HARRISBURG -- A plan to bolster the state's economy by dispersing up to $400 each in state funds to thousands of lower-income families is headed for an uphill battle.

Republican lawmakers already are gearing up to block the $130 million stimulus plan that Gov. Ed Rendell put forward yesterday in his annual state budget address.

The Democratic governor's 2008-09 budget calls for $28.3 billion in General Fund spending for the fiscal year beginning July 1. That's $1.1 billion, or 4.2 percent, more than the current fiscal year's spending plan.

It provides money to expand prisons; hire more police officers in Philadelphia, Pittsburgh and elsewhere; provide autism services for adults; provide prescription coverage for Medicare recipients; add pre-kindergarten programs to more elementary schools; and put more laptop computers in high schools.

"It is a slow-growth budget, one that keeps a tight rein on state spending," Mr. Rendell said in his budget address. "But it also focuses on our future, calling for strategic investments in energy, health care and education."

But those spending reins aren't nearly tight enough for Republicans, who want to cut some of his spending plans and stop bond-issue borrowing by the state, which they said causes sizable interest payments for future generations. And they especially want to kill the governor's proposed one-time $400 disbursements to lower-income families.

Mr. Rendell characterized the payments as "tax rebates," although they would go to families whose incomes are so low that they are exempt from paying state income taxes, such as a family of four that makes no more than $32,000 a year.

"Those Pennsylvanians who are paying the personal income tax won't get a dime back," said Senate President Pro Tem Joe Scarnati, R-Jefferson, who favors an across-the-board reduction in the income tax rate.

He said the governor's plan amounts to "targeted tax cuts," adding that what the state needs "is a more structured form" of tax relief.

Mr. Rendell's budget secretary, Michael Masch, defended the plan, saying it is one part of a wider budget with programs that help all segments of the population.

"Taken as a package, this is a balanced budget that offers something for everyone ... but offers something in particular to low-income working families," Mr. Masch said. "These are families who are working to make ends meet and who are going to bear the brunt of any economic downturn."

Mr. Rendell's rebate plan calls for borrowing the $130 million from the state's Rainy Day Fund, which is intended to cushion the state budget in economic hard times. The $130 million would be replenished at the end of the fiscal year on June 30, 2009, when the state is required by law to earmark 25 percent of any budget surplus for the Rainy Day Fund.

But Republicans said there's no way of knowing if the state will have a surplus at that time.

"With the prospect of a recession looming, going into the Rainy Day Fund concerns me," said Senate Majority Whip Jane Orie, R-McCandless. "Borrowing against those funds in uncertain times sends up a red flag."

The governor's administration says the plan is sensible.

"At a time of economic slowdown, it doesn't make sense to be increasing the balance in the Rainy Day Fund as opposed to helping Pennsylvanians through a difficult time," Mr. Masch said.

Mr. Rendell said the rebate plan would help spur the economy because lower-income Pennsylvanians won't save the money but will spend it on consumer goods, and the cash infusion will spur the economy in a way that helps everyone.

Meanwhile, he is asking the Legislature to approve $750 million in capital funds to help pay for hospital expansions and construction of new community-owned facilities. One project is construction of a new emergency department at St. Clair Hospital in Mt. Lebanon.

Allegheny County's top-ranking Democrats, Chief Executive Dan Onorato and Pittsburgh Mayor Luke Ravenstahl, said the funds -- which must be matched locally dollar-for-dollar -- could help the region.

Downtown redevelopment and the Bakery Square project in East Liberty both could benefit, Mr. Ravenstahl said.

Other state funding in Mr. Rendell's budget -- $100 million to prepare old industrial sites for new construction -- could provide for water and sewer lines near Pittsburgh International Airport, preparing those sites to be reused for new construction, Mr. Onorato said.

"We have another 1,500 acres around the county that we'd like to clean and clear," he said.

The governor's budget proposal also calls for more taxes on tobacco and a new fee on insurance policies for homes built on flood plains. The fee, 7 cents per $100 of premium, would equate to about 42 cents per year for the average homeowner and would be used to fund flood-mitigation programs, while the 10-cents-a-pack increase in the cigarette tax would help fund health benefits for 760,000 uninsured adults.

Other aspects of the budget, such as a plan to repair and replace bridges and dams, would be funded through bonds.

Republicans want to fix the infrastructure, too, but many of them oppose borrowing money to do it.

"At a time when the commonwealth and the nation are facing financial uncertainty, borrowing and spending our way to prosperity is bad economic policy," said state Rep. Brian Ellis, R-Butler. "Every dollar we borrow must be paid back, and this will have a negative effect on our children and grandchildren, who will inherit these debt payments."

Similarly, Republicans support measures to mitigate flooding by diverting waterways and building up river banks, but they oppose the proposed fee on insurance policies.

"Flood control is an issue, particularly in my district, but there are other ways to fund it," said Sen. Mary Jo White, R-Venango.

Many of the initiatives in the governor's proposal are the same ones Mr. Rendell introduced in his budget speech in February 2007, and a few date back to February 2006. They include his health plan, alternative energy plan and the Jonas Salk Fund for research, which the Legislature has refused to approve so far.

He also wants to add another $100 million to the Business In Our Sites fund, which prepares old industrial sites for redevelopment.

Mr. Rendell's budget proposal also includes his new Rebuilding Pennsylvania program. He wants to spend about $800 million over the next three years to rebuild 1,000 ailing bridges in the state, along with 17 state-owned "high hazard'' dams.

Republican lawmakers say they are expecting a long and contentious budget season, which they hope to wrap up by the June 30 deadline.