HARRISBURG — Gov. Ed Rendell today presented a $29 billion state budget that would devote more money to schools, prisons and health care for the poor while taxing the sale of many services for the first time.

The proposal would increase spending by $1.1 billion, or about 4 percent, and relies on nearly $2.8 billion in federal stimulus money — some of which has yet to be approved by Congress — to augment state revenues amid a stubborn recession that continues to cut deeply into state tax collections.

"With help from Washington, our challenge to produce a balanced budget with no tax increase for the coming fiscal year is daunting, but doable," Rendell told legislators.

The budget's biggest surprise — an expansion of the state sales tax — came as part of Rendell's plan to prepare the state for an expected "fiscal tsunami:" A combined $5.6 billion deficit from the 2011 expiration of federal stimulus money and a 2012 spike in pension obligations.

Under the plan, Rendell proposes reducing the state sales tax rate from 6 percent to 4 percent, but to extend it to 74 services and other transactions that are currently exempt, including professional laundry, candy, gum and personal hygiene products. His plan would keep intact some major exemptions, including those on groceries, clothing and prescription drugs.

With the state economy expected to recover slowly from the recession, next year's spending increases would be supported by other changes, including a speedup in business' remittance of the sales tax money they collect, income from commercial drilling for natural gas on state forest land, and taxes on newly legalized table games at Pennsylvania's casinos.

Rendell's proposed budget for the 2010-11 fiscal year that starts July 1 is his last as governor. He is barred by law from seeking a third consecutive term.