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Rendell says budget contains no tax increases

HARRISBURG, Pa. (AP) — The $21 billion state budget Gov. Ed Rendell was to present to lawmakers Tuesday holds the line on state taxes, but calls for broad-ranging spending cuts and a hefty increase in debt-service costs that aides said stemmed from borrowing by the previous Republican administration.
The budget also proposes more than $29 million in license and fee increases, although officials could not immediately provide a breakdown of those items before the governor’s address to the Legislature. It also would slow down the phase-out of the state’s Capital Stock and Franchise Tax, a levy on businesses.
“The budget I submit to you today lays bare the budget choices we face as a result of our current economic condition,” the Democratic governor wrote in an introductory letter in the nearly 2-inch-thick budget document.
The budget unveiled Tuesday, which represents a 1.4 percent increase in state spending, is designed to maintain most state services while erasing a projected $2.4 billion shortfall in tax collections for the fiscal year that starts July 1. It is only the first of two parts; In a few weeks, Rendell plans to follow up with a blueprint for fulfilling his campaign promises to increase school subsidies and slash local property taxes.
One of the biggest increases in the budget is nearly $320 million for increased debt payments. Rendell’s spokesman, Ken Snyder, said those expenses stemmed from borrowing to help balance this year’s budget and hundreds of millions of dollars in capital-development project money that former Gov. Mark S. Schweiker awarded during his brief tenure.
“The bill came due under Rendell,” Snyder said.
Among the largest proposed spending cuts were $52 million from the elimination of grants for sewage-treatment plant operations and tens of millions of dollars in cutbacks in the Department of Public Welfare, including a $35 million reduction for patient services provided under the medical-assistance program and the elimination of $48 million for behavioral services.
Other cuts are likely to draw political flak from the Republican-dominated General Assembly, particularly the elimination of community-revitalization grants for local projects, a $70 million program protected in the past by lawmakers who view it as a re-election tool. Other politically sensitive cuts include the elimination of three education initiatives promoted by Rendell’s GOP predecessors — performance incentive grants, school-improvement grants and education-support services — to save $77 million.
“Compared to what other states are doing, it’s a walk in the park,” Rendell said of the cuts Monday in an impromptu interview on the eve of his first budget address as governor.
Governors and legislators across the country are struggling to overcome budget shortfalls that are expected to total tens of billions of dollars next year. Other states have scaled back services, increased taxes, fired state workers and even released prison inmates early to balance their budgets.
For the 2001-02 fiscal year, Pennsylvania relied largely on one-time revenues, except for a $600 million-plus increase in the cigarette tax, which more than tripled the levy to $1 a pack.
Rendell has not ruled out tax increases in the second part of his budget, and he hopes to persuade the Legislature to legalize slot machines at the state’s horse racing tracks to raise an additional $500 million a year.
Rendell reached out to legislators Monday night and invited some to a breakfast budget briefing at the governor’s residence Tuesday morning.
“So far, about 95 have accepted,” he said. “I think the interest is much higher because of the unique challenges that we face” this year.