$28 billion Pa. budget deal heads to Senate

HARRISBURG - Gov. Rendell and leaders of the Pennsylvania legislature are on the brink of achieving something they haven't done in his first seven years in office: enacting a state budget on time.

They struck a deal Tuesday on a $28 billion state budget with a day to spare before the new fiscal year begins.

But the spending plan, which is about $1 billion less than what Rendell had originally proposed, has its share of question marks.

The plan relies on receiving hundreds of millions in federal Medicaid funds from Congress that do not appear likely to materialize.

It calls for taxing the extraction of natural gas from the Marcellus Shale formation - but puts off until fall such critical details as what the tax rate will be, how much revenue is expected, and how that revenue is to be disbursed.

And the plan - which adds money for public schools, but cuts aid to parks and libraries - still needs approval Wednesday in the Republican-controlled state Senate and the narrowly Democratic House.

Nonetheless, Rendell on Tuesday cautiously called the agreement a victory, especially considering the recession's impact. He said the spending plan was "a conservative budget that reflects the fact that we have lost significant revenue."

"It's a good budget," Rendell told reporters at a 3 p.m. news conference. "It's a frugal budget."

The $28 billion plan includes a $250 million increase in basic education funding. That is less than Rendell had proposed, but is still a 4.5 percent bump.

Few other areas fared as well.

To help offset the state's $1.2 billion deficit, Rendell said, there will be steep cuts to state parks, environmental protection programs, health-care centers, and libraries, among other items. That, in turn, will likely translate into layoffs of about 1,000 state employees, according to administration estimates.

"There is no way to do this without inflicting pain," Rendell said.

The administration said specific program cuts had not yet been decided.

The plan includes a $14 million reduction to the Accountability Block Grant program, which helps public schools defray the costs of prekindergarten and full-day kindergarten among other items.

Senate Majority Leader Dominic Pileggi (R., Delaware) said the plan would be brought to a full Senate vote on Wednesday, the last day of the fiscal year.

The measure would then be sent to the House.

If both chambers approve the budget by the end of Wednesday, it will be the first time in Rendell's tenure that a budget has passed on time.

But even then, several pieces must fall into place for the agreement to remain intact.

The biggest: a hoped-for $850 million federal infusion to help balance the budget and pay the state's federally mandated Medicaid obligations - in essence, the cost of providing health care to the poorest Pennsylvanians.

If all or a portion of that money is not forthcoming - and the latest signs from Congress have not been encouraging - then Rendell and legislative leaders will have to decide how to slice $850 million out of the spending equation.

Rendell had warned last week that losing the federal money would lead to "Armageddon" in Pennsylvania, with 20,000 or more layoffs, including state employees and others whose paychecks are underwritten to various degrees by state funds: county and municipal workers, as well as public-school teachers.

The lame-duck governor acknowledged Tuesday that if Congress didn't come through, a highlight of the budget deal - the $250 million increase for basic education, one of his signature issues - would have to be erased.

Still, public-school advocates on Tuesday sounded upbeat.

Timothy Allwein, assistant executive director of the Pennsylvania School Boards Association, said: "To get this much [of an increase] in this bad of a budget year is still quite an accomplishment."

Rendell is scheduled to travel Wednesday to Washington to push Capitol Hill lawmakers to approve the Medicaid-reimbursement money.

That funding, however, is bound to be an issue as state legislative leaders try to sell the budget agreement to their members.

"It's a house of cards," said Cathleen Palm, a longtime Harrisburg advocate for child-welfare agencies that stand to get hit hard if the federal money isn't approved.

"Yes, [the budget] is being done in a timely manner, but rank and file are being asked to make decisions without the best information," she said.

Pileggi, the Senate GOP leader, noted Tuesday that Pennsylvania was only one of many states that had counted on receiving the federal assistance in their budgets.

If the money doesn't come through, he said, the governor and legislature will simply have to find more cuts.

"It's not as if we will go through the budget year oblivious to the final decision" by Congress, Pileggi said. "If we get it, the spending plan will remain intact. And if the funding is reduced to zero, we will make the necessary reductions."

He and others also defended the decision to delay debate on the specifics of a Marcellus Shale tax. In effect, it would be the second delay: Last year, Rendell proposed such a tax, but retreated in the face of opposition from the natural-gas industry.

On Tuesday, Rendell said more time was needed to figure out the details of such a tax, and he set an Oct. 1 deadline to do so.

But there was grumbling.

Said Rep. Greg Vitali (D., Delaware): "We are voting on a tax package without a severance tax."

House Majority Leader Todd Eachus (D., Luzerne) acknowledged that no deal would become final until the rank and file had signed off on it.

But Rep. Dwight Evans (D., Philadelphia), chairman of the powerful House Appropriations Committee, said he was confident that the chamber's slender Democratic majority would muster enough votes to pass the budget Wednesday.

Evans called it a good budget "under tough circumstances."

Here are some key elements of the tentative $28 billion state budget agreement between Gov. Rendell and legislative leaders for the fiscal year that

starts Thursday.

The big picture

An overall increase in spending of less than

1 percent.

About $25.3 billion

in taxes, fees, and other revenue, plus about $2.7 billion in federal economic stimulus money.

No increase in the state income or sales taxes.

Spending increases

$1 billion-plus on mandated programs such as health care for the poor, state employee pensions, and prisons.

$250 million, or 4.5 percent, for public- school operations and instruction.

Spending cuts

Agriculture Department, 11.7 percent.

Department of Conservation and Natural Resources, 11 percent.

Department of Labor and Industry, 10 percent.

Department

of Environmental Protection, 9.2 percent.

Libraries, 9.1 percent.

Governor's office, 7.5 percent.

State parks, 7.3 percent.

State health-care centers, 6.9 percent.