State of the state in 2010

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HARRISBURG -- Things went so poorly at the state Capitol in 2009 that it's hard to imagine they might get worse in 2010.

But it could very well happen, some observers say.

Many lawmakers will be focusing on their re-election campaigns rather than state business. Recession-wracked state revenues will continue to lag, and 1,000 state workers could be laid off soon if an agreement isn't reached on table games at casinos.

Gov. Ed Rendell could lose clout because he's a lame duck. More arrests are looming in an ongoing Capitol corruption scandal, and trials are due to start this month for some of the two dozen "Bonusgate" defendants already charged by state Attorney General Tom Corbett.

"There is no magic bullet to end the political paralysis that has enveloped Harrisburg," said Eric Epstein, of Rock the Capital, a citizens group that sprang up to overturn the 2005 legislative pay raise and continues to monitor legislative activity.

"Let's face it, we're in a funk," he added. "You can bet the house that the next state budget will not be done on time -- for the eighth straight year."

The $27.8 billion budget for fiscal 2009-10, which will end June 30, wasn't adopted until Oct. 9 -- 101 days late, a General Assembly record for procrastination. And the budget still isn't 100 percent complete; it lacks $250 million projected from a new tax on table games, which hasn't been approved yet. House and Senate leaders remain at odds over some of the details of adding blackjack, poker and other table games to slots parlors but hope to work out a deal this week.

In early February, Mr. Rendell will unveil his proposed budget for the next fiscal year, which begins July 1. However, since he became governor in 2003, there hasn't been a complete state budget enacted on time, meaning by July 1.

Legislative leaders often don't even begin serious budget talks until June. Mr. Rendell wants talks to start earlier this year, but it's a question whether legislators can shed their foot-dragging habits.

"I'm skeptical that things will get any better in 2010 in terms of the budget," said Tim Potts, of Democracy Rising PA, who is pushing for a constitutional convention to change the way legislators do business.

"Having gone through the 2009 ordeal [with the late budget], they should be ready to try a different approach, but there is no reason to believe they will," said Mr. Potts, who once was a Democratic House staffer.

He is vowing a major effort for a statewide referendum in November to call a constitutional convention, which wouldn't be held until 2011. He is hoping voters will pressure legislators to put the convention question on the fall ballot.

Some critics say that balancing the 2010-11 budget could be especially difficult because one-time revenue sources, such as a $700 million account to defray doctors' medical malpractice costs and the state's $750 million "rainy day fund," were used up to balance the current budget.

"The cleaning out of every reserve fund will put Pennsylvania in another precarious budget cycle in 2010," said Matthew Brouillette, president of the Commonwealth Foundation, a conservative watchdog group. He said state officials must do more to reduce state spending in order to avoid tax increases to balance the next budget.

State revenue from the income tax, sales tax and other levies received from July to November, the first five months of fiscal 2009-10, came in $217 million below forecast. The shortfall could reach $450 million by June 30, Mr. Rendell recently warned. And while that's not good, it's far better than the $3.2 billion deficit that the state faced last June 30.

State officials are desperately hoping that the recessionary economy will soon begin to improve and tax revenues will pick up. Mr. Rendell said last week that anecdotal evidence of shoppers hitting stores in droves for holiday shopping is an encouraging sign, but he's still warning of laying off 1,000 more state workers in early 2010, if necessary, to reduce spending and balance the budget.

The Democrat-controlled state House often runs in low gear even in good years, but 2010 could pose special problems, among them the cloud hanging over the head of Majority Leader Todd Eachus, of Luzerne.

The Pittsburgh Post-Gazette disclosed last year that Mr. Eachus and House Democratic Whip Bill DeWeese, of Waynesburg, had been invited to testify before a grand jury Mr. Corbett has established to see if taxpayer-funded bonuses were paid in exchange for political work.

Mr. DeWeese and former state Revenue Secretary Steve Stetler, a York Democrat, have since been charged in the so-called Bonusgate scandal. While Mr. Eachus hasn't been charged, Rep. Bryan Lentz, D-Delaware, last week called on Mr. Eachus to hold new leadership elections when the House reconvenes Tuesday and not run for majority leader himself.

Mr. Eachus has refused to comment.

If Mr. Eachus' attention is distracted by legal concerns, the House's ability to act on legislation in 2010 could be deterred. Also, if more legislators are charged by Mr. Corbett, it's almost certain to put the House in the slow lane.

Mr. Rendell, who has proposed ambitious legislative agendas each year in office, is vowing he's going to be active in 2010 even though he has just 12 months left in power. But his considerable clout in the governor's "bully pulpit" could wane, adding to the chances of paralysis in Harrisburg.

He told reporters last month that in 2010 he will again seek approval of a new tax on the natural gas pumped out of the extensive areas of Marcellus shale in Pennsylvania. He proposed such a levy last year but, to the consternation of environmentalists, later dropped it, saying the Marcellus shale industry should get a few months to ramp up without a wellhead tax.

Mr. Rendell was coy about whether he'll again push for a 0.5 percent increase in the state's 3.07 percent personal income tax rate. "We'll see," is all he would say, while noting that Pennsylvania's personal income tax rate is second-lowest in the nation.

He proposed such a tax increase last June, but even many Democrats couldn't support it. Legislators are even less likely to increase taxes in a re-election year.

Mr. Rendell said he'll also seek additional funding for public education in 2010. Last year, he wanted to spend an additional $418 million on schools but compromised at $300 million in light of revenue shortfalls. He boasted that Pennsylvania was one of the few states to increase education funding last year and wants to continue progress in schools.

As tough as things were in 2009 and probably will be again this year, Mr. Rendell is warning of even worse times. He foresees a financial "tsunami" by July 2011, when the current $2 billion in federal stimulus funds will end and the state will be faced with up to $3 billion in additional pension costs for retired state workers and retired teachers.

He said "a gathering storm" is on the way, and increasing the personal income tax rate now "would help us meet those financial challenges" that are on the horizon.


Bureau Chief Tom Barnes can be reached at tbarnes@post-gazette.com or 717-787-4254.


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