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Pa. lawmakers reach budget deal

Rendell veto possible

September 11, 2009

HARRISBURG, Pa. (AP) -- Pennsylvania legislative leaders outlined the broad terms of a state budget deal Friday that includes higher business and cigarette taxes, as well as revenue from legalized table games in casinos.

They acknowledged that many details remained to be worked out. Meanwhile, Gov. Ed Rendell's chief of staff warned that the plan's revenue assumptions are too rosy, and the governor immediately threatened a veto.

Leaders of both parties in the Senate, and of the House Democratic caucus, described the nearly $28 billion budget as a compromise that also includes $2.25 billion from one-time sources such as the state's "rainy day" contingency fund.

"People on both extremes of points of view surrounding this budget will find fault in what we're agreeing to today, but the people of Pennsylvania have waited long enough for a budget, and this represents a fair middle ground," said Senate Majority Leader Dominic Pileggi, R-Delaware.

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Supporters highlighted that the deal would not require raising broad-based taxes on income or retail sales, pumps an additional $300 million into the basic public-school subsidy, and includes about $1.2 billion in recurring revenue designed to combat projected shortfalls in future years.

Pennsylvania has been without a comprehensive budget since the fiscal year began July 1 and is the last state still fighting over its annual spending plan. It remains to be seen whether Rendell will support the final package, and House Republican Leader Sam Smith said Thursday that his caucus opposed the new taxes and the overall size of the spending.

House Speaker Keith McCall, D-Carbon, apologized to state residents for the length of the budget impasse, currently at 73 days.

"The people of Pennsylvania deserve better, but the reality is that it did take a coming together; it took a lot of hard work and a lot of hours by a lot of people," McCall said.

The deal calls for an increase in the capital stock and franchise tax rate, to raise $374 million in the current year. It assumes the introduction of table games such as poker at slots casinos will bring in $200 million this year.

It also draws $100 million from increased natural gas leases, $97 million from a quarter-a-pack cigarette tax increase and about $100 million from taxing -- and allowing higher payouts on -- the small games of chance often used as fundraisers by fire departments and other groups. The windfall from a one-year tax amnesty program was estimated at $100 million.

The plan also would generate new revenue by expanding drilling for natural gas on state-owned land, which Jan Jarrett, president of the Harrisburg-based environmental group Citizens for Pennsylvania's Future, called "a big sweetheart deal to the multi-national gas drilling industry."

Details about which programs were sustaining cuts were not immediately available, but legislative leaders said they were braced for complaints.

"There will be a lot of people who will be banging on our doors, not happy with where we're at," said Sen. Jay Costa of Allegheny County, the ranking Democrat on the Senate Appropriations Committee and a key budget negotiator.

Steve Crawford, Rendell's chief of staff, said the administration estimates the plan is about $500 million out of balance and would create a $1 billion-plus deficit next year.

"It has a way to go, and it is troublesome that there would be a news conference announcing a deal based on numbers that just don't add up," Crawford said.

The Pittsburgh Tribune-Review reported that Rendell, in Pittsburgh, said Friday that he planned to tell lawmakers he "absolutely" planned to veto it.

"If they override it, they override it," Rendell said. "They pay the price next year when there's a billion (dollar) deficit."

The fate of so-called "walking-around money" was unclear. The annual spending that lawmakers control, also referred to as WAMs, has been a target of critics who see it as a way to direct money to pet projects without going through the more traditional appropriations process.

Both Costa and Appropriations Chairman Jake Corman, R-Centre, declined to comment on the fate of WAMs, and leaders ignored a question on the topic during their group news conference Friday.

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