raise taxes.”

Hughes, the minority chair of the Senate Appropriations Committee, said Republicans in both chambers “have got to get serious.”

“They’ve got to offer a comprehensive proposal, not just a tax proposal, so that we can take so we can take a fair assessment and a fair look,” he said. “They’ve been very good at saying no. Just like the little baby who doesn’t want to eat his spinach or his broccoli or his carrots. Well, you’ve got to eat something. And it can’t be ice cream. That does not help the situation.”

So in favor of raising taxes, some lawmakers have called for expanding gaming.

Gaming? What’s that mean? Another casino?

Expanding the Pennsylvania gaming statute has already been done on a number of occasions. It’s controversial for anti-gaming advocacy groups but, as Madonna pointed out, most voters don’t really care much one way or the other on the expansion of gaming in Pennsylvania.

Reed, a Republican, told reporters this week that the state could bring in hundreds of millions in new revenue if it once again expanded gaming, this time to allow for Internet gambling and slot machines in airports.

“The (anti-)gaming forces will go bananas,” Madonna said, “but they will be powerless to stop it.”

Many Democrats, including Hughes, are generally reluctant to expand gambling in the state. But approving expansion measures also aren’t as politically polarizing as, say, increasing taxes or cutting school funding. It could happen.

When is this budget thing going to start mattering?

It already is for state-funded social services. Non-profits have taken a major hit, and domestic violence and sexual assault centers will begin closing in the coming month if a budget is not passed. They’re running on fumes.

But it’s also not like it was in years before before when there were budget impasses and people were working for the state without being paid. After a situation in 2009 led to that, a court ruling later paved the way for state workers to continue being paid during budget impasses. State workers getting a paycheck = less pressure on lawmakers to pass a budget.

What about the schools?

School districts in Pennsylvania haven’t closed yet. But it could be coming.

More than $2 billion in state funds to school districts have been withheld since the budget deadline on June 30, and the auditor general has reported that districts have borrowed some $350 million to make up for the gaps in funding from the state. Of that borrowing, a staggering $275 million came from the School District of Philadelphia. The next highest borrowing total was $10 million.

A representative from the School District of Philadelphia didn’t respond to a request for comment. But crunch time for the schools is expected to come in mid-November, when they’ll begin running out of reserves and decisions will have to be made to cut staff, slash programs or cancel school altogether.

The school district in Erie has already said it’s running out of money and is looking at closing its doors entirely. Some districts have reportedly considered suing the state, if only they had enough cash to do so.

This is crazy. Why aren’t the legislators just doing something?

There’s little pressure at this point. With state workers still getting paid, it’s not like the halls of the capitol building are filled every day with protestors or unions or teachers or people begging officials to come to an agreement.

“Neither side is facing a lot of pressure,” Madonna said. “Wolf thinks he won the election, so he should get his way. He knows he won by 10 points and defeated [Tom] Corbett and was elected on a platform to increase spending and use a shale tax. In Republican-elected districts, they ran against just that.”

Anna Orso was a reporter/curator at Billy Penn from 2014 to 2017.