Rendell hopeful Obama can stop deficit bleeding
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Gov. Ed Rendell speaks during a news conference in Harrisburg Thursday.
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HARRISBURG -- As Pennsylvania's budget deficit continues to swell, Gov. Ed Rendell is hoping that his new friend in Washington, D.C., will provide a key element to stop the bleeding.
Mr. Rendell yesterday upped his estimate of the deficit in the $28.3 billion budget, predicting the red ink will reach $2.3 billion by June 30. That's $700 million more than his forecast made a month ago and $400 million more than his estimate made just last week. He said state revenues from the sales tax and the income tax are declining due to the ongoing poor economy.
But Democrat Rendell is hoping that this week's change of power in Washington, with Democrat Barack Obama becoming president, soon will provide a sizable chunk of aid, $1 billion a year or even more, in each of the next three years.
The money would go for one of the largest items in the state's budget, Medicaid costs for health care for lower-income Pennsylvanians. The state and federal government spend about $6 billion a year in Pennsylvania on those health costs.
In 2003, Mr. Rendell said, the federal government provided $900 million over two years in additional Medicaid help for Pennsylvania. Under the Obama administration, there are expectations of more money -- for Pennsylvania, perhaps $2.3 billion to $4 billion over a three-year period.
Also yesterday, Mr. Rendell urged the Legislature to return to the state treasury about $175 million from its $200 million "budget reserve." That account, sometimes called a "legislative slush fund," has been building for the last 15 years.
Legislators say they need that money so they can stay in business starting each July 1 -- the start of the new fiscal year -- if a new state budget hasn't been adopted by that time, which has happened consistently in recent years.
Mr. Rendell said $25 million is enough to keep the Legislature in business for July, which is all the time that's needed to adopt a budget.
The other elements of Mr. Rendell's deficit-erasure plan include using about half of the state's $750 million "rainy day fund" for economic emergencies; telling the state agencies to set aside as much as 4.25 percent of their 2008-09 spending allotment in a reserve fund; eliminating raises for 13,000 nonunion workers; using $174 million in fees from companies that want to drill for natural gas on Marcellus shale land; and imposing a state hiring freeze, although at least 300 people have been hired despite the freeze.
As for balancing the 2009-10 budget, which starts July 1, Mr. Rendell didn't rule out the possibility of layoffs of state workers or temporary unpaid furloughs. He gave no details and wouldn't say how many workers may be affected.
Dave Fillman, executive director of AFSCME Council 13, which represents state workers, said the unions would not reopen their current contracts to bridge the growing financial gap. He acknowledged, however, that the administration had talked to union officials about the possibility of short-term furloughs to shave the state's personnel costs.
"They are talking about possible furloughs at some point in time," he said. "I can't be specific. They're looking at a variety of areas. The Commonwealth is looking at all of their options, and is furlough an option? Of course it is. These are desperate times."
Convincing legislators to return most of their budget reserve could be a problem. Senate Republicans have suggested the four legislative caucuses give back $75 million, but giving back $175 million will meet resistance.
But Senate Democratic leaders Bob Mellow of Lackawanna and Jay Costa of Forest Hills said yesterday that "all [budget-balancing] options should remain on the table, including legislative funds. There are no sacred cows in any budget line item."
House Republican spokesman Steve Miskin disputed Mr. Rendell's claim that executive branch agencies have cut their budgets by 4.25 percent. Mr. Miskin said the actual cuts are less than 2 percent, saving only $464 million instead of $1 billion. He said the Legislature needs to keep four to six months of operating funds in reserve to ensure the equality of branches of government.
Mr. Miskin said the House GOP has trimmed its spending by more than 10 percent in each of the last three years. He also said the administration has a budget reserve of its own, $268 million, of which the governor has agreed to return only $101 million to the treasury.
The governor, in discussing additional revenue in fiscal 2009-10, ruled out seeking "broad-based tax increases," such as higher sales or income taxes.
But he will call for taxing smokeless tobacco and cigars, which aren't taxed now in Pennsylvania, and he will suggest some sort of surcharge be placed on natural gas taken from the state's large areas of Marcellus shale. The tobacco taxes failed to win approval last year.
He again warned of pain from programs that are reduced or eliminated. "I don't want to hear any whining" over the cuts, he said. "Everyone has to tighten their belts."
Some departments, such as Education and Corrections, will get increases because their costs keep rising. Also, grants will be given for economic development projects that create jobs.
First Published January 23, 2009 12:00 am
