Optimism that the Pennsylvania legislature could get a budget deal done this week was high, right up until the point when proceedings collapsed completely on Wednesday.

Pennsylvania Governor Tom Wolf frustrated over budget deal collapse

Pennsylvania Governor Tom Wolf showed his frustration with the legislature for failing to reach a budget plan compromise. “This is not the way government is supposed to work,” he said. (Image: AP)

With negotiations once again lying in tatters, there will be no movement on gambling expansion, which includes online gambling, at least not for now.

So, what happened?

Until this week, the GOP controlled House had been determined to fund the $2.2 billion hole in the $32 billion budget without raising taxes. Its so-called “Taxpayer’s Budget” plan proposed siphoning around $630 million from existing special state funds, earmarked for things like transport, infrastructure and environmental clean-ups.

This was roundly derided by its opponents, including Democratic Governor Tom Wolf, who felt it was unwise to increase spending by $700 million without creating new recurring revenue streams to balance it.

The Compromise

The Senate plan had included around $570 million in new taxes, including a levy on natural gas drilling, largely opposed by House Republicans.

In fact, the only recurring revenue stream both chambers could agree on was gambling expansion, which they each expected to generate $200 million per year, although the exact details had yet to be worked out.

The chatter in Harrisburg earlier in the week suggested a compromise had been found and that a deal was all but done. Possible compromises included raising hotel taxes, as well as levies on warehousing and logistics services.   

In terms of gambling expansion, video gaming terminals would be allowed only in certain truck stops, as opposed to almost anywhere licensed to sell alcohol as had been previously proposed by the House.

New “mini casinos” for certain regions were also on the table, as was legalizing online gambling and daily fantasy sports.

Governor Takes Control

But the hotel tax appeared to be the sticking point that ultimately scuttled negotiations, apparently unpalatable to House Republicans. A visibly angry Tom Wolf said afterwards he would seek to raise $1.2 billion by borrowing against future expected payments from the Pennsylvania Liquor Control Board, operator of the state’s liquor monopoly.

“This is not the way government is supposed to work. But I have to make sure that Pennsylvanians are not hurt, so I’m going to have to act to protect the investments that we all made earlier this year,” he said.

Despite the discord in the legislature, gambling expansion is the only issue on which both chambers are fully committed. The question is, how long will it take them to agree on all the other stuff?