Pa. budget deal ends stalemate with new taxes

HARRISBURG - Gov. Rendell and legislative leaders announced last night that they had tentatively agreed on a nearly $28 billion state spending plan that would finally end the longest state budget standoff in the nation.

"I think we can say with a great deal of satisfaction that we have a budget agreement," Rendell, flanked by legislative leaders, announced at 8 p.m. on the 80th day of the impasse. He called the plan "good, responsible, and fair."

The governor boasted that the deal, if enacted by legislators, would make Pennsylvania "one of the few states in ... this horrible recession that is actually increasing funding for education" - by $300 million.

If the agreement is ratified, people will pay more to attend concerts and plays, and to smoke the small cigars known as cigarillos. All of those are to be taxed under last-minute additions to the package.

Elements of the budget, long the subject of partisan and ideological bickering, began falling into place yesterday after several negotiating sessions at the governor's mansion between Rendell and top Senate Republicans.

Like the pact proposed last week by three of the four legislative caucuses, the deal avoids any broad-based tax hikes, but increases business taxes, adds 25 cents per pack to the cigarette tax, expands gas-drilling leases on state land, and authorizes table games such as blackjack and poker at casinos.

Rendell said the package contained all those components plus additional revenue sources. He refused to discuss those new items last night, saying he wanted rank-and-file lawmakers to be briefed on them first.

But sources familiar with details of the agreement confirmed that Rendell successfully pushed to establish a sales tax on "theater, dance, music, and performing arts" tickets - everything from the ballet to Beyoncé - which have been exempted from the levy. The proposal does not tax tickets to movies or sporting events.

The state also would rewrite its definition of cigarettes to include the small cigars that are made from cigar or pipe tobacco. That means that cigarillos would face excise taxes for the first time in Pennsylvania.

Those last two items would produce enough new dollars for the state - more than $130 million combined - to give Rendell the comfort margin he needed to sign off on the package, the sources said.

Overall, the budget calls for the state to spend $400 million less this year than it did in fiscal 2008-09. It does so while still increasing spending on basic education needs by $300 million - a firm condition Rendell placed on any budget plan from the start.

"We need a state budget now - and we need to fund core government programs - but we can't afford to mortgage our future with higher taxes and higher spending," said Senate President Pro Tempore Joe Scarnati (R., Jefferson). "This agreement does not include the massive personal-income-tax increase that the governor proposed, but it does invest in education and recognizes the fiscal realities that we face."

Senate Minority Leader Robert J. Mellow (D., Lackawanna), who is credited with bringing his own caucus, as well as the Senate Republicans and House Democrats, to the table to reach a budget framework, said, "I feel like it's a burden lifted."

On Sept. 11, those caucuses sent Rendell what they portrayed as a tentative bipartisan budget agreement.

Rendell, however, quickly said he would veto the plan because it relied on what he called unrealistic projections of what the state could expect from the chosen menu of revenue options.

Over the last week, legislative leaders have tried to convince Rendell that their numbers were solid and would not, as he envisioned, leave the state with a fiscal shortfall in coming years.

"The revenues in this budget were not the construct I would have made, by no means," Rendell said last night. "However, they are recurring, they are well-honed, and we have some real certainty in the numbers."

Top lawmakers stressed last night that delay in reaching a deal was a byproduct of the worst recession in the nation's history.

"You talk about winners and losers," said House Speaker Keith McCall (D., Carbon). "I think it's about winners and survivors."

Most states faced the same recessionary budget crunch this year, and many blew their deadlines to enact spending plans. But none did so as badly as the Keystone State.

Connecticut lawmakers came to terms with Gov. M. Jodi Rell two weeks ago, leaving Pennsylvania the only state still operating under an incomplete budget.

Rendell in early August signed a stopgap measure that authorized $11 billion in spending, allowing the state to pay its employees and to fund some departments.

As the impasse dragged on, more social-service agencies that rely heavily on state subsidies were forced to trim services or lay off workers.

Rendell said last night that state Treasurer Rob McCord had been asked to expedite the process of sending out overdue checks to state vendors, such as child-care agencies and drug-rehab centers, as soon as the budget is completed.

Now that the sides have come to terms, the package must be put into bill form. It then will go to a House-Senate conference committee of legislative leaders for approval.

The full House and Senate then will vote on the package, without the ability to change it. If all goes as planned, it could be ready for the governor's signature within the next two weeks, officials said.

House Republican leaders were not party to the compromise.

Rendell issued a plea last night for them to sign on based on the reduced spending in the plan. But their spokesman said they would not support the proposal.

"We think the spending is too high, and it includes new taxes," said Steve Miskin, spokesman for House GOP members, who are the minority caucus. "It's the wrong time to be taking money out of people's pockets."