Pa. governor outlines $29 billion budget

February 04, 2009

HARRISBURG, Pa. (AP) -- Pennsylvania Gov. Ed Rendell outlined a $29 billion budget Wednesday that would expand spending on education, prisons and health coverage while drawing from federal aid and state surpluses, increasing some taxes and cutting other programs.

The plan, a 2.5 percent increase from what was originally approved for the 2008-09 budget, also would withdraw hundreds of millions of dollars from the state's "rainy day" contingency fund without draining it completely.

It does not call for increasing any broad-based tax.

"The budget I propose requires considerable sacrifice and pain, so that we can close the deficit and put our fiscal house in order, while at the same time continuing the kinds of strategic investments that strengthen Pennsylvania's economy for the long-term," Rendell said.

Many key proposals have trickled out in recent days, from adding a dime per pack to the cigarette tax to legalizing video poker machines and using the money generated to help thousands of college students pay tuition.


But in one previously undisclosed proposal sure to ignite debate, Rendell said he wants eliminate 400 of the state's 500 school districts to make public education more efficient.

The state's basic education subsidy to schools would increase $300 million for the fiscal year that starts July 1.

The state also would add 2,400 beds in prisons and community corrections facilities.

The budget would more than double the number of lower-income residents in the state's adultBasic health coverage program to about 90,000. Expanding the program has been a priority for the governor, but he's failed in the past to get it through the Legislature.

He also revived a proposal to have the Department of Public Welfare buy pharmaceuticals directly from drug companies, eventually saving $146 million annually.

The budget includes new taxes on the extraction of natural gas and on previously untaxed tobacco products like cigars, pipe tobacco and snuff. Coupled with the dime-a-pack increase, the new tobacco levies are expected to bring in $100 million a year.

He proposed letting counties tack a penny onto the state sales tax and split the proceeds with cities.

To raise additional money, he told legislators he would consider closing tax loopholes for companies based outside the state, or charging municipalities that rely solely on the state police for police services.

The budget spends a total of $3.5 billion during the current and next fiscal years from Pennsylvania's expected share of the federal stimulus that Congress is considering. Without the federal spending, the general fund budget is $26.6 billion.

In recent weeks Rendell and his aides have talked about a need for state government layoffs, and his budget would reduce the number of state jobs by about 2,600. Rendell spokesman Chuck Ardo said officials have not decided how many of those job cuts would be made through attrition and how many would be the result of layoffs.

The Scotland School for Veterans' Children in Franklin County and the Scranton State School for the Deaf would close. The Department of Labor and Industry would lose nearly 600 positions. Funding would be cut for anti-drug education, health literacy, upgrades to child-care centers and a summer program for artistically and academically talented high school students.

"We simply have no choice. The crisis demands that we make these cuts," Rendell said.

Rendell proposed the creation of a new Cabinet-level agency, the Department of Emergency Management and Homeland Security.

The $753 million "rainy day" contingency fund would be reduced by $250 million during the current year to help cover a projected $2.3 billion falloff in state tax revenues. Another $375 million from the fund would be used to balance the 2009-10 spending plan.

The governor also asked the Legislature to kick in $175 million from its own reserves to help with the current year's shortfall.

He said his budget would save $977 million by eliminating 101 line items and reducing another 346, but in previous years many such cuts were eventually restored by the Legislature during budget negotiations.

"We are just managing to be more effective and do more with less every year," Budget Secretary Mary Soderberg said.

Rendell proposes doubling to $130 million the capital funding for 14 state universities. He also wants $537 million to fix bridges, upgrade rail and aviation infrastructure and improve water and sewer systems, flood control and hazardous dams. Most of that spending is not included in the general fund budget.

The governor's budget address is the first step in a monthslong haggling process that will determine what adjustments are needed to keep the budget balanced through mid-2010.

Budget highlights

Highlights of Gov. Ed Rendell's $29 billion budget for 2009-10 fiscal year that begins July 1:


o $26.6 billion in taxes, fees and surpluses

o $2.4 billion in federal stimulus money

o No increase in income or sales taxes


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