AP Explains: What's upcoming for the Pennsylvania budget

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HARRISBURG, Pa. (AP) — Consolidating, squeezing and scrimping are apparently the order of the day in Pennsylvania government. On Tuesday, Democratic Gov. Tom Wolf will unveil his third budget plan to a Republican-controlled Legislature that has opposed Wolf's overtures to wipe out a stubborn post-recession deficit with a major tax increase. The fiscal outlook is grim again, the Legislature is now run by the largest Republican majorities modern Pennsylvania history, and Wolf has declared he will try a new strategy this year: He will propose balancing the budget without increasing sales or income taxes. Wolf has kept some secrets and revealed other elements of what will be in his spending plan for the 2017-18 fiscal year starting July 1. For now, Wolf's strategy is being viewed as a challenge to Republicans: live with the pain of austerity or get behind a substantial tax increase. In the background is fear in the Capitol that Wolf and Republican lawmakers are headed for the kind of months-long stalemate that marked Wolf's first budget. ___ THE NEXT BUDGET Spending is likely to exceed $32 billion in Wolf's coming budget proposal, up from $31.5 billion in approved spending this year. Budget analysts are projecting a roughly $3 billion budget gap in this year and next year combined, the difference between projected tax collections and the cost to maintain current programs. Wolf has said he will attempt to fill it, at least in part, by streamlining and cutting, but leaving benefits for the vulnerable intact. Wolf has said he will renew his push for a tax on Marcellus Shale natural gas production, something lawmakers have rejected for nearly a decade now. It is not clear whether he will call for any other tax increases. On spending, Wolf's office said he will seek to increase aid to public schools, a pursuit that has been a cornerstone of his administration, but he has not said by how much. ___ THE DEFICIT The size of Pennsylvania's deficit is expected to continue growing every year for the future, if nothing changes. Tax collections are lagging official projections this year by more than $400 million, and balancing deficit-riddled budgets in the past few years has meant siphoning one-time cash from off-budget programs, relying on unrealistic predictions of revenues or savings and delaying big payments to counties and insurers. That practice has left Pennsylvania's bond rating among the lowest of states. In his first two budgets, Wolf had sought billions of dollars in tax increases to wipe out the deficit and fix school-funding disparities that are among the nation's widest. The Legislature, however, has rejected most of Wolf's proposals. In the current fiscal year, lawmakers approved a roughly $650 million tax package, anchored by a $1-per-pack cigarette tax increase. ___ AUSTERITY Wolf has made several moves in the past six weeks to try to squeeze out savings. He ordered the closure of the state prison in Pittsburgh to save a projected $80 million next year, and he eliminated positions in state government, a move he says could save $100 million a year. He is also ordering the consolidation of four state public agencies into one, which will require approval from the Legislature. Wolf said it could mean savings into the tens of millions, and the administration has predicted it would yield improvements in service delivery and enable the state to qualify for more federal matching aid. ___ PRESSURES Budget pressure is growing from the same, and new, directions. One key area to watch is whether the state can slow the growth in Medicaid costs, which are rising as more elderly people seek long-term nursing care and health care costs increase. The state also must start helping pay for hundreds of thousands of people newly eligible under the federal health care law's expanded income guidelines. Pension obligations also are rising, in part to make up for payments the state put off in previous years. Now, the state must start paying off a school-construction bond and a $200 million loan from a state medical malpractice insurance fund to balance this year's budget. It is trying to reverse the flow of highway construction dollars to an expanding state police budget and the federal government is warning that the Department of Environmental Protection is inadequately staffed to enforce safe drinking water standards. ___ Follow Marc Levy on Twitter at www.twitter.com/timelywriter. His work can be found at http://bigstory.ap.org/author/marc-levy.