Pennsylvania $2 bln budget gap is 'time bomb': governor

By Hilary Russ NEW YORK (Reuters) - Pennsylvania's $2 billion budget deficit is a "time bomb" that could cause "fiscal catastrophe the likes of which we have never seen" if it is not resolved, Governor Tom Wolf said in his budget address on Tuesday. Wolf proposed a $32.7 billion fiscal 2017 budget that would add $200 million of funding for K-12 public schools and another $110 million to early and special education programs. Including pension contributions, the budget would be nearly $33.3 billion. To pay for the increases, Wolf would increase personal income taxes by nearly 11 percent to 3.4 percent, expand sales taxes, raise taxes on tobacco products and implement a 6.5 percent severance tax on natural gas producers, according to documents released during his speech. But dominating Wolf's message was the budgetary crisis escalated by political gridlock. Wolf, a Democrat, and the Republican-led legislature have disagreed since this time last year, when Wolf proposed his first budget. Now seven months after the start of fiscal 2016 on July 1, the state still has only a partial $23.4 billion emergency spending plan. Wolf had been ready to sign a negotiated $30.8 billion agreement but it was scuttled in December. Wolf reminded lawmakers of that turn of events on Tuesday. In web-streamed remarks, he urged them to send the agreement back to him. "House Republican leaders just walked away," he said during his speech at the state capitol in Harrisburg. Some booed in response. "Yelling will not make it go away," Wolf said. "We need to do what's right," he continued, to applause. He later told lawmakers to "find another job" if they could not reach a solution. His 2017 proposal is built upon the eventual approval of that compromise budget for the current fiscal year. Senate Republicans, who had passed the budget compromise, said Wolf was "doubling down" on last year's proposal. "This retread budget proposal offers superficial changes to his sizable tax-and-spend plan that has already been soundly opposed by taxpayers," Senate Majority Leader Jake Corman said in a statement on Tuesday. Unless next year's deficit is closed, property taxes for homeowners will skyrocket, Wolf said. More than 23,000 teachers and school employees would be cut, as would special education and pre-kindergarten programs. Services for senior citizens, the mentally ill, child care and domestic violence shelters also would be slashed, he said. Wolf's address was no olive branch, said Muhlenberg College political scientist Christopher Borick. "He turned up the heat," Borick said. (Reporting by Hilary Russ; Editing by David Gregorio and Bill Trott)