Corbett: Pension cuts must come before discussing possible tax hike

HARRISBURG – Gov. Tom Corbett acknowledged Tuesday that Pennsylvania’s budget situation is not pretty, but insisted he will not listen to arguments for a tax increase until lawmakers pass major legislation slashing public employee pension costs.

A tax increase is looking increasingly likely as lawmakers eye a state budget for the soon-to-start fiscal year. The alternative – cutting programs, tapping politically sensitive grant programs or forgoing more aid for public schools and human services programs – would be a challenge to pass, said Senate Majority Leader Dominic Pileggi.

Corbett and Pileggi spoke against the backdrop of closed-door negotiations on Corbett’s $29.4 billion budget plan for the fiscal year that begins July 1. Stumbling tax collections and risky assumptions, however, have blown a nearly $2 billion hole in that plan.

Corbett, who campaigned in 2010 on a pledge not to raise taxes or fees, did not dismiss the idea of some sort of tax increase to help fill a massive hole in the state’s finances. But, he said, lawmakers must address the state’s pension obligations first in an effort to ease the long-term costs.

“It’s not a pretty picture, and we certainly don’t want that, but the first place we have to go is the cost drivers,” Corbett said.

In an effort to win passage of pension legislation, Corbett also has promised to hold up the budget past July 1 – thus blowing away another 2010 campaign pledge to sign on-time budgets.

“If we’re not able to finish by June 30, we’re not able to finish by June 30,” Corbett said.

Warning of a $50 billion unfunded liability in the state’s two major public pension systems, Corbett supports legislation that is expected to save more than $10 billion over 30 years. But it would not help close a deficit in this year’s budget, and it lacks support in the GOP-controlled House. Democrats oppose it and unions say it would save money by punishing future teachers, nurses and other public employees.

“If we want to solve our budget crisis, we have to look at the real culprit – the billions in outsized taxpayer giveaways to corporations,” the AFL-CIO’s state president, Rick Bloomingdale, said in a statement.

Meanwhile, the Capitol is stuffed with lobbyists pressing lawmakers for help in the budget, including advocates for hospitals, nursing homes, human services providers and public schools.

Democrats, who have been all but frozen out of budget negotiations, are championing a number of moves they say would resolve the budget shortfall. For the first time under Corbett, votes from Democrats will likely be necessary to pass a budget.