Rendell Signs Budget

HARRISBURG – Gov. Edward G. Rendell signed legislation to enact a $27.799 billion state General Fund budget for 2009-10 that increases education funding while reducing overall spending. It contains no new broad-based taxes.

State-dollar spending is $1.9 billion lower than in 2008-09. When $2.6 billion in federal stimulus dollars are included, the new budget still spends $524 million less than last year.

“While the budget I have signed today is late, it’s a responsible budget, given the economic condition of the nation and the state,” Rendell said. “This budget is a half billion dollars smaller than the budget we enacted last year. In fact, it is only the third budget in the past 50 years that is lower than the previous year’s.”

Despite a national recession that caused a dramatic decline in state revenues, Pennsylvania balanced its budget without any broad-based tax increases. During the past year, 11 other states increased their personal income tax or added brackets, 12 states increased their sales tax or broadened the base, and 11 states raised business taxes.

Pennsylvania also invested in its economic future by increasing or maintaining funding for its most critical long-term needs.

“In spite of the cuts and tough decisions, this budget meets my two primary objectives – protecting the programs that provide education and health care, and ensuring that we can balance next year’s budget as well as this one, assuming no further dramatic downturn in the national economy,” Rendell said.

Basic education funding will increase by $300 million under the new budget, to $5.5 billion. Other education programs, such as Pre-K Counts, Early Intervention, Head Start Supplemental Assistance, and Accountability Block Grants see funding preserved at 2008-09 levels.

“We know that one of the reasons Pennsylvania has made so much academic progress over the past six years is that we are investing in what works – starting with high-quality early childhood education,” Rendell said. “This budget preserves every dollar for those critical programs that will benefit our society and our economy for decades to come.

“We also continue to close the gap in adequate funding among school districts with the $300 million increase for public schools,” he added. “I commend the General Assembly for investing in our most essential educational programs, especially while many other states made the opposite choice in this difficult economy– 25 states cut funding for early childhood and K-12 education, and 15 have laid off teachers.”

With $1.5 billion in higher education expenditures aided partly by federal stimulus money, Pennsylvania maintains funding for the State System of Higher Education, state-related universities, and community colleges at 2008-09 levels.

With the final budget signed into law, the state can begin to make payments to school districts, social service providers, vendors, and others who have been awaiting state funds since July 1, as the commonwealth lacked authority to disburse money. The Rendell administration has been working with state agencies and the state Treasurer to process and distribute payments expeditiously.

Of the 657 line items in last year’s budget, this plan completely cuts appropriations to 142 line items. Another 360 line items are reduced from last year’s amounts. Administrative spending declines by 9 percent; the Governor’s office is funded at 1997-98 levels, while the General Assembly is at the 2003-04 mark. The budget eliminates legislative initiative grants, commonly known as WAMs.

The Governor also stressed the importance of the funding for health care and economic development programs in the coming year.

Money for the Children’s Health Insurance Program, or CHIP, climbs by $10 million over last year, to $97 million. As a result, 203,000 children will receive health care coverage from the state’s Cover All Kids program.

The state will also preserve funding for proven economic development programs.

“The budget includes substantial funding for our core economic development programs – including Opportunity Grants, World Trade PA, Infrastructure & Facilities Improvement Grants, Infrastructure Development and Customized Job Training. While I wish we were able to provide more resources, the budget I am signing provides three times as much funding for these critical programs as SB 850 would have – meaning that we will be able to make competitive offers to companies like Harley Davidson that we are recruiting to come to Pennsylvania or remain here,” Rendell said.

Although the budget includes no broad-based tax increases on income or sales, the state will increase taxes on cigarettes by 25 cents per pack and will institute a new tax on small cigars. It postpones a scheduled phase-out of the Capital Stock and Franchise Tax paid by businesses, and makes several other tax changes. The budget does not include tax increases on arts and cultural events, profits from small games of chance, and natural gas extraction, which were part of several budget proposals in recent weeks.

To raise additional revenue and help balance the budget, Pennsylvania will lease a limited amount of state forest land for natural gas production. The state will use competitive auctions and advanced technology that helps identify areas with the greatest Marcellus Shale gas reserves, generating the most revenue by leasing as few acres as possible. In addition, the Department of Conservation and Natural Resources will receive a significant share of future lease royalties to help fulfill its conservation mission.

During the protracted debate that resulted in Pennsylvania going more than three months without a fiscal blueprint in place, Governor Rendell frequently emphasized the need to generate sufficient recurring revenue to balance this year’s budget as well as next year’s. The budget enacted today includes nearly one billion dollars in new recurring revenue. In addition to the tobacco levies, legislation is in development to include table games at Pennsylvania’s 14 authorized gaming facilities, which currently offer only slot machines.

“The budget that reached my desk meets the threshold I established for recurring revenue, and does it without increasing broad-based taxes like income or sales tax,” the governor said.

The Rendell administration also laid the groundwork for dealing with fiscal challenges next year by basing the budget on conservative economic forecasts. The budget assumes no growth in existing revenue sources during the current fiscal year.

The state will use approximately $2.4 billion in one-time revenue, but projects a year-end balance of $350 million to cushion against potential economic challenges in 2010-11.

“We are certainly not out of the dark, but the budget that I am signing today will serve Pennsylvania well throughout the remainder of this fiscal year and sets the groundwork for a balanced budget in 2010-11 – while continuing to provide the programs and services that will help working families today and grow our economy to a better tomorrow,” the governor said.

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