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Serious budget talks to begin

State has no surplus this year to divvy up

HARRISBURG - Now that they've agreed on how deep the state's financial hole is, legislative leaders get to figure out how to fill it.

The remaining 11 weeks leading up to the expiration of Pennsylvania state government's current budget holds many tough decisions for legislators as they struggle to adjust to the biggest money crisis of many, if not all, of their careers in the Capitol.

The big problem: Most years Gov. Ed Rendell and legislative leaders get to divvy up a surplus for their pet causes. This year they might have to dish out more pain than money.

Already causing friction between Republicans and Democrats is the size of next year's budget and how it will be supported, such as by Rendell's proposed new tax on natural gas extraction.

"Ultimately we may have some differences on how to solve the problem, but we all agree there's a problem and it's going to involve sacrifice," said Senate Appropriations Committee Chairman Jake Corman, R-Centre.

On Monday, the Legislature returned from a two-week break to Harrisburg, where it will hold session for nine of the 11 weeks until June 30, the deadline to approve a budget for the 2009-10 fiscal year.

Legislative leaders have begun meeting earlier than in other years every Wednesday when the Legislature has been in Harrisburg and say the discussions were cordial and put them in a position to begin shaping an agreement.

After their weeks of meetings, they have come to an understanding of how the state can use the billions of dollars from the federal government's economic stimulus package and agreed that Pennsylvania probably faces a current-year shortfall that will be slightly worse than the $2.3 billion, or nearly 10 percent, that Rendell previously projected.

But to this point, legislative leaders have not cut off partisan rhetoric, made compromises or proposed any sweeping alternatives to the $29 billion budget Rendell unveiled in early February.

Steve Crawford, Rendell's chief liaison to the Legislature, acknowledged that top legislators are taking the matter seriously, but said: "Now it's time to ramp up the intensity of the work."

The next question may be who sacrifices.

The Democratic governor has given legislators a lot to mull between his new budget proposal and his plans to fill this fiscal year's projected shortfall.

Rendell is seeking a 4 percent spending increase over this year's approved budget, with big boosts for public schools and medical care for the poor, elderly and disabled. Republicans say next year's spending should be well below this year's approved figure of $28.3 billion, leaving the sides more than $1 billion apart.

"It's clear to me that we can't be increasing spending when all the world's tightening their belts and trying to live within the economic reality," said House Minority Leader Sam Smith, R-Jefferson.

Rendell has not proposed raising any of the state's broadest taxes personal income, sales or corporate income and even is proposing to cut the rate of the capital stock and franchise tax that businesses pay.

However, Smith said Democrats are trying to lay the foundation for the eventual approval of a personal income tax increase. Neither Crawford nor House Majority Leader Todd Eachus, D-Luzerne, would rule out any outcome.

"All issues are on the table," Eachus said.

The entire universe of Rendell's plans involve a couple dozen pieces of legislation. An actual budget bill has not been introduced yet Rendell administration officials sent it over late last week prompting gripes from Republicans who already are sensitive to a history of budget fights with Rendell that dragged past the June 30 deadline.

Rendell also wants to defray the cost of college tuition at Pennsylvania's state university system by legalizing and taxing video lottery terminals in bars and clubs, and add prescription drug coverage to the state's low-cost health insurance program for adults.

A rising bottom line, touchy program cuts, more gambling options and additional taxes on natural gas extraction and tobacco sales being proposed by Rendell have Republicans uneasy.

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