Pennsylvania lawmakers sent to Gov. Tom Wolf’s desk a series of bills – including a massive gambling expansion -- intended to plug a $2.2 billion budget shortage and end a nearly five-month budget impasse.

Wolf, a Democrat, let a $32 billion spending plan become law in early July without his signature, leaving lawmakers to devise the revenue package.

Pennsylvania Gov. Tom Wolf is still calling for a natural gas severance tax. Pennsylvania Internet News Service

Leaders of the Republican-controlled legislature say the gambling expansion would pull in roughly $200 million for the state this fiscal year and slightly less in others.

The House of Representatives signed off on Thursday after tweaking the Senate’s revenue plan. The package also includes $1.5 billion of tobacco-settlement borrowing, and levies on fireworks and online sales.

The latest gambling bill allows the creation of 10 mini-casinos statewide, which could operate up to 750 slot machines and 30 table games. Existing casino operators within the state would get the inside track for mini-casino licenses. Additionally, the bill enables truck stops to have video-gambling terminals.

Pennsylvania’s latest budget gridlock – and the legislature have been at odds since he took office in January 2015 – triggered the wrath of bond-rating agencies.

S&P Global Ratings last month downgraded Pennsylvania’s general obligation bonds to A-plus from AA-minus. Moody’s Investors Service and Fitch Ratings assign Aa3 and AA-minus ratings, respectively.

“Experience shows the rating agencies prefer a mix of revenues for a state or municipality,” said David Fiorenza, a Villanova School of Business professor and former chief financial officer of Radnor Township, Pa.

“Although gambling is a good source of revenue, there is the realization that this market is saturated due to the surrounding states’ presence of gambling. Rating agencies look for a consistent revenue stream other than gambling, such as real estate taxes or state or wage taxes.”

Wolf on Thursday repeated his call for a severance tax on natural gas drilling. Pennsylvania is the only gas-producing state without such a tax.

“The fairest and simplest solution to the current budget challenge is a severance tax on natural gas production,” the governor said. “The House could still do the right thing and vote on a severance tax.”

The nonpartisan Independent Fiscal Office recently reported that residents in other states and even international markets purchase more than 80% of Pennsylvania's natural gas.

Lawmakers will continue to meet in Harrisburg during the truncated fall session.

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Paul Burton

Paul Burton

Paul Burton is the Northeast Regional Editor for The Bond Buyer and the author of the book "Tales from the Newsrooms." He is a sought-after public speaker and has appeared on radio and TV shows, including former CBS News White House correspondent Sharyl Attkisson’s public-affairs program, “Full Measure.”