By MARC LEVY
HARRISBURG — Gov. Ed Rendell on Tuesday presented lawmakers with a $29 billion spending plan 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,” the Democrat 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” after he leaves office: 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 many professional services, home electric bills, candy, gum and personal hygiene products. His plan would keep intact some major exemptions, including those on groceries, clothing and prescription drugs.
Leaders of the Senate’s Republican majority, however, pronounced the sales tax plan dead on arrival and criticized Rendell’s proposal to increase spending at a time when his administration is also projecting a $525 million shortfall this year.
They instead said they would press for cost savings by enacting pension, welfare and prison reforms and would look first to cut spending.
“I know the governor said we already cut to the bone, but there’s a good layer of fat before we get to the bone,” said Senate President Joe Scarnati, R-Jefferson.
Rendell insists there are no painless cuts left in state government, just four months after state budget-makers slashed spending by nearly 2 percent to help fix a multibillion-dollar, recession-driven shortfall in tax collections.
Anybody who says otherwise is guilty of political pandering, he said.
“I’m going to challenge them publicly to lay out their spending cuts, total them and also tell people what the implications are,” he said at a news conference after his speech.
“Talk is cheap,” he said.
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.
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.
For the coming fiscal year, Rendell is calling for a fifth straight large increase for public schools – $355 million, or 6 percent more – a hallmark of his administration that Rendell says will ensure a better economic future for Pennsylvania and cut down on crime.
