A proposed $29.1 billion budget is headed to Pennsylvania's House floor after its appropriations committee approved it.
Tuesday's vote was 21-14 along party lines, with Republicans in the majority.
The bill, to which Democrats objected, would still leave the state with a budget gap due to a large shortfall in tax collections. It includes $380 million in revenue from a proposal to privatize state-run liquor stores and $227 million in transfers from special funds.
Still unanswered is what lawmakers will do with Republican Gov. Tom Corbett's proposal to merge traditional-defined benefit state employee retirement plans with a 401(k)-style defined contribution plan in a hybrid that is thought would still leave Pennsylvania with an estimated $50 billion in unfunded pension liability.
Standard & Poor's said it would monitor fiscal 2015 budget and pension overhaul efforts and said it could downgrade the Keystone State "in the absence of a structurally balanced budget and meaningful pension reform."
Fitch Ratings downgraded Pennsylvania's general obligation bonds in July 2013 after the state let pension overhaul slide. Fitch and S&P rate Pennsylvania AA, both with negative outlooks. Moody's rates Pennsylvania Aa2 with a stable outlook.
"First and foremost is pensions," budget director Charles Zogby told reporters Tuesday.
Discussing revenue options, Zogby added: "A variety of options are on the table. Anything but the [personal income tax] is in play."
Moving liquor privatization through the Senate, where Republicans have only a 27-23 advantage, could be more difficult.
Democrats, who want more funding for schools, want to tax Marcellus Shale natural gas drilling and minimize business-tax cuts.
