Rendell's budget up, but no big tax hikes

HARRISBURG - Gov. Rendell proposed a $29 billion budget yesterday that relies on a major infusion of federal aid to plug a growing deficit and afford a modest spending increase overall.

But the budget, austere compared with previous Rendell budgets, also includes the "painful" cuts that the governor has proposed to hundreds of state programs, from agriculture to veterans affairs.

"We must act now to adopt a budget that recognizes the pain we all must share, provides critically needed emergency relief, and continues to make the strategic investments that can spell the difference between productivity and panic for Pennsylvanians," Rendell told a standing-room-only crowd in the House chamber.

The 2009-10 fiscal blueprint - 2.5 percent larger than last year's budget - was crafted against the backdrop of a weakening economy that has contributed to a $2.3 billion deficit for the state in the current fiscal year.

Still, Rendell's proposed budget includes no broadbased tax hikes, but does seek a 10-cent per pack increase in the cigarette tax and new levies on smokeless tobacco and natural gas reserves.

Rendell also wants to allow counties to boost their sales tax by up to 1 percentage point - as Philadelphia and Allegheny Counties already have done - with half of it going to hard-hit cities.

The governor urged legislators to consider consolidating dramatically the number of public school districts - from 500 to 100 - and called on the 2,566 municipalities to share services as a way to weather "the economic storm."

"For every single one of us in this hall today, Republican or Democrat, urban or rural, young or old, this is our moment," Rendell told a joint session of the General Assembly. "How we respond to this crisis will define us for years to come."

While education, welfare, corrections, and probation and parole would see budget increases, every other department faces cuts in the fiscal year that begins July 1.

Rendell is relying on more than $2 billion in federal stimulus money to help pay for the increases.

The budget contained few surprises. Details of Rendell's package leaked out over the last week, including his idea to expand the state's health insurance program for adults and legalize video poker to help cover college tuition for 175,000 students.

Still, Rendell has proposed eliminating funding for 101 state programs, including schools for the deaf and children of military veterans, while 346 programs would see their spending trimmed in an effort to face down grim economic times.

Rendell said some cuts would be permanent, but he intends to restore funding for some critical services such as libraries and drug and alcohol programs as soon as the economy improves.

The 79-minute speech received few cheers, though the legislature has the largest number of Democratic members since 1993. The most sustained applause came when Rendell mentioned the Super Bowl champion Pittsburgh Steelers.

Rendell's budget proposal was roundly criticized by Republican leaders and even one top Democrat.

House Minority Leader Sam Smith (R., Jefferson) said a budget that increases spending "is letting a few links out of the belt - it's certainly not tightening the belt."

"We should maybe try no new programs for a change, try to decrease spending instead of increase spending for a change," said Smith. "How about maybe no new taxes for a change? Maybe we could cut some of the waste in government spending."

Senate Minority Leader Robert Mellow, a Democrat whose Lackawanna County district was hit hard by the funding cuts, accused the governor of using the budget as a "ploy to force the state legislature to consider tax hikes."

"I think his presentation was very short on leadership, short on substance," he said.

Others, like House Appropriations Chairman Dwight Evans (D., Phila.), called the budget a responsible plan during an economic crisis.

"But I want to stress, this is the governor's proposal - it's now up to us," said Evans. "We don't need to get into a political ping-pong with him over his proposal."

Mayor Nutter, who was on hand for the budget address, said he had yet to review the fiscal package to see how the city fared in it. But Nutter said the governor "delivered the right message, given the economic times that we are facing."

"That message is that things are tough and everyone should have their eyes wide open about that," he added.

Rendell did not mention state worker furloughs or layoffs in his address, as he threatened last week. However, the budget document calls for the reduction of 2,900 state positions.

Later, Rendell said some of those cuts would come by eliminating programs or leaving positions unfilled, but added that if concessions are not made by labor unions, layoffs may be needed.

Rendell's first mention in his speech of legalizing video poker touched off an angry exchange with House Republicans in the audience.

When Rendell argued that he was not advocating expanding gambling but rather acknowledging a profitable illegal activity that already exists, loud snickers and guffaws erupted.

That prompted Rendell to depart from his prepared text to ask whether they would be "polite enough to listen." When the murmurs continued, Rendell lit into the lawmakers, saying, "You'd better listen. There are thousands of families who can't afford to send their kids to college and depend on this."

Some lawmakers suggested that Rendell's logic for legalizing video poker could just as easily be used to justify legal prostitution.

In a briefing with reporters later in the afternoon, Rendell called that "a stupid argument."

"We could also legalize contract killing . . . and tax it," Rendell quipped.

The budget presentation opens weeks of hearings in the House and Senate as lawmakers craft their own version of the spending plan. A final package must be passed by July 1, the start of the fiscal year, or the state loses much of its ability to spend money.

Of Rendell's six previous budgets, none has been enacted on time.