By David DeKok
HARRISBURG, Pa. (Reuters) - Incoming Pennsylvania Governor Tom Wolf will face a $2 billion budget deficit in fiscal 2016, partly caused by one-time fixes this year, the state's budget secretary said on Wednesday.
Wolf, a Democrat, will present his first spending plan in March after ousting Republican Governor Tom Corbett, who had to close a $1.2 billion shortfall to balance the $29 billion budget in fiscal 2015, which ends June 30.
"It's going to be a challenge," Pennsylvania budget secretary Charles Zogby said. "Corbett said we ought to look at one-time options rather than raise taxes on Pennsylvania families and businesses."
In September, Fitch Ratings downgraded Pennsylvania one notch to AA-minus because of escalating pension liabilities and the nearly 7 percent, or $2 billion, of Corbett's budget that relied on one-time revenue sources.
The state is also struggling with sluggish revenue and job growth, which has lagged the nation.
Corbett was voted out in November, the first time an incumbent Pennsylvania governor failed to win reelection since it was allowed in 1968.
Corbett and the Republican-led legislature "have run this state into the ground financially," said Senate Democratic Appropriations Chair Sen. Vincent Hughes at a news conference after Zogby's presentation.
Democrats blamed the state's fiscal struggles on one-time budget fixes, poor job growth policies, education spending cuts, and $2.1 billion of corporate tax cuts under Corbett.
State lottery net revenues have also declined. Pennsylvania is expected to close this fiscal year with only about $1 million in reserves, Zogby said.
The deficit prompted Democrats on Wednesday to renew talk of implementing a tax on natural gas extraction, a move Corbett resisted for fear it would impede the industry's growth.
The state could also save money by consolidating some state departments, particularly with a merger of the corrections department and parole board, Zogby said.
The majority of state worker labor contracts expire in June, and will have to be renegotiated, Zogby said, noting the potential for higher wages.
(Reporting by David DeKok; Editing by Hilary Russ and Richard Chang)