HARRISBURG -- Wasteful government spending is costing Pennsylvania taxpayers $3.7 billion this year and could cost another $4.3 billion next year under Gov. Ed Rendell's budget proposal, according to a report issued yesterday by two conservative policy groups.

Commonwealth Foundation in Harrisburg and Citizens Against Government Waste in Washington, D.C., teamed up on the report, which recommends ending public funding of the arts, stopping subsidies for agricultural research, eliminating pork-barrel spending and removing licensing requirements and government oversight of hairstylists, manicurists and funeral directors.

"That's all fun when you can afford it, but Pennsylvania can't afford it," said David Williams, vice president of policy for Citizens Against Government Waste.

Kate Philips, spokeswoman for Mr. Rendell, said the report fails to distinguish between wasteful spending and government investment in the future.

For example, she said, the report suggests cutting economic development programs that have created thousands of jobs and preschool programs that serve thousands of children.

"We question the wisdom behind cutting the government's investment in our future through reasonable job-creation programs and a stronger public education system for our children," she said.

Mr. Williams and Matthew Brouillette, president of the Commonwealth Foundation, say Pennsylvania hasn't had enough job growth or academic improvement to justify spending in those areas.

Their report, dubbed the Pennsylvania Piglet Book, also calls for an end to public funding for business subsidies, tourism advertising, historical museums and public television.

Examples in yesterday's report include $30 million in state funding to help PNC Bank build a $139 million complex -- including offices, condominiums, retail space and a hotel -- in Pittsburgh; $5.4 billion on agricultural shows and fairs; $2.7 million for the Milk Marketing Board, which determines market rates of dairy products; and $25.2 million for the Fish and Boat Commission to enforce boating laws and stock fish in Pennsylvania rivers and streams.

"These are programs that help a select few Pennsylvanians but everybody is charged for them," said Mr. Brouillette. "These are not things taxpayers should be compelled to support, especially if they can be supported in the private sector."

The report also recommends eliminating the Liquor Control Board and the Pennsylvania Higher Education Assistance Agency. The private sector can provide student loans and alcoholic beverages better and more cost effectively than government, the report asserts.

They call for an advisory board of business leaders who will make recommendations on state spending and procurement.

"Every year, Pennsylvania lawmakers and bureaucrats waste billions of dollars on boondoggles and unnecessary programs," said Tom Schatz, president of Citizens Against Government Waste.