State lawmakers reported nearing budget agreement

HARRISBURG - Legislative leaders are nearing a "handshake agreement" that would end a protracted budget stalemate and Pennsylvania's distinction as the only state in the nation without a fiscal spending plan in place.

House Majority Leader Todd Eachus (D., Luzerne) said tonight that he and Republican counterparts in the Senate will hold a news conference at 11 a.m. tomorrow in the Capitiol to announce the agreement.

"It is now Sept. 10. Tomorrow will be Sept. 11. It's time to get a budget passed," said Eachus. "More news at 11."

When pressed whether that meant there would be an announcement of a handshake agreement, Eachus said, "I think we have a framework of that. We are working through the night to guarantee it."

". . . We are hopeful that we will make a conclusion of this tomorrow."

Specifics were few last night, but the aides confirmed that legislative leaders have agreed on an overall spending figure of roughly $28 billion - less than Rendell had sought but more than Senate Republicans were initially willing to appropriate.

The proposal contains a 25-cent cigarette tax increase, a 30 percent increase in the capital stock and franchise business tax and expands gambling to include table games, said Steve Miskin, spokesman for House Minority Leader Sam Smith (R., Jefferson).

The agreement, which could resolve the impasse that is about to stretch into its 10th week, also would include other recurring revenue sources.

Top administration officials said tonight that they were pleased legislative leaders had made progress, but that the current proposal still did not meet Rendell's criteria for a budget bill he will sign: sustained revenue to carry the state through the predicted slow growth of the next two years and the preservation of education and health care funding.

"The document we have been shown struggles on all counts," said Steve Crawford, Rendell's chief of staff.

Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware), said, "Discussions among legislative leaders over the past week have been very productive. There is a growing sense of optimism, and we hope to have more to say tomorrow."

Johnna Pro, a spokeswoman for House Appropriations Committee Chairman Dwight Evans (D., Phila.) echoed Arneson's optimism, saying, "We have come a lot closer on how much to spend and how much needs to be raised."

House Republican leaders, who were told of the agreement late tonight, said they would not support the proposal because it contained tax increases and the spending level was too high.

Under the agreement, House and Senate lawmakers agree for the first time on the overall spending amount for the budget and some broad funding categories. However many specifics still are to be worked out before a bill is submitted for a vote in each chamber.

Toward that end, Pro said House Democrats hope to reconvene a conference committee of senators and House members is scheduled to resume hammering those details as early as Sunday.

Rendell and House Democrats have been locked in a stalemate with Senate Republicans since the budget deadline came and went on June 30, the last day of the fiscal year. The standoff led to missed paychecks for more than 70,000 state workers, which were reinstated when Rendell signed a budget preserving funding for salaries, but eliminating virtually all other budget items.

The absence of state payments this summer left hundreds of social services agencies that provide child care, transportation for the elderly, drug and alcohol counseling, veterans services and some libraries that depend on state support in dire straits, forcing some to cut services, reduce hours and lay off staff.

In the months after his February budget address in which he proposed a $29 billion spending plan for 2009-2010, Rendell has made hundreds of millions in cuts across almost all government agencies. But he has repeatedly said he draws the line at any further reductions in education and health care funding.

Rendell proposed a personal income tax hike, because he said he wanted to ensure adequate recurring revenue to ensure fiscal stability in the coming years, but later dropped it when it met strong resistance among Republican and some Democratic lawmakers.

Rendell also set aside his proposal to tax natural gas extraction in the so-called Marcellus Shale reserve in the interest of encouraging growth of a developing resource.

With the broad-based income tax hike off the table budget negotators have looked at a menu of other tax options such as eliminating sales tax exemptions, increasing the cigarette tax and freezing the phase out of the Capital Stock and Franchise business tax.

They also will likely tap one-time revenue sources such as the state's Rainy Day Fund as well as other existing funds.