Rendell reverses, now optimistic about budget

September 17, 2009 8:46:54 PM PDT
Gov. Ed Rendell dramatically changed his stance Thursday toward a bid by top state legislators to end a 2½-month budget impasse, opening the door to an agreement soon. The move came just hours after he had threatened again to veto their plan.

Rendell would not say what had changed - it wouldn't be productive in securing an agreement, he told reporters in a Thursday night news conference in the Capitol.

But the Democrat's shift in tone was remarkable after he spent nearly a week, including Thursday morning, disparaging legislators' evolving budget proposal as a "phony" plan that lacked political courage and left the state facing a new deficit.

"We're not there yet, but I am cautiously optimistic that, in the next day or two, we have a real chance to close the gap and agree on something that will be beneficial for the citizens of this commonwealth and ... will allow us to have a balanced budget for next year," Rendell said.

Rendell spoke following a private meeting with Senate Republican leaders at his official residence in Harrisburg.

The meeting was cordial but did not bridge a $200 million to $300 million gap between what the sides believe can be collected in the future from the taxes, fees and other revenue sources in the legislators' plan, said Senate Majority Leader Dominic Pileggi, R-Delaware.

Resolving those differences will not be easy, Pileggi warned.

"But we're committed to making a diligent effort to do that," he said.

The primary issue dividing Rendell and legislators is how to fill a multibillion-dollar, recession-driven shortfall in tax collections.

Pennsylvania has been without a comprehensive budget since the fiscal year began July 1 and is the last state still fighting over its annual spending plan. Without money flowing from the state treasury, the private organizations and businesses that make up Pennsylvania's social safety net are taking out loans, laying off workers and shuttering services to stay afloat.

Last week, leaders of the House Democrats and of both parties in the Senate unveiled the original version of their nearly $28 billion plan. Many details about the plan remain under wraps or are being negotiated behind closed doors.

Dealmakers are counting on higher taxes on businesses and cigarettes and more money from expanding legalized gambling and gas exploration in state forests to help balance the recession-ravaged budget. They also propose tapping more than $1.5 billion in reserves, slashing overall spending by about 1 percent and boosting funding for public schools' operations and instruction by more than 5 percent.

Rendell's earlier proposals to raise taxes on income, the extraction of natural gas and sales of cigars and smokeless tobacco were rejected by legislators.

House Republicans do not support the plan, saying it raises spending too high and relies on tax increases that they oppose.

Rendell also pounced on it, saying its foundation of new revenues was inadequate to get the state through the recession, sustain crucial programs and avoid a major tax increase when federal budget aid disappears and pension costs spike in two years. In the meantime, some rank-and-file members of the House and Senate are expressing reservations about it.

One House Democrat, Rep. Dan Frankel, of Allegheny County, called for the budget agreement to close "loopholes" that exempt sales of sales of cigars and smokeless tobacco from being taxed - taxes that nearly every other state collects.

Another House Democrat, Rep. Greg Vitali, of Delaware County, said Thursday he would vote against the plan because it slashes environmental regulation by nearly 25 percent while allowing an expansion of drilling in state forests to generate more revenue. "We cannot balance this year's budget at the expense of our environment," Vitali said.

Rendell said Thursday that his staff negotiated a dramatic reduction in the amount of state forest acreage that would be leased for gas drilling under the legislators' plan, although he did not give specifics.

He also said legislators have largely addressed his concerns about how money would be spent under the plan, restoring dollars to learning and health care programs as well as the financial incentives that encourage businesses to expand in or come to Pennsylvania.

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