HARRISBURG, Pa. (AP) — Democratic Gov. Tom Wolf will head into 2017 with perhaps bigger challenges than his first two years in office.
He is facing Pennsylvania's largest Republican legislative majorities in decades, the state government's stubborn post-recession deficit looks as bad as ever and Wolf's upcoming re-election campaign is in view.
Meanwhile, fear is rife in the Capitol that 2017 will bring a second drawn-out budget stalemate, similar to the record-breaking fight that ended last spring, more than nine months into Wolf's first full fiscal year as governor.
For now, Wolf is changing strategy. For the first time, Wolf will give lawmakers a budget proposal — his third — that does not include a major sales or income tax increase, he said. That has received a warm embrace from Republicans, and skepticism from Democrats that it can be done.
"I think there ought to be skepticism," Wolf told The Associated Press in an interview Wednesday.
After all, deficit-laden governments that do not raise taxes typically balance budgets by "slashing and burning and cutting" education and human services, Wolf said. "I don't think anybody I know has done a good job of streamlining government in a way that continues to serve the needs of people, but I think that's what government needs to do."
How Wolf balances the political reality of the Capitol for the next two years, but still achieves his goals, could become clearer in early February when he delivers his budget proposal to the Legislature.
"This is all going to be very interesting, because we do not yet know how Governor Wolf is going to govern in his third year, if he's looking toward re-election or if he's looking toward being a hard-line progressive and not caring about re-election," said Rep. Rob Kauffman, R-Franklin.
Wolf came into office seeking billions of dollars in tax increases to wipe out a massive budget deficit that had left Pennsylvania's credit rating among the nation's lowest and to fix school-funding disparities that are among the nation's widest.
Republicans fought off the lion's share of Wolf's tax proposals, including a refusal to impose higher taxes on the Marcellus Shale natural gas industry.
This year, the state government's budget is full of holes — tax collections are sluggish and human services programs are underfunded, Wolf administration officials say — and a deficit projected at $1.7 billion next year looms.
Pension obligations, prisons costs and providing health care for the poor are rising by more than $1 billion a year, and Republicans, for the moment, are conspicuously avoiding talking about cutting benefits or increasing taxes.
Instead, Republicans are heading into the new year emphasizing that state government must undergo difficult and far-reaching changes to control rising costs.
"These are things that won't benefit us today and may not help this year's budget," said Senate Majority Leader Jake Corman, R-Centre. "But until you start putting in that hard work and reforming these areas, you're going to be going on for the next half-decade or so talking about deficits or absorbing the tax increases that nobody wants."
Rep. Matt Bradford, D-Montgomery, said Republicans in control of the Legislature the past six years had the chance to do everything that they are talking about now, but preferred to paper over deficits or to cut aid to schools and the poor. Rep. Mike Sturla, D-Lancaster, had one suggestion for Republicans wanting to balance the budget without raising taxes: raise the minimum wage.
"If we do that, I think we can save a ton of money in terms of what we are spending on public assistance," Sturla said.
Meanwhile, Wolf's drive to make Pennsylvania's school-funding system more equitable is a mixed bag. While he has made considerable concessions on his school-funding agenda, he is also declaring a victory of sorts.
"Two years ago, we were in a real hole," Wolf said. "And I came into government to try to plug that hole, to fill it in, to actually get back to at least where we were and to try to move forward, and in the last two years I've done that and I will continue to do everything I can to keep us from falling backward."
Follow Marc Levy on Twitter at www.twitter.com/timelywriter. His work can be found at http://bigstory.ap.org/author/marc-levy.