Rendell Identifies $350M in Budget Cuts

PA state budget cuts identified.

Governor Rendell Says $350 Million in Cuts Will Help Keep Budget Balanced

Last update: 3:54 p.m. EDT Oct. 30, 2008
HARRISBURG, Pa., Oct 30, 2008 /PRNewswire-USNewswire via COMTEX/ -- Vows Continued Vigilance; Budget Reductions are on Top of $1.5 Billion in Annual Savings From More Efficient Government

With the national economic crisis continuing to affect state revenue collections, Gov. Edward G. Rendell said today that his administration has identified $350 million in cuts to help keep the 2008-09 budget balanced while preserving crucial services.

"I asked my cabinet secretaries last month to find ways to save $200 million this fiscal year," the Governor said. "They have responded by identifying $289 million in savings in their agencies. They have also followed my directive to preserve critical spending, including funding for state police protection and much-needed health, education and safety net programs for our most vulnerable citizens.

"The revenue situation may get worse before it gets better. We will continue to monitor these volatile economic conditions in order to maintain the commonwealth's balanced budget." Governor Rendell said. "Any dire predictions about next year's potential budget shortfall are premature and counterproductive. We need to focus on the spending reductions announced today and use the expertise we developed in the past six years to continue improving government efficiency to save taxpayer money."

The $289 million in cuts to agencies under the Governor's jurisdiction announced today is in addition to the 1.3 percent budget reduction that Governor Rendell agreed to in budget negotiations because of economic conditions. The enacted budget is $72.4 million less than the budget he proposed in February.

With revenues for the current fiscal year coming in below expectations, last month the Governor directed his cabinet secretaries to cut 4.25 percent of their enacted budgets. Agencies that provide public safety, health and education services were given smaller percentage targets to meet. As part of his call for fiscal restraint, the Governor also announced a general hiring freeze and bans on out-of-state travel and on the purchase of new vehicles for the state fleet. The funds from all cost-saving measures will be put into budgetary reserve.

Governor Rendell also requested that independent entities, including the legislature, the judiciary, the treasurer, the attorney general, the auditor general, the Pennsylvania State System of Higher Education and the Pennsylvania Higher Education Assistance Agency (not including direct grants to students) reduce their budgets by the same 4.25 percent that was expected of agencies under his jurisdiction.

The $289 million in cuts identified by agencies under the Governor's jurisdiction, combined with a $22 million cut the Pennsylvania State System of Higher Education and a $457,000 cut from Thaddeus Stevens College of Technology, comes to $311 million. The SSHE and Thaddeus Stevens cuts represent the 4.25 percent savings the Governor requested.

An additional $39 million in savings would be realized if the General Assembly and other independent state entities agree to make 4.25 percent cuts in their budgets. The General Assembly and the other independent entities have not yet revealed whether they will do so.

"It is my hope and expectation that every branch of government will do their part. I
look forward to their cooperation and prompt response," Governor Rendell said.
"Pennsylvania's revenue shortfall is of no single branch's making, and it will take the work of all branches of government to respond to this challenge."

The administration will continue monitoring revenue collections closely in the coming months, the Governor said, and will work to keep the budget balanced.

Unlike many other large industrial and competitor states, the commonwealth continues to have historically high numbers of Pennsylvanians working. The state has 163,700 more jobs today than it did in January 2003, and Pennsylvania's unemployment rate was 7 percent better than the nation in September and has been at or below the national average for 67 of the past 69 months.

This high level of employment bodes well for projected personal income tax collections next April. In addition, Pennsylvania is continuing to see private business investment grow the economy - such as the recent groundbreaking of the $1.2 billion U.S. Steel project in southwestern Pennsylvania.

"The national economy is extremely volatile and, despite the solid footing of Pennsylvania's economy, we recognize that there will be additional challenges throughout the year," he said. "The wisest course of action is to reduce spending now while being prepared to take additional steps as needed as we gain more information until the crisis subsides."

Earlier this week, in his role as chairman of the National Governors Association, Governor Rendell sent a letter on behalf of the nation's Governors asking Congress to pass an economic recovery package that helps states and spurs economic growth by temporarily increasing the federal matching rate for Medicaid and providing additional funds for infrastructure investment.

Pennsylvania's economy remains on a firmer footing than the economies of other states, according to a report released in mid-October by the national Center on Budget & Policy Priorities.

Other signs also point to the commonwealth's overall fiscal soundness. Pennsylvania's credit rating remains double-A, which is the second-highest level possible, and the state has a Rainy Day Fund balance of nearly $750 million.

Governor Rendell said Pennsylvania is now saving $1.5 billion a year as a result of his efforts to enhance government services while improving efficiency and cutting waste, including:

-- There are nearly 3,000 fewer commonwealth employees than in January
2003, which saved the commonwealth approximately $240 million last year;
-- The commonwealth has saved $272 million by developing smarter purchasing
policies;
-- The commonwealth has reduced the size of the state's automobile
fleet and is keeping vehicles longer, saving approximately $33 million;
-- The Governor's recent directive to halt the purchase of new
commonwealth vehicles will save an estimated $40 million this year
alone;
-- The commonwealth has kept average annual employee health care cost
increases to less than 3 percent over the past five years - far below
the growth in private health care costs; and
-- Adjustments announced last year to the Retired Employees Health Program
will save $94 million a year.

"Commonwealth employees have more than five years of experience in finding new and cost-effective ways to operate," the Governor said. "I know they will accept this challenge to develop innovative ways to do even more with less."

As he reviewed the current state of the commonwealth and national economies, the Governor emphasized: "This is a work in progress. We will continue to take the steps necessary to ensure that our budget stays in balance."

The Rendell administration is committed to creating a first-rate public education system, protecting our most vulnerable citizens and continuing economic investment to support our communities and businesses. To find out more about Governor Rendell's initiatives and to sign up for his weekly newsletter, visit www.governor.state.pa.us.

EDITOR'S NOTE: For a list of appropriations affected by the budgetary reserve initiative, go to www.budget.state.pa.us and click on the Budget & Financial Reports link.