After delay and cuts, Pennsylvania governor signs budget

By David DeKok

HARRISBURG, Penn. July 10 (Reuters) - Pennsylvania Governor Tom Corbett signed a smaller $29.02 billion 2015 budget on Thursday, after stripping out millions of dollars and waiting more than a week in the unfulfilled hope that lawmakers would pass pension reform.

Corbett, a poorly polling Republican who is up for re-election this fall, for the second year in a row could not get a legislature controlled by his own party to make changes aimed at improving the state's underfunded public retirement system.

So he used line-item vetoes to trim the legislature's $320 million budget - which pays lawmakers and staffers - by $65 million, or 20 percent. Corbett said the legislature's six-month budgetary reserve of $153 million could cover the reduction and still leave a more than three-month reserve.

He also angrily urged them to return this summer to finish pension reform, though he did not order them back into session, which he has the power to do.

"The legislature needs to take action on pension reform," Corbett said, blaming the teachers' union in particular for helping to thwart reforms. He had pushed a proposal to move new state employees into a "hybrid" pension plan that could reduce future costs.

David Broderick, a spokesman for the Pennsylvania State Education Association, said the governor's plan would save no money in the first year and only small amounts in later years, while cutting retirement security for young workers.

"It was defeated because it is a bad plan," he said. "It won't reduce property taxes. That's why it couldn't get the votes."

The state has about $50 billion of unfunded long-term pension liabilities. About 63 cents of every new dollar of state revenue goes to pay pension costs, Corbett said.

The state's pension problem is "a bleeding wound that needs a tourniquet," state budget Secretary Charles Zogby told reporters following Corbett's press briefing.

Despite facing a $1.5 billion budget deficit, the legislature had increased funding for its own operations by 2 percent and filled the budget with discretionary spending, Corbett said.

Pennsylvania's Republican majority leaders in the Senate said Corbett had eliminated or withheld funds from programs for low-income residents, education, arts, job training and biotechnology research as part of $7 million in cuts to earmarks in a related bill.

They said in a statement that his use of line-item vetoes was "unprecedented" and "likely unconstitutional." The legislature can overturn the line-item vetoes on a two-thirds vote of each chamber.

(Reporting by David DeKok in Harrisburg; Editing by Hilary Russ and Cynthia Osterman)