Dec 27, 3:10 PM EST

GOP draws lines as Wolf focuses on huge deficit



HARRISBURG, Pa. (AP) -- With Democratic Gov.-elect Tom Wolf touring Pennsylvania to drum out his message about state government's massive structural deficit, the leaders of the big Republican legislative majorities are sending their own message to him: Me first.

So far, Republican leaders say their ideas must come first before they will consider any tax increase, including on natural gas drilling. However, they are staking out positions that Wolf opposed during his campaign and that stalled under Republican Gov. Tom Corbett amid solid opposition by Democratic lawmakers.

The looming conflict has left some rank-and-file Republicans and Democrats wondering whether new and bigger GOP majorities will reject a Wolf agenda in favor of passing legislation he is sure to veto.

Senate Minority Leader Jay Costa, D-Allegheny, said the opening salvo from Republicans does not mean compromise won't happen.

"That's the starting point," Costa said. "And, at the end of the day, my guess is that we'll work toward compromise on some of the issues that are being talked about."

Underpinning that optimism was the tone of a Dec. 15 dinner between Wolf and two leaders from each legislative caucus. Everyone sounded willing to work together, Costa said.

In six months, the state government's new fiscal year will begin, forcing policymakers to deal with a stubborn deficit that has prompted three rating agencies to downgrade Pennsylvania's debt. This year's budget is $29 billion, and the Independent Fiscal Office projected a nearly $2 billion deficit over the next year and a half.

Wolf, who takes office Jan. 20, has a task force studying the situation as he stresses the seriousness of the problem in media appearances around the state.

Top Republican lawmakers are starting to form a response, and they say their priorities must come first.

One idea is to overhaul the state's two major public employee pension systems.

"It'd be interesting to see what they're talking about because one of the things they keep running back to is pensions as a cost driver, but their proposal doesn't do anything to reduce the cost in any near-term way," said House Minority Whip Michael Hanna, D-Clinton.

Senate Appropriations Committee Chairman Pat Browne, R-Lehigh, said legislation he is writing would shift all new state and school employees into a 401(k)-style plan. He acknowledged that it promises no immediate help with the deficit or rising annual pension payments mandated under a 2010 law designed to settle up long-delayed bills. Rather, it would ensure that the state does not roll up another pension debt, he said.

The idea never got a vote under Corbett, even with Senate GOP leaders backing it, while Wolf and Democratic lawmakers oppose exchanging the traditional pension system for a 401(k)-style system.

"We'll have to work with the new governor on that, but it's a priority for us," Browne said.

In the House, the man who will become speaker in January, Mike Turzai, wants the state to sell its wholesale and retail wine and liquor operations to private businesses. That should be the first place policymakers look to for new revenue, Turzai's spokesman Steve Miskin said.

But Turzai's legislation stalled, even with Corbett's support. Wolf and Democratic lawmakers oppose privatizing the system.

Left untouched under Corbett were ideas Democrats supported to help close a deficit without raising taxes, and those ideas may get more consideration under Wolf.

Those ideas include giving private insurers a chance to control costs in the state's Medicaid-funded nursing home care program for the elderly, giving more autonomy to the Pennsylvania Liquor Control Board to set hours and pricing, and borrowing money to help offset rising pension payments.

Treasurer Rob McCord, a Democrat, thinks Republicans could be persuaded to support the idea of borrowing money, investing it and using the gains to help the state make its pension payments.

"I think you could find constructive uses of historically inexpensive debt that would be approved on a bipartisan basis and would be financially prudent," McCord said.

Browne and other top Republican lawmakers dismiss borrowing as a money-losing proposition if securities markets sour, but it has boosters among Republicans.

Rep. Glen Grell, R-Cumberland, sees borrowing as an avenue to winning valuable concessions from labor unions that can save billions of dollars down the road.

"It makes sense if you're making up for the 10 years we underfunded the plan," Grell said, "and if concessions are given in exchange for that borrowing."

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Marc Levy covers politics and government for The Associated Press in Pennsylvania. He can be reached at mlevy(at)ap.org. Follow him on Twitter at http://www.twitter.com/timelywriter .

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