Rendell to propose another tight state budget this week

HARRISBURG - The governor's budget speech typically starts the annual debate over state tax-and-spend policies, but for the past year there's been no letup in the fiscal challenges facing Pennsylvania.

Democratic Gov. Ed Rendell presents the final budget proposal of his tenure Tuesday to a joint session of the House and Senate, just one month after the last piece of the 2009-10 budget was completed with legalization of table games at the slots casinos.

The governor's address is accompanied by the release of a thick book detailing proposed appropriations for hundreds of programs. But the numbers in this book don't have as much permanency as in previous years, given the successive spending cuts ordered since the fall of 2008 when state tax revenues started to drop after the financial crash. Rendell implemented $170 million in cuts last month to keep the budget in balance.

The governor is projecting a $450 million deficit when the fiscal year ends June 30. There's an expectation among many analysts the red ink will swell in the months ahead.

The Pennsylvania Budget and Policy Center sees bad tidings in the January revenue collections, $120 million below estimate.

"The economic recovery is moving along slowly," said center director Sharon Ward. "Many economists expect unemployment to continue to rise in Pennsylvania through the first quarter. That could lead to a larger deficit than was predicted by the governor."

Pennsylvania is not alone. All but two states are struggling with red ink.

"Tax receipts of all kinds are declining," said Susan Urahn, managing director of the Pew Center on the States. "Sales taxes are slowing as consumers buy less; corporate and personal income taxes are falling as companies earn less and increase layoffs."

With grim memories of the 101-day budget stalemate last summer and fall, nonprofit groups and local governments that rely on state aid vow to put pressure on the governor and lawmakers to enact a timely budget.

Nonprofits are still struggling to overcome the impact of the stalemate, which left food pantries, day care centers and homeless shelters without state aid from July through early October.

"Many organizations exhausted their financial reserves, were left deep in debt with vendors and banks and had to scramble to restart programs and rehire staff,' said United Way of Pennsylvania officials in an open letter last week. "The Commonwealth cannot afford another budget impasse."

County governments started their fiscal year Jan. 1 with word of a $4 million state cut to the Human Services Development Fund, an umbrella program that supports county-run social services on matters ranging from domestic violence to food assistance for the disabled.

The top priority of the County Commissioners Association of Pennsylvania is staving off more state and federal aid cuts to social service programs that would result in tax hikes for county property taxpayers.

Efforts have been made to start budget deliberations even ahead of Rendell's speech.

The House Appropriations Committee started a round of hearings last week featuring budget presentations by agency heads.

Although outnumbered in that chamber, Democratic senators last week unveiled policy proposals to save costs, create jobs and make education less expensive. They include expanding programs to steer non-violent offenders to punishment programs that keep them out of state prisons, increase the borrowing level for a state program that aids community development projects and require schools to negotiate with publishers to make textbooks less expensive.

"That budget cannot include any additional broad-based tax hikes," said Sen. Robert Mellow, D-22, Peckville, referring to the personal income, corporate income and sales taxes.

There is little appetite among lawmakers of both parties for new state tax hikes in an election year, but Rendell plans to revive a proposal to levy a state severance tax on natural gas production. He could potentially offer proposals to address the looming 2012 spike in pension costs for retired public school employees and state employees.

"Taxes are an easy answer, but a wrong solution especially in this type of economy," said Stephen Miskin, spokesman for House Minority Leader Sam Smith, R-66, Punxsutawney.

Ward said relying on state spending cuts solely to erase red ink can hurt local economies and set back a recovery. She urged lawmakers to consider reasonable levies like the severance tax and a tax on smokeless tobacco.

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