Pennsylvania budget to go into effect, ending long stalemate

By Hilary Russ (Reuters) - Pennsylvania Governor Tom Wolf, a Democrat, said on Wednesday he would allow a Republican budget bill for fiscal 2016 to become law without his signature, ending nine months of stalemate that starved schools and social service agencies of funding. Due to the political gridlock, the state until now only had a partial spending plan in place for this fiscal year, which began on July 1. Wolf, who took office in January 2015, previously said he would veto the latest $30 billion budget bill. But on Wednesday he said he would let it become law to allow funding to flow to schools, some of which have said they could have to close within weeks without state aid. The move leaves the worst-rated U.S. state, Illinois, as the only one without an enacted budget for the current fiscal year. Earlier in March, Standard & Poor's Ratings Services warned that it could downgrade Pennsylvania's 'AA-' credit rating by the end of the month without an enacted budget that addresses the structural deficit. "We still face enormous problems that this budget does not even pretend to address," he said in a statement, noting that the spending plan is still out of balance. "Let's be clear: the math in this budget does not work. Next fiscal year - that already has a $2 billion deficit - will now begin with an extra $300 million deficit," he said. The announcement and additional $200 million of education funding in the budget "come at a critical time as more schools are nearing the end of their financial rope," the Pennsylvania School Boards Association said in a statement. The group supported Wolf's efforts to increase education funding. His campaign promise to restore education funding by imposing a new tax on natural gas extraction met resistance in the Republican-led legislature. The association said the state should also reimburse school districts for interest payments on loans they had to take to stay open. Through December, when lawmakers finalized a partial spending plan, schools had borrowed about $1 billion with interest costs of up to $50 million. (Reporting by Hilary Russ; Editing by Chris Reese and James Dalgleish)