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GOP eager to pass Rendell's budget

| Wednesday, March 5, 2003

HARRISBURG -- An austere state budget proposed by Democratic Gov. Ed Rendell was placed on the fast-track for consideration Tuesday by the Republican-controlled Legislature, to Rendell's dismay.

GOP legislative leaders, in effect, called Rendell's bluff, saying they will try to pass the governor's plan, which holds state spending to a 1.3 percent increase and avoids a tax increase for most residents. Rendell's budget cuts deep in some areas to help close a projected $2.4 billion state deficit, including a 6 percent decrease for the Port Authority of Allegheny County and elimination of state money to offset Allegheny County's suburban law enforcement costs.

"I hate this budget. I hate it with every fiber of my body," Rendell told a joint session of the House and Senate on Tuesday.

The budget, he said, "does nothing to change our future" and "will doom us to repeat the past."

Still, he said he will sign the budget if the Legislature approves it.

Rendell wants to use the $21 billion budget for 2003-04 as the first step of a two-part plan.

The governor plans to announce the second part on March 25. That proposal is expected to include financing for economic development projects with a $2 billion state bond issue. Another key component of the second stage of Rendell's spending blueprint is likely to be an education reform proposal that would use revenue from the legalization of slot machines at horse tracks, and possibly higher state taxes, to cut local property taxes by 30 percent, reduce inequities between rich and poor school districts and pay for full-day kindergarten.

"I want to be honest with the people of this commonwealth: I anticipate that a tax increase will likely be necessary to make this (March 25) plan a reality," Rendell said.

Political experts said the bare-bones budget presented yesterday is intended to provide Rendell with leverage to push for a tax increase, based on interest groups lobbying lawmakers for more state money.

If the budget is separated from the overall spending plan he is pursuing, Rendell's first-year agenda could be derailed, Democratic lawmakers said privately.

GOP legislative leaders decided they like the budget Rendell submitted yesterday.

"He hates a budget that doesn't raise taxes?" said House Majority Leader John Perzel, a Philadelphia Republican. "The governor gave us a lean budget."

Perzel said he hopes the House will pass the budget by Thursday. Senate Majority Leader David Brightbill, a Lebanon County Republican, said the Senate plans to consider it next week, perhaps wrapping up by March 12. Approval of a balanced budget is required by July 1.

House Minority Leader Bill DeWeese, a Greene County Democrat, argued against quick passage.

Rep. Frank Dermody, an Oakmont Democrat and chairman of the Allegheny County delegation, said, "I'm hopeful we are able to consider the governor's proposal in full." But Rep. Jeffrey Habay, a Shaler Republican, said, "There seems to be a pretty broad consensus on it in our caucus."

The taxpayers "don't want to see gridlock," Habay said.

Allegheny County Chief Executive James Roddey, a Republican, praised Rendell for his budget message.

"I think he had a tough budget to produce. He did it. I think the Legislature should pass it. Allegheny County will be hurt, but I think we can survive," Roddey said.

Many county departments would stay even or see slight increases. The loss of $5.5 million for county law enforcement, to help pay for the county crime laboratory and homicide unit, might result in cuts in the county budget, Roddey said.

The Port Authority said state cuts might affect services and fares.

"While we understand the serious financial condition of the commonwealth, we are extremely disappointed in the governor's public transportation funding proposal," said Port Authority Chief Executive Officer Paul P. Skoutelas.

The budget does not address Pittsburgh Mayor Tom Murphy's support for two new taxes to help balance the city budget. Murphy is seeking legislative approval of a 10 percent tax on drinks and an 0.5 percent tax on payrolls. The city projects the taxes would raise $29 million to help meet an estimated deficit of $60 million.

Murphy's proposals will be contained in separate legislation, as part of a "larger conversation" about the city's fiscal health and the state's financial picture, said the mayor's spokesman, Craig Kwiecinski.

Rendell's proposed budget includes a one-year delay in the scheduled phase-out of the state capital stock and franchise tax.

The budget is financed in part by using $250 million in state reserves and with the last $330 million of the tobacco litigation settlement.

Rendell also proposes an assessment on nursing homes in Pennsylvania that would add $145 million in revenue to the state's long-term care plan.

Michael Masch, Rendell's budget secretary, was asked, but provided no explanation of the assessment on nursing homes.

Fee increases would add $29 million in revenue. Fees would go up for birth and death certificates, as well as for licenses for insurance agents, valuation of insurance policies, approval of building plans, boiler inspection fees, elevator inspection fees and security agents' filing fees.

Budget highlights

A look at the highlights of Gov. Ed Rendell's proposed $21 billion budget for the fiscal year that starts July 1:

REVENUE

  • Transfers $330 million to the General Fund from the state's tobacco-settlement fund.

  • Transfers $250 million from the "rainy day" contingency fund.

  • Changes the program governing unclaimed property, including the calculation of the dormancy period for mutual insurance companies, to generate a one-time increase in revenue of $90 million.

  • Steps up enforcement of tax collections to increase revenue by $13.5 million.

  • Reduces the interest rate paid on tax refunds to save $2.3 million.

    TAXES & FEES

  • Slows the ongoing reduction in the business levy known as the Capital Stock and Franchise Tax by keeping the rate unchanged for 2003 and cutting it by one-quarter mill in 2004. The original reduction rate of 1 mill would resume in 2005. Savings: $52.6 million.

  • Increases unspecified fees and licenses by $29.3 million.

    EDUCATION

  • Cuts aid to the 14 state-owned universities in the State System of Higher Education and the four state-related universities: Temple University, Penn State University, University of Pittsburgh and Lincoln University. Savings: $57 million.

  • Eliminates school performance-incentive grants, school-improvement grants and education-support services. Savings: $77 million.

  • Reduces improvements to library services. Savings: $37.6 million.

    DEBT SERVICE

  • Increases debt service for local capital-development projects and borrowing used to help balance this year's budget. Cost: $320 million.

    LABOR & INDUSTRY

  • Eliminates programs that provide self-employment assistance, employer information resources and employment services. Savings: $21 million.

    SOCIAL SERVICES

  • Reduces state support for inpatient services provided under the medical-assistance program and eliminates $48 million for behavioral services in the Department of Public Welfare. Savings: $83 million.

    ENVIRONMENT

  • Eliminates a safe-water program or sewage treatment plant operations grants through the Department of Environmental Protection. Savings: $63.1 million.

  • Reduces funds for heritage parks, state parks operations, and forest past management through the Department of Conservation and Natural Resources. Savings: $15.1 million.

    COMMUNITY AND ECONOMIC DEVELOPMENT

  • No longer funds one-time grants for community revitalization and urban development. Savings: $79.5 million.

  • Reduces funds for tourism, business and interactive marketing, shipping-port development, private-sector job training and infrastructure development grants. Savings: $19.5 million.

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