Feb 6, 2016 4 min read

HARRISBURG – Gov. Tom Wolf is scheduled to release his 2016-17 budget proposal for the fiscal year that begins July 1. After an unresolved fight with the Republican-controlled Legislature, the Democrat is the first governor in modern Pennsylvania history to come to this point with substantial portions of the budget for the current fiscal year still in limbo. Wolf made some revelations about what he will propose Tuesday, and here is a look at what is unfinished and what may be a part of his budget package.

In November, Wolf and Republican and Democratic leaders of the House and Senate agreed to the outlines of a budget package and associated policy initiatives, including a Senate Republican demand to overhaul benefits in the state’s two large public pension systems and the House Republican demand to break apart the state-controlled system of wine and liquor sales. It also included raising state taxes to absorb a portion of the school funding burden currently paid by local property taxes.

The spending package called for $30.8 billion, a 6 percent increase, and a tax increase of more than $1 billion. Wolf sought the extra money to deliver a record boost in aid to schools — and help close a massive funding disparity between wealthier and poorer school districts — and to narrow a long-term deficit that damaged the state’s credit rating. However, the deal collapsed, piece by piece, as rank-and-file House Republicans fought it.

Senate Republicans signed onto a $30.3 billion budget package written by House Republicans as lawmakers rushed to leave before Christmas. However, Democratic lawmakers bottled up more than $500 million in university subsidies and Wolf vetoed another $6 billion, in part to keep heat on Republican lawmakers to pass a budget plan along the lines of the November agreement. Republicans said they want to wrap up the 2015-16 budget without a tax increase, and within the spending outlines of the $30.3 billion package. Negotiations are at a standstill, and Wolf’s targeted vetoes may begin to affect schools, prisons and hospitals in the coming weeks.

Wolf said he will seek an additional $200 million for public school instruction and operations next year and another $60 million in new money for pre-kindergarten programs for children of low-income parents. The state is also facing growth in legally required pension obligation payments and Medicaid costs. If Wolf uses the $30.8 billion plan as a baseline, a new spending plan could approach $32 billion, an approximately 4 percent increase. How to pay for it is sure to be a sticking point with tax-averse Republican lawmakers.

Wolf maintains a tax increase of some sort is necessary to deal with a long-term deficit that knocked Pennsylvania’s credit rating into the basement. Wolf said he will resume his pursuit of a severance tax on the Marcellus Shale reservoir, the nation’s most productive natural gas reserve. It was not part of the November agreement and is likely to meet the same resistance from Republicans. Wolf also may revive his proposal to slash the corporate net income tax in half, but restructure the way it is applied in an effort, he said, to force more out-of-state companies to pay it. Republicans opposed the restructuring. Wolf still wants the state government to finance reductions in local school property taxes. One big dispute between Wolf and Republican lawmakers is over which school districts should see the biggest property tax reductions from a state tax increase.

Wolf’s economic development plans from last year’s budget proposal garnered little discussion. Those include more than $1.1 billion in bonds to bolster business development loan programs, energy and energy efficiency programs, and water and sewer system projects. These could resurface.