Rendell budget has tax rebate for poorer families

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HARRISBURG -- Tax rebates of up to $400 are in store for low-income families if the Legislature approves a proposal Gov. Ed Rendell put forward yesterday during a preview of today's state budget address.

The governor's overall budget is expected to be about $28.3 billion, or 4.2 percent more than the current year's $27.2 billion spending plan.

He said it calls for no general tax increases, although it does propose a new fee on homeowner's insurance policies, assessed at a rate of 7 cents per $100 of insurance premium. Mr. Rendell said the fee would average about 42 cents per policy annually.

He is expected to repeat a call for an increase in tobacco taxes to expand state-provided health insurance.

Mr. Rendell yesterday provided a glimpse of his spending plan for 2008-09, which is aimed at stimulating the state's economy as the nation moves toward a possible recession.

"Our revenues remain stable so far this fiscal year, and we have a record-high job count at 5.8 million. But there are storm clouds in the national economic forecast, and we need to continue working together now to ensure residents and businesses can weather any storm," he said.

His spending plan calls for investments in job creation, infrastructure, education and biotech laboratories.

Republicans already are balking at a key part of the governor's plan that would provide at least $130 million in tax rebates to 475,000 low-income families. The governor said the one-time cash infusion could occur immediately if the Legislature agrees. There's no need to wait for passage of the budget because the funds could be borrowed from the state's Rainy Day Fund and repaid through a general-fund surplus expected to grow to $427 million by the end of June.

"In this economy, how can we rely on a projected surplus?" said Senate Majority Leader Dominic Pileggi, R-Chester. "The national economy, the Pennsylvania economy, are in very uncertain times," he said.

His caucus isn't opposed to government helping to stimulate the economy, but it isn't sure if the governor's plan is the right one.

Senate President Pro Tem Joe Scarnati, R-Jefferson, wants to consider other longer-term ideas, like reducing the personal income tax.

"We have to put everything on the table and get valued input from the economic field" to ensure any measures enacted actually will stimulate the economy, he said.

Mr. Pileggi agreed. "To simply add tax rebates in a hurry and in a rush without looking at the long-term impact could be a mistake," he said.

Under the governor's proposal, four-person families with incomes below $32,000 would be eligible for the maximum rebate of $400.

Low-income families were targeted for the rebates because they are the most affected by inflation, including increases in home-heating costs, and they are the ones most likely to return the money to the economy through purchases of staples and other goods, Mr. Rendell said.

"Because these families have limited resources, they are likely to spend these funds in the consumer sectors of the economy, which means that targeted state relief to these families will help keep their credit sound and their families more stable," he said.

The proposed rebates are part of a multipronged plan Mr. Rendell has dubbed "Protecting Our Progress."

Another of its initiatives calls for creation of The Jonas Salk Legacy Fund, which Mr. Rendell will tout for the third straight year. So far lawmakers have refused to fund the proposal, which calls for shifting money away from research and toward capital projects like laboratories and equipment.

A separate line item calls for a $100 million infusion toward revitalization of old industrial sites.

"This will get sites shovel-ready for development. Virtually every community has businesses ready to come in if they had shovel-ready sites," Mr. Rendell said.

He also proposes:

• Adding $10 million in funding for the Infrastructure Development Program, which provides matching funds to businesses that expand their facilities and add jobs.

• Pumping at least $700 million into programs to repair bridges, dams and flood-prone riverbanks, and to expand rail and aviation facilities.

• Tripling the amount of tax credits for job creation.

The proposal may be too ambitious for Senate Republicans, although they largely do support the objectives of job creation, infrastructure repair and flood mitigation.

"It boils down to priorities. We can't bond, borrow and spend on every single issue the governor puts out," Mr. Scarnati said.

Tracie Mauriello can be reached at or 717-787-2141.


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