Dec 15, 2013 4 min read

HARRISBURG – Gov. Tom Corbett and the lawmakers tasked with balancing a budget next year are facing an intensifying search for funds in what is shaping up as a challenging time for state revenues.

At the top of the list for Republicans who control the Legislature and the governor’s office are expanding lottery gambling, cutting the pension benefits of future public employees and auctioning the accounts of millions of Pennsylvania households to firms that buy and sell electricity.

Cutting spending on education or programs for the poor – pursuits that helped balance Corbett’s first two budgets – could severely damage the re-election prospects for Corbett and the GOP’s narrow Senate majority.

The governor’s budget secretary, Charles Zogby, said he will listen to almost any proposed solution.

“If there’s anything that can help us cover this gap without having to go back to Pennsylvania taxpayers and take more from them in the way of tax increase, then we need to explore that,” Zogby said.

Corbett’s decision-making will play out over the next seven weeks before he presents his budget proposal to the Legislature Feb. 4.

The money hunt is likely to produce battles with minority Democrats.

Senate Democrats assembled a list of moves that they said would create $1 billion in revenue or savings. Chief among them is the expansion of Medicaid under the 2010 federal health care law. The billions of new federal dollars would absorb $400 million in health care costs the state currently foots, Democrats say.

Republicans have little to say about the Democrats’ list, which also includes improving tax-collection methods, postponing a planned tax cut for businesses, scaling back a long-standing tax break for retailers and slapping new taxes on cigars and smokeless tobacco. Corbett is resisting an expansion of Medicaid, and it’s unclear how or when the federal government will respond to his counterproposal.

“Now is really the time for (Corbett) to put up,” said Philadelphia Sen. Vincent Hughes, the ranking Democrat on the Appropriations Committee. “The question is, Is (Corbett) going to cut more programs for the poor? All he seems to be able to do is come up with more ways for people to gamble.”

Last month, Corbett and the Legislature approved the expansion of gambling in bars in hopes that taxing it will eventually produce $150 million a year. In addition, most lawmakers seem to be in agreement on scaling back payments to charter schools.

Zogby is warning that next year’s budget could prove more difficult than Corbett’s first three budgets, which were complicated by rising public employee pension costs and the disappearance of federal recessionary bailout aid.

For now, Zogby is projecting a $1.4 billion deficit, or about 5 percent of the $28.4 billion budget for the current fiscal year ending June 30. On top of that, Corbett and most lawmakers will want to increase spending on public schools.

To help afford it all, Zogby is assembling a plan to postpone some of the state’s immediate pension fund payments – which are expected to rise by $600 million next year – for teachers and state employees. To cover the cost of putting off the payments, pension benefits for future public employees would be slashed. Similar legislation passed in 2010.

The Legislature is studying the implications of legalizing and taxing online casino gambling, while Republicans are considering the introduction of a lottery game called keno. Keno could add several hundred million dollars to the $3.7 billion in Pennsylvania Lottery program.

Also under serious consideration is a Senate GOP bill being promoted by companies – known as suppliers – that buy electricity in wholesale markets and sell it to retail customers. Under the bill, Pennsylvania would become the first state to auction off the accounts of residential and business customers who still pay a traditional power utility for electricity. The suppliers would pay the state $100 for each account they win in the auction, potentially injecting $360 million into the state treasury.

Democrats are wary of it, and the AARP opposes it.

Senate Majority Leader Dominic Pileggi, R-Delaware, acknowledged that the electricity suppliers’ bill is controversial and said lawmakers have just begun to evaluate it. He also sounded a cautionary note about pursuing short-term cash needs at the expense of good, long-term policy.

“We have the real challenge of balancing the budget,” Pileggi said, “but my concern is that the decisions we make now will be the law for 20 years.”