Rendell targets budget shortfall

From the BCCT.

Why is it sounding like the budget process is now akin to the RMS Titanic and we're all sitting in the 4th class steerage section waiting for the porter to return with some ice?

Rendell targets budget shortfall
A combination of spending cuts, federal money, funds from gas drilling leases and some reserves will be used to make up revenue losses.
By MARC LEVY

HARRISBURG — Gov. Ed Rendell plans to offset an estimated $1.6 billion hole in Pennsylvania’s budget this year with spending cuts and money from reserves, gas-drilling leases in state forests and an anticipated federal aid package.

Rendell revealed his plans, and the gaping shortfall projection, Tuesday at a traditional midyear budget briefing for state legislators, who generally reacted positively to what they heard.

The rapidly deteriorating economy has left Pennsylvania and dozens of other states with a shortfall this year, Rendell said. For now, Rendell said his goal is to weather the volatile economy in the next year-and-a-half without a broad-based tax increase or layoffs, or any further budget cuts, until the new fiscal year begins in July.

Cuts announced so far have hit a broad array of programs, from highway and local road improvements to help for the poor, handicapped and neglected. Thousands of nonunion state employees also will go without a costof-living salary increase.

“It’s a good first step, but the numbers are bleak,” said Republican state Rep. Marguerite Quinn of the 143rd District, which includes parts of Central and Upper Bucks. “More cuts need to be made. It’s not an easy position to be in but the job has to be done. We just have to make sure we’re making necessary cuts and live within our means.”

State Rep. Rick Taylor, a Democrat from the 151st District, which includes parts of Horsham and Montgomery Township, said, “The fact that both the governor and the leadership believe we should raise taxes only as a last resort is good news for all of us, especially in this tough economy when people are losing their jobs.”

The Democratic governor pledged to work cooperatively on the plan with lawmakers, whose approval of some aspects of the plan will be necessary, and he appealed for understanding from people and organizations that are hurting from a loss of state money and services.

“We’re going to try to make the cuts we have to make in a way that still preserves our ability to grow and still preserves the services you need,” Rendell said at the briefing at the State Museum auditorium in Harrisburg. “We’re going to do it in a responsible way, because this is a crisis. Hopefully it will be a short-lived crisis.”

State Sen. Rob Wonderling, a Republican whose 24th District includes parts of Upper Bucks and Montgomery County, said, “There are no sacred cows. All facets and assets of government should be subject to scrutiny. But I’d be very careful about cutting help and support for those at the greatest disadvantage who are the most vulnerable.”

In July, Rendell signed a $28.3 billion budget, an increase of about 4 percent over last year’s budget. But through the end of November, state tax collections ran nearly 7 percent behind expectations. If the shortfall continues at that rate, the state will face a nearly $2 billion deficit when the fiscal year ends in June.

Rendell said Tuesday that his administration is projecting a $1.6 billion shortfall, a number that he cautioned could change as the nation’s unpredictable economic future unfolds.

“There’s no surety to that $1.6 billion figure,” Rendell said. “We think $1.6 billion is a conservative estimate. It could be better, and obviously it could be worse, so this will be a work in progress.”

The plan to offset it includes $500 million in cuts that Rendell has already requested from across state government and its independent agencies, including the courts and Legislature.

Rendell wants to take half the state’s budgetary reserve — or $375 million — plus another $101 million sitting idle in various program accounts that was committed in past years but never spent.

He also plans to divert $174 million from leases that allow five exploration companies to drill for natural gas on publicly owned state forest land in northern Pennsylvania. The money was slated for the state’s Oil and Gas Lease Fund, which is reserved for improvements to the state parks and forests.

In addition, Rendell said he is estimating that the federal government will approve an aid package for state governments.

“I fully expect that the commonwealth will receive the federal stimulus funding that President-elect Barack Obama spoke of last week,” Rendell said. “We anticipate receiving $450 million this fiscal year. Those funds will allow us to preserve the remainder of the Rainy Day Fund until 2009-10.”

Asked if that meant the stimulus would not be used to create jobs, Rendell spokesman Chuck Ardo said, “No, it means we will not have to dip as deeply into the rainy day fund as we might if no help from Washington were forthcoming.”

House Minority Leader Sam Smith of Jefferson County said he generally approved of Rendell’s handling of the deficit, and suggested that House Republicans are willing to contribute some of the estimated $240 million legislative reserve to the deficit plan.

However, Smith warned that the real challenge will be handling the increasing pressure on the state’s finances in the 2009-10 fiscal year. The woeful outlook on tax collections virtually assures that state government will be unable to increase spending, he said.