WASHINGTON – Gov. Tom Wolf said Sunday night he would let Pennsylvania's $31.5 billion fiscal 2017 budget become law without his signature if state lawmakers cannot agree on a revenue package to plug a $1.2 billion deficit.
The House of Representatives met into Sunday evening while resolving nothing. A cigarette tax increase and an expansion of casino-style gambling were the main talking points with changes to the pension system for state employees, while not part of the budget bill itself, a possible bargaining chip. The House is expected to reconvene at 11 a.m. Monday while the Senate, which did not meet over the weekend, is also expected to meet.
Wolf, a Democrat, must act on the budget by midnight Monday, 10 days after lawmakers sent him the spending plan.
"If a revenue package is passed before [then], I will be equally as proud to sign it then," Wolf told reporters at a press conference at the state capitol in Harrisburg. "But if the General Assembly fails to pass a responsible revenue package by [Monday] evening, this bill will become law without my signature."
State law requires a balanced budget. Wolf press secretary Jeffrey Sheridan said the state constitution does not require the governor to sign or veto, fully or partially, the general appropriations bill.
Wolf, who said his decision would help "avoid unnecessary distractions," said he would not spend more than what the Republican-controlled legislature sends him.
His move prevents a repeat of last year's budget delay that alarmed bond-rating agencies and municipal analysts. In March, he also let a nine-months late $30 billion plan for fiscal 2016 become law by not signing it. The delay forced counties, school districts and nonprofits to borrow billions to continue operating.
The commonwealth has received five downgrades in the last three years, with rating agencies citing budget imbalance and an estimated $63 billion unfunded pension liability.
In the wake of Wolf's announcement, S&P Global Services Monday placed Pennsylvania's AA-minus rating on CreditWatch with negative implications, because the state "will likely proceed into fiscal 2017 with a spending plan that is not supported by a revenue package or offsetting spending cuts to bring the budget into alignment."
Moody's Investors Service rates Pennsylvania's general obligation bonds Aa3 with a negative outlook, while Fitch Ratings assigns its AA-minus rating with a stable outlook.
Pennsylvania had been the only state without a fiscal 2017 budget. Illinois on June 30 adopted a six-month stopgap budget, while Massachusetts Gov. Charlie Baker on Friday signed a $39 billion spending bill.
State spending under the new plan would rise by 5% over the fiscal 2016 approved budget and represents half the increase Wolf had sought. Education, pension obligations, prisons and opioid abuse prevention measures account for much of the increase.
Bills authorizing another $600 million, or a 2.5% increase, for state-related universities Penn State, Temple University, University of Pittsburgh and Lincoln University are still before the House of Representatives.
David Fiorenza, a Villanova School of Business professor, said Wolf is trying to avoid bad exposure for Pennsylvania with the Democratic National Convention scheduled for Philadelphia from July 25-28.
"The Democratic governor does not want or need any negative publicity," said Fiorenza, a former chief financial officer of Radnor Township, Pa. "If the DNC was not in Philadelphia, Gov. Wolf would be prepared to have a standoff similar to last year's budget fiasco."
According to Fiorenza, Philadelphia already has enough negative media publicity with the Southeastern Pennsylvania Transportation Authority, the mass-transit system that serves the region, taking one-third of its rail cars out of commission for repair and Mayor Jim Kenney's soda tax about to take effect.