Pennsylvania budget impasse is latest partisan battle in long-running political war over taxes

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HARRISBURG, Pennsylvania — Pennsylvania is now five months into a budget impasse with taxes the main sticking point — a scenario familiar to anyone who's tried to understand the Byzantine motives that drive elected officials in its capital city.

A "framework" agreement being worked out between Democratic Gov. Tom Wolf and the Republican-controlled Legislature teetered on the edge of collapse after Republicans said a key element, increasing sales taxes to plug a budget deficit and cut school property taxes, lacked support among their ranks.

A few days later, a Senate Republican proposal to impose a $12 billion to $14 billion state tax increase to fully eliminate the hated school property taxes — legislation Wolf opposed — failed by a single vote last week.

The state began a new fiscal year on July 1 without a valid spending plan in place, after talks soured and Wolf vetoed a Republican plan that attracted no votes from Democrats. He then also rejected a stopgap plan in September that would have provided funding while talks continued.

More recently, Wolf and legislative leaders of both parties raised hopes after announcing they'd reached what they termed a framework to help get a deal, a plan that was missing many details but involved raising the sales tax rate by 1.25 percentage points.

Wolf is looking for recurring revenues to prevent the annual budget crises and improve the state's borrowing ratings.

But in recent years, lawmakers have repeatedly turned to one-time sources of money to balance budgets.

The governor wants to cut property taxes, make up a deficit and send more money to schools and for county human services programs. He has also sought to raise education money by imposing a severance tax on natural gas drilling, but that was not part of the compromise "framework."

If the current impasse carries into the new year, it will surpass the worst standoff in recent history. Back in 2003, Gov. Ed Rendell's first year, it was late December before he was able to get approval of a boost in the personal income tax rate from 2.8 percent to 3.07 percent, where it is today. In a familiar sounding scenario, Rendell was a newly elected Democratic governor who wanted to spend more for public education while facing an inherited deficit.

Rendell was followed by a Republican, Gov. Tom Corbett, who came into office vowing to oppose taxes and fees.

Despite a precipitous drop-off in state revenues from the Great Recession, Corbett and his Republican allies in the Legislature added to the state's fiscal pressures by cutting some business taxes. They also made a fateful decision to enact deep cuts to education spending, causing the loss of thousands of teaching jobs and higher local property taxes for some residents. Wolf, a first-time candidate, made those cuts the centerpiece of his gubernatorial bid.

Corbett and the Legislature, however, did hit the booming gas industry in 2012 with an impact fee that raises about $200 million annually from drilling.

The big tax increase under Corbett came two years ago, when he changed positions and actively pursued a major transportation bill, funded with the taxes and fees he had specifically ruled out while running for the job.

The bill imposed a gasoline tax of about 29 cents a gallon along with wide array of motorist fees, enough to eventually generate about $2.3 billion a year. It's being phased in just as gasoline prices are particularly low, softening the blow.

The Transportation Department says that money helped it finish nearly 1,100 projects and start some 650 more during the past two construction seasons. The state has also improved about 12,000 miles of pavement since the law was enacted.

Despite his policy shifts on natural gas and transportation taxes, Corbett used taxes as a wedge issue against Wolf during the 2014 campaign. Voters paying even the slightest attention knew Republicans were convinced Wolf, a businessman from York County, would raise taxes. He proposed just that within weeks of taking office.

The latest apparent collapse of those talks this week was followed — less than an hour later — by an announcement from Republican leaders that their framework with Wolf remained in place. They said they would work through the holiday weekend to iron out the details required for a real agreement.

They may not have a deal, but it seems apparent they're all feeling the pressure.

Mark Scolforo covers state government for The Associated Press in Harrisburg. Reach him at, or follow on Twitter: @houseofbuddy.

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