Pennsylvania Governor Capitulates to End Budget Stalemate

  • Budget is 266 days late, longest delay in plan since 1956
  • Republican plan passed last week omits tax increases

Pennsylvania Governor Tom Wolf, a first-term Democrat, conceded victory to the state’s Republican-led legislature and said he’ll bring an end to a eight-month budget stalemate by allowing its spending plan for the year that began in July to become law without his signature.

Tom Wolf

Photographer: Gilbert Carrasquillo/WireImage

“It’s time to move on,” Wolf said Wednesday during a press conference in Harrisburg. “The real battle is in the sixteen-seventeen budget. I’ve convinced myself this is the right thing to do.”

The legislature last week passed a $30 billion budget that doesn’t raise taxes and that Wolf characterized as unbalanced, saying he would veto it. He said Wednesday that he plans to work with lawmakers to craft a "responsible" budget for the year that begins in July.

“He gave up on this round, perhaps looking at the next round of budget negotiations and strategizing to get what he wants for the next round,” said Alan Schankel, a managing director at Janney Montgomery Scott in Philadelphia.

The stalemate stemmed from Wolf’s intent to raise levies to finance education, while lawmakers were resistant and wanted to adjust state worker benefits to shore up the underfunded pension system.

The rift has led to Pennsylvania’s AA- rating, fourth-highest, being placed on watch for downgrade by Standard & Poor’s, and pushed the state’s 10-year borrowing costs relative to benchmark securities to the highest since at least 2013, according to data compiled by Bloomberg.

Debt issued by school districts through a Pennsylvania program that intercepts state aid to payments was also cut. School officials tapped short-term loans to keep classrooms open.

While passage of the fiscal plan is a “good sign,” credit-ratings companies and bond buyers will be evaluating whether the state’s leaders “set more realistic objectives” for next year’s budget, Schankel said.

The 266-day delay over the budget was the longest since 1956, which was 336 days late.

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