Gov. Rendell, Pa. lawmakers agree on $28.2 billion budget

HARRISBURG - On the last day of the fiscal year, Gov. Rendell and legislative leaders struck a deal on a $28.2 billion state budget, averting a repeat of last year's employee furlough and partial government shutdown.

The budget, which still must be passed by both the House and the Senate and signed by the governor, trims spending across the board, provides historic funding increases in education and renewable energy programs and contains no new taxes.

Republicans and Democrats say it was a compromise deal in which both sides "gave a little."

"Every single person at the table was able to give and take some things for their caucuses and their constituents," said House Majority Leader Bill DeWeese (D., Greene).

Senate President Pro Tempore Joseph Scarnati (R., Jefferson) said he was pleased the deal avoided any state tax increases and curbed spending.

"Our objectives were met, and I now believe that Pennsylvania will have a budget that recognizes the fiscal realities of working families and job creators," he said.

Rendell yesterday also praised elements of the spending plan, but conceded that about $545 million in budget cuts were necessary given the economic climate and Republicans' insistence on a slimmed-down budget.

"I like certain parts of it for sure," Rendell said of the budget agreement. ". . . We've made tremendous progress in education, energy and infrastructure."

But, he said of the compromise plan: "Cuts are always difficult."

Rendell refused to detail the reductions, saying he didn't want to risk wrecking the deal that has been reached.

"There have been many a slip between the cup and the lip, so I don't want to get into much detail," he said.

Pressed to explain what is so sensitive about detailing cuts in taxpayer-funded programs, Rendell responded: "Nothing is sensitive about it, but it's a process. I've signed off on it; it's now subject to legislative debate. I don't want to color that debate in any way."

While the legislature was unable to approve the spending plan before the start of the new fiscal year, the agreement ensures there will not be a repeat of last year's one-day furlough of 24,000 state workers.

A far lower-than-projected state surplus called for some creative financing ideas. The surplus, which stands at $159 million, $300 million shy of the projected amount, often is applied toward the next year's budget.

To make ends meet, the sides agreed to transfer at least $60 million from surpluses in special accounts, including the liquor store system and the recycling fund, to cover general state spending needs. This year, the state lottery fund will pick up $50 million in nursing home and other costs typically covered by general appropriations.

The state also will forgo this year's contribution to its reserve fund, called the Rainy Day fund, and instead put that money - roughly $138 million - into the general fund. This set-aside is used to cover shortfalls during economic downturns to avoid raising taxes.

Given the current bleak financial picture, Senate Majority Leader Dominic Pileggi (R., Delaware) said reaching a budget agreement this year was "an achievement in and of itself."

The budget includes a significant piece of Rendell's "Energy Independence Strategy" - a $650 million energy development fund that expands grants and loans to businesses that develop alternative and renewable energy sources.

Pileggi said yesterday that about $180 million of that would go toward rebates for solar panels and investments in solar energy, and another $25 million would be used to build energy-efficient buildings, or so-called green buildings.

The budget also includes $274 million in additional education spending, the largest increase in two decades, $350 million to repair about 400 structurally deficient bridges and $800 million for water and sewer system upgrades during the next several years.

In all, this fiscal year's budget represents a 3.8 percent increase over last year's spending.

One unexpected victim of the larger debate over Rendell's budget this year could be the Pennsylvania Health Care Cost Containment Council, an independent state agency that monitors the cost and quality of health care.

A bill that would extend funding for the Council, which expires this morning, has become caught up in a political tug-of-war between the administration and Senate Republicans over health care.

The governor has said that the health-care issue could not be resolved in time for the budget, and pushed discussion of it to the fall. But Senate Republicans want one aspect of the health-care debate - funding for MCARE, the state's reimbursement program to doctors for medical malpractice insurance - to be addressed before the legislature breaks for the summer.

The governor has said he will not address the MCARE issue unless the legislature passes his proposal to cover an additional 143,000 uninsured Pennsylvanians.

The Senate Republicans responded by trying to tie MCARE funding to a bill that would continue to fund the Council. The Council's funding ran out at midnight, and as of 6:30 p.m. officials were meeting to figure out whether its employees would lose their jobs today.

"Their work helps us make important policy decisions," said Rep. Todd A. Eachus (D., Luzerne), one of the council's biggest advocates. "It would be a black eye for Pennsylvania if they were to shut down."