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Wolf: Deal on taxes is necessary to avoid worse consequences

Associated Press

Gov. Tom Wolf warned Monday that steep cuts in education spending and higher borrowing costs are among the inevitable consequences if he cannot persuade enough state lawmakers to support higher taxes to pay for a long-term budget deficit he inherited.

The first-term Democrat issued the warning as Pennsylvania state government's budget impasse is certain to reach its 100th day later this week.

In a briefing for reporters at his official residence in Harrisburg, Wolf would not say whether he has been able to attract any Republican support for a tax plan he supports, just two days before it could see a vote in the GOP-controlled House of Representatives.

As part of the briefing, Wolf reviewed how the prior state budget's reliance on the use of more than $2 billion in one-time cash reserves and other temporary stopgaps have combined with increasing costs for pensions and health care to result in a multibillion-dollar deficit.

"If we don't balance our budget after years of not doing it, in a bipartisan way, we are going to have serious problems this year and even bigger problems next year," Wolf told reporters.

Wolf said he plans to unveil a revised tax plan on Tuesday that is different from what he originally floated in March with a $31.6 billion budget proposal. With Democrats currently a 119-84 minority in the House, Wolf will need Republicans to cross party lines and support higher state taxes on sales or income, or both.

Wolf also has sought higher taxes on banks, cigarettes and Marcellus Shale natural gas production as part of an overall package that would raise a net of $4.6 billion in the 2018-19 fiscal year, its first full fiscal year in effect, according to an April report by the Legislature's nonpartisan fiscal analysis arm.

Top Republican lawmakers say that most Pennsylvanians cannot afford a tax increase of that size and that there is no support among the GOP ranks for an increase in the income or sales tax.

Instead, they have offered to assemble a smaller tax package that does not raise sales or income tax.

However, Wolf maintains that he has seen no other way to raise the money necessary to fix the deficit.

Wolf said the tax plan he will roll out on Tuesday will include an increase in sales or income taxes, despite Republican opposition. Wolf would "be there in a second" if he thought he could formulate a budget plan that wipes out the deficit without an increase in sales or income taxes, Wolf said.

"I have not seen any alternative way to get to a truly balanced budget that balances mathematically," Wolf said. "If they can do that with integrity and honesty in another way then I'll give this up. But I will continue to fight for what I think Pennsylvania deserves, and that is an honest approach to this budget."

Leaving the deficit unaddressed, however, will require education funding cuts, longer waiting lists for human services, higher local school property taxes and more credit downgrades that drive up the cost of borrowing, Wolf warned.

Asked if he was promising state aid for hometown civic projects to lawmakers who support his tax plan, Wolf said no. But he also suggested he can help those who do.

"I will be a lot more sympathetic if decisions have to come to people who have, I think, seen Pennsylvania's needs and requirements more honestly than those who don't," Wolf said.

Wolf vetoed a $30.2 billion Republican-crafted state budget on June 30 that did not increase taxes and raised education spending modestly. But that plan's use of more than $1.5 billion in stopgaps would have deepened the deficit, given short shrift to public schools and allowed the natural gas industry to escape paying a severance tax, Wolf has argued.

Asked Monday if any Republicans were on board with Democrats, House Minority Leader Frank Dermody said: "I think there's a few, yeah."

One Republican who has supported a more modest increase in the income tax, Rep. Gene DiGirolamo, R-Bucks, said Monday he was still waiting to see what the Wolf administration would propose.

"My guess is, right now, you can't assume they have any Republicans," DiGirolamo said.

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