Pennsylvania - 7 Years, No Budget

Pennsylvania - 7 Years, No Budget

Pennsylvania's state government is poised to begin a seventh straight year under Gov. Ed Rendell without a spending plan in place, a reality that many have come to grudgingly accept.

When the new budget year begins Wednesday, the state will have a curtailed authority to spend money, and both chambers of the Legislature will be in session, rather than on the two-month break from Harrisburg that had been traditional before Rendell took office.

This year's stalemate, however, may be the most entrenched of Rendell's six-plus years in office, as the recession-wracked economy caused a $3 billion budget deficit. The governor met with senior lawmakers to review the budget at his residence late Monday, hoping for a breakthrough in budget talks, but no agreement was reached.

Democratic leaders in the General Assembly back Rendell, but they and the leaders of the GOP-controlled Senate are billions of dollars apart on their budget proposals and are squaring off over Rendell's request for a three-year income tax increase of 16.3 percent. The increase would mean a Pennsylvania resident making $40,000 a year would pay an extra $200 in income taxes.

"It has to go off the table," Senate President Joe Scarnati, R-Jefferson, said Monday. "That's an onerous, large tax. ... Members of the governor's own party are publicly and privately telling us that they're not voting for a tax increase."

Rendell has traveled the state warning about the local property tax increases and state service cuts that he says will result if the state cuts spending on crucial programs, including school subsidies and services for the sick and disabled.

He also has insisted on substantially increasing funding for public schools, pressing for another $418 million, a 7 percent jump, at a time when state revenue collections have fallen 8 percent from last year.

The governor has challenged Republicans to show how the budget can be balanced without raising taxes. Rendell wants to increase or add taxes on income, natural gas extraction, health care premiums and tobacco sales, while delaying the scheduled phase-out of the capital stock and franchise tax that businesses pay.

Rendell said he hoped Monday night's budget review would prompt Republicans to agree that program cuts would be far more painful than tax increases.

"There's pain, but the pain is relatively small," Rendell said earlier in the day. "Let's suck it up and do the right thing."

The state's poorest families, as well as the unemployed and retired, would not pay the income tax increase, leaving one of every two adults to pay it, Rendell said.

Scarnati said he understands the impact of the cuts, and has already combed through the budget.

"We've done that," he said. "Our position is we need to go line by line through the revenue, what we have to spend."

Without a budget in place, many state agencies won't be able to pay bills or otherwise spend money to operate starting Wednesday. The impact, at first, will be slight, Rendell said, as many vendors are expected to extend credit to the state for a period.

Legislators will miss their July paychecks, which normally go out on the first of each month. Tens of thousands of state employees will receive only partial pay on July 17 and July 24, before their paychecks are entirely withheld.

By law, welfare payments, debt payments and pension checks will continue to be sent out as usual. State parks, at least at first, will remain open. Many highway projects will continue, since they are already paid for with dollars from the soon-to-end budget year.

Copyright Associated Press / NBC Philadelphia