Rendell says Pa. facing $1.1 billion shortfall

HARRISBURG - For Pennsylvania in a recession year, April is indeed the cruelest month.

In a bleak news conference Monday, Gov. Rendell described in detail just how cruel: the state, he said, collected roughly $390 million less than expected, leaving it with a $1.1 billion shortfall.

And, he added ominously, if the legislature does not enact a combination of onetime revenue transfers and tax increases proposed by his administration, he will have to furlough and lay off a "very significant" number of state employees.

"I'm sorry, but we are whipsawed either way," the governor told reporters at a Capitol news conference. "When I propose spending cuts, everybody hates those spending cuts. When I propose layoffs, everybody hates the layoffs. The legislature doesn't want layoffs, they don't want spending cuts, they don't want to raise revenues."

"Well, neither do I," Rendell continued. "I don't like those proposals either. But it's my job."

Rendell's remarks officially set the stage for what could be another showdown over the state budget with Republicans who control the Senate.

The remarks mirrored what Rendell and others in his administration said last year, when the budget ended up being enacted 101 days after the June 30 deadline.

The same holds true for Republicans. All day Monday, they echoed positions from last summer, when they refused to balance the budget with tax increases and advocated cutting spending instead.

Earlier Monday, the Republican chairman of the powerful Senate Appropriations Committee projected that the state would face a whopping $1.3 billion shortfall by the June 30 end of the fiscal year.

Sen. Jake Corman (R., Centre) said there was little support in his caucus for many of Rendell's proposed tax increases, and pushed for reducing spending to reflect the state's new "budget reality." He did not describe what cuts he would make.

Senate Majority Leader Dominic Pileggi (R., Delaware) said that "it was the governor's responsibility to produce a balanced budget," and added that Rendell's proposed spending plan is, as it stands, "dramatically out of balance."

Pileggi called Rendell's call for new taxes "a diversion from the main issue at hand: to reduce . . . the hundreds of millions in excess spending compared to available revenues."

Rendell on Monday laid out a three-pronged plan to tackle the shortfall.

There would likely have to be furloughs and layoffs - how many will depend on whether the legislature enacts other parts of his budget proposal.

The state would need onetime infusions of revenues. One example: having the legislature contribute a portion of money it keeps in reserve. The legislature keeps those funds so it can operate in case of a standoff with the administration.

There would need to be new sources of revenue.

Rendell has proposed imposing new taxes on tobacco products and natural gas extraction; closing the so-called Delaware loophole provision, which allows companies operating in the state to shelter profits from Pennsylvania taxes; and eliminating a 1 percent incentive for companies that submit their sales tax money on time.