Pennsylvania Gov. Tom Wolf proposed a $30 billion budget for fiscal 2015-16 with sweeping changes in state taxes and more spending on education while closing a $2.3 billion deficit.

His spending plan, presented Tuesday to the state legislature in Harrisburg, calls for increases in the state sales tax to backstop nearly $4 billion in property tax relief for local school districts. Wolf also wants a 5% Marcellus Shale tax on natural gas drilling companies.

Under his proposal, the personal income tax rate would rise from 3.07% to 3.7%, the sales tax from 6% to 6.6%. Wolf said his plan would mean an average 50% reduction in homeowner property taxes.

The budget includes $1.2 billion, or 4.1%, for debt service. It reverses $1 billion in cuts to public education that occurred under Wolf's predecessor, Tom Corbett.

Wolf, who took office in January, also proposed a $3 billion bond issue to help offset the commonwealth's roughly $50 billion unfunded pension liability that all three major bond rating agencies cited last year in lowering the commonwealth's general obligation rating. Other pension initiatives include curbing management fees, eliminating "double dip" payments to charter schools and full payment of all actuarially required employer obligations.

Standard & Poor's and Fitch Ratings rate Pennsylvania's general obligation bonds AA-minus. Moody's rates them Aa3.

"Regarding pensions, I don't see any real drama, nothing that will significantly change the math," said Alan Schankel, a managing director at Janney Capital Markets in Philadelphia.

The Keystone State's two major pension plans are the State Employees Retirement System and the Public School Employees Retirement System. Their aggregate funded rate is about 63%.

Wolf, a Democrat who must work with a Republican-controlled legislature, invoked bipartisanship in his appeal. "We are staring at a $2.3 billion budget deficit, we are near the bottom of the country in job growth, our state's credit ratings have been in decline, and our schools are struggling," he said.

According to Schankel, steep partisanship in Harrisburg will make his tax package a tough sell.

"He's got a lot of heavy lifting to get his proposals through the legislature," said Schankel. "It's politics, the Rs vs. the Ds."

The Keystone State's two major pension plans are the State Employees Retirement System and the Public School Employees Retirement System. Their aggregate funded rate is about 63%.

Wolf and the legislature may also collide over liquor privatization, which the governor opposes. The House last week approved a bill to dismantle and sell the system of state liquor stores by a 114-87 vote. Its fate is uncertain in the Senate, where a similar bill stalled two years ago.

House Speaker Mike Turazi, R-Marshall Township, still hopes he can sway Wolf. "It's an archaic system," he said. "This is a reform measure. We know that Gov. Wolf is a reformer and we think this is one of those reforms that the public is demanding."

Wolf said Tuesday that reforms to the Liquor Control Board could also save the state money.

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