By MARC LEVY Associated Press Writer


HARRISBURG, Pa.â€"Gov. Ed Rendell and legislative leaders are intensifying their search for budget cuts and spare millions as the deteriorating economy continues to unravel Pennsylvania's $28.3 billion spending plan.
The state's bleak revenue collections look certain to make November the seventh straight month that expectations have not been met as Rendell's agency heads draw up a second round of spending cuts to try to avert a deficit.

Some of the biggest recipients of the state's fundingâ€"hospitals and nursing homes that serve the poor and uninsured, and counties that administer safety nets for addiction treatment, mental health needs and neglected childrenâ€"are worried about those cuts.

"Worried is sort of an understatement," said Jim Redmond, a Hospital and Healthsystem Association of Pennsylvania lobbyist.

Public schools this year received a big new injection of money to help them educate students to meet Pennsylvania's academic standards, and now school boards are worried about the future of those programs.

County commissioners warned the state against cutting their funding and simply sending the costs down the ladder to county taxpayers.

"The state cutting its share may save state taxpayers money, but those same taxpayers are hit when we are forced to raise property taxes to make up the difference," said Dave Coder, a Greene County commissioner who is president of the County Commissioners Association of Pennsylvania.


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Through October, Pennsylvania state government revenue collections were running 7 percent behindâ€"at that rate, the state would be facing a deficit of nearly $2 billion when the fiscal year ends on June 30.

On Oct. 30, Rendell announced that he was freezing $311 million in spending, and asked groups outside his control, including the Legislature and Judiciary, to take similar steps. Two weeks ago, he ordered his agency heads to undertake a second round of cuts, to be revealed Dec. 9 when Rendell briefs legislative leaders.

Decisions on where to cut, and whether to increase a tax, is likely to send partisan sparks flying.

Senate President Pro Tempore Joe Scarnati and Democratic House Appropriations Chairman Dwight Evans are saying everything should be consideredâ€"although they diverge on the question of a tax increase.

Evans' spokeswoman said the Philadelphia Democrat is willing to consider a "targeted" tax increase, as opposed to a more general tax increase. Scarnati's spokesman said the Jefferson County Republican believes the budget can be balanced without an increase.

Regardless, there are plenty of suggestions from Capitol observers on what should be done.

"It is a cop out just to do a 5 percent across-the-board cut, because you're rewarding bad programs and punishing good programs," said Eric Epstein, coordinator of RocktheCapitol.org.

For starters, tens of millions of dollars in grantsâ€"known as "WAMs," for walking around moneyâ€"are controlled by state legislative leaders. The grants may go toward worthy causes, such as community non-profits and school groups, but Epstein and others say recipients are selected in a secretive process that is not based on merit.

The state spends tens of millions more on what the libertarian Commonwealth Foundation calls "corporate welfare"â€"grants, tax credits and reimbursements that reward businesses for picking Pennsylvania over another state as a destination to expand or relocate.

The state also has reserves to consider.

That includes a "rainy day fund" of nearly $750 million for hard economic times. The Legislature keeps its own surplus, too, squirreled away since the 1990s in the name of shielding the institution during a budget dispute with a vengeful governor. The last annual audit of the surplus tallied it at more than $240 million on June 30, 2007.

Then there's the tax code.

The liberal Pennsylvania Budget and Policy Center pointed out that the state could capture more than $600 million if it closes a loophole through which many businesses avoid paying Pennsylvania's corporate income tax.

In addition, Pennsylvania is one of the biggest natural gas-producing states that does not tax the activityâ€"a free pass that could cost Pennsylvania more money in the future as exploration companies flock here to drill into the potentially lucrative Marcellus Shale gas formation.

Posted by: Tony Phyrillas | 11/26/2008 2:10 PM



A citizens' group that led the fight to repeal the 2005 legislative pay raise is demanding Pennsylvania officials suspend their annual COLA increase.

RockTheCapital.org says the 2.8% cost-of-living adjustment for legislators, members of the Rendell administration and judges is a "stealth" pay raise.

The base salary of a Pennsylvania lawmaker goes up to $78,315 on Dec. 1. Legislative leaders earn more. For example, the Senate Pro Tempore would earn $118,095 after the COLA kicks in.

Pennsylvania lawmakers are already among the highest paid in the nation. They attempted to pull off a middle-of-the-night pay raise in July 2005, but public pressure forced the Legislature to repeal the pay raise a few months later.

From Eric Epstein, coordinator of RockTheCapital.org:


"At a time when working class families are getting clobbered, the political class is making plans to jet to New York City and whine and dine in the lap of luxury. Those in the 'no whine zone' are prospering. Speaker McCall will be making $122,000, and Supreme Court Chief Justice Ron Castille will be hauling in $192,000. Rank-and-file lawmakers will have to get by on $78,300 with per diems, a state car, and full benefits."

Epstein said the Dec. 1 pay raise is particularly galling because Pennsylvania elected officials have done such a poor job of managing state revenues.

"No one should be rewarded for creating a $500 million deficit," Epstein said. "Taking a COLA this year is like stealing your children's savings' bonds."

RockTheCapital.org, one of several citizen reform groups that fought to repeal the 2005 middle-of-the-night pay raise, believes that a nonpartisan and independent compensation commission should determine future pay adjustments for elected and appointed officials.

"State government is a publicly held corporation with by-laws that specifically exclude COLAS (Article III, Section VIII)," Epstein said. "If lawmakers want a bonus plan then they need to submit a proposal to taxpayers for ratification."

For more on the group's reform agenda, visit www.RockTheCapital.org