No budget deal? No problem. 'I can do this indefinitely,' Wolf says

HARRISBURG — It had been a chaotic few hours in the state Capitol when House Minority Leader Frank Dermody strode out to the hallway outside the governor's office to vent his frustration.

Like most leaders in Harrisburg on Wednesday, the Democrat from Allegheny County was upset that a compromise with House Republicans to end the budget stalemate — which at the start of the week had seemed so close — had suffered yet another spectacular collapse in public view.

"I don't know where we are right now," Dermody told reporters.

Those eight words encapsulated what most everyone in the Capitol was thinking as the week drew to a close: More than three months into the  impasse, those involved in negotiations are out of new ideas for a deal on how to pay for the state's $32 billion budget.

And it raised the prospect, for the first time since the July 1 start of the new fiscal year, that there may be no deal this year — and that instead, Gov. Wolf, a Democrat, will have to maneuver around the Republican-controlled legislature.

This week, Wolf said he would do just that. As talks collapsed, he said he would borrow more than $1 billion to keep the state solvent and allow it to continue paying its bills on time this fiscal year.

"I'm going to do it myself," Wolf said Thursday during an appearance before the Inquirer and Daily News Editorial Boards.

Though Wolf said he was not giving up on the legislature, he also said he was done waiting for House Republicans to come to a meeting of the minds. He said Thursday that GOP leaders had engaged in "dysfunctional bomb-throwing."

Under Wolf's plan, the state will borrow $1.25 billion in this fiscal year to cover a portion of the state's $2 billion deficit. His administration has also signaled that an additional $600 million due to be doled out to the state-related universities — Temple, Pittsburgh, Lincoln, and Pennsylvania State — will remain frozen unless new revenue plans somehow arise.

The governor said he would pay back the loan using proceeds from the Liquor Control Board, which controls the flow of wine and liquor into the state and operates more than 600 stores that sell those products.

LCB officials, who administration officials acknowledged would have to sign off on the deal, have said only that they "pledge to work collaboratively" with Wolf.

Asked about managing the state's finances without a complete budget, Wolf said: "I can do this indefinitely."

He may have to.

The House and Senate adjourned Wednesday and are not expected to return until mid-month. To some, Wolf's surprise borrowing announcement seemed to take the urgency out of any budget talks.

"It's certainly not the ending that we wanted," Senate Majority Leader Jake Corman (R., Centre) said Wednesday, about an hour after the governor announced his borrowing plan.

Still, Corman expressed a desire to find a way to fund the state-related universities — one that Wolf echoed. But there is no agreement on how to achieve that, nor did there appear to be any imminent meetings.

The legislature passed a nearly $32 billion spending plan in late June, sneaking it in just before the deadline for the new fiscal year. But it didn't have a plan to pay for it, nor a way to close a $1.5 billion deficit from last year and about a $700 million shortfall from this year.

The disagreement, at its core, is over taxes — whether to raise them or impose new ones.

Republicans have said there isn't support for increasing either the state sales or personal income taxes. But GOP leaders in the Senate have been open to other taxes, even voting over the summer to approve a new levy on natural gas drilling companies.

House Republican leaders were adamantly against that plan. In fact, the fight over taxing drillers helped lead to the breakdown in this week's negotiations.

In an interview Thursday, Dermody said leaders were still trying to piece together whether they need to pass remaining budget bills, when to meet, and what steps to take next. His caucus, for one, might push various taxes as a way to fund the state-related universities.

"There's no easy way out of this," he said.