2008-12-04 / Local & State

Pa. Chopping Block Grows As Deficit Gets Bigger

By Marc Levy ASSOCIATED PRESS WRITER

HARRISBURG, Pa. (AP) - Gov. Ed Rendell and legislative leaders are intensifying their search for budget cuts and spare millions as the deteriorating economy continues to unravel Pennsylvania's $28.3 billion spending plan.

The state's bleak revenue collections look certain to make November the seventh straight month that expectations have not been met as Rendell's agency heads draw up a second round of spending cuts to try to avert a deficit.

Some of the biggest recipients of the state's funding - hospitals and nursing homes that serve the poor and uninsured, and counties that administer safety nets for addiction treatment, mental health needs and neglected children - are worried about those cuts.

"Worried is sort of an understatement,'' said Jim Redmond, a Hospital and Healthsystem Association of Pennsylvania lobbyist.

Public schools this year received a big new injection of money to help them educate students to meet Pennsylvania's academic standards, and now school boards are worried about the future of those programs.

County commissioners warned the state against cutting their funding and simply sending the costs down the ladder to county taxpayers.

"The state cutting its share may save state taxpayers money, but those same taxpayers are hit when we are forced to raise property taxes to make up the difference,'' said Dave Coder, a Greene County commissioner who is president of the County Commissioners Association of Pennsylvania.

Through October, Pennsylvania state government revenue collections were running 7 percent behind - at that rate, the state would be facing a deficit of nearly $2 billion when the fiscal year ends on June 30.

On Oct. 30, Rendell announced that he was freezing $311 million in spending, and asked groups outside his control, including the Legislature and Judiciary, to take similar steps. Two weeks ago, he ordered his agency heads to undertake a second round of cuts, to be revealed Dec. 9 when Rendell briefs legislative leaders.

Decisions on where to cut, and whether to increase a tax, is likely to send partisan sparks flying.

Senate President Pro Tempore Joe Scarnati and Democratic House Appropriations Chairman Dwight Evans are saying everything should be considered - although they diverge on the question of a tax increase.

Evans' spokeswoman said the Philadelphia Democrat is willing to consider a "targeted'' tax increase, as opposed to a more general tax increase. Scarnati's spokesman said the Jefferson County Republican believes the budget can be balanced without an increase.

Regardless, there are plenty of suggestions from Capitol observers on what should be done.

"It is a cop out just to do a 5 percent across-the-board cut, because you're rewarding bad programs and punishing good programs,'' said Eric Epstein, coordinator of RocktheCapitol.org.

For starters, tens of millions of dollars in grants - known as "WAMs,'' for walking around money - are controlled by state legislative leaders. The grants may go toward worthy causes, such as community non-profits and school groups, but Epstein and others say recipients are selected in a secretive process that is not based on merit.

The state spends tens of millions more on what the libertarian Commonwealth Foundation calls "corporate welfare'' - grants, tax credits and reimbursements that reward businesses for picking Pennsylvania over another state as a destination to expand or relocate.

The state also has reserves to consider.

That includes a "rainy day fund'' of nearly $750 million for hard economic times. The Legislature keeps its own surplus, too, squirreled away since the 1990s in the name of shielding the institution during a budget dispute with a vengeful governor. The last annual audit of the surplus tallied it at more than $240 million on June 30, 2007.

Then there's the tax code.

The liberal Pennsylvania Budget and Policy Center pointed out that the state could capture more than $600 million if it closes a loophole through which many businesses avoid paying Pennsylvania's corporate income tax.

In addition, Pennsylvania is one of the biggest natural gasproducing states that does not tax the activity - a free pass that could cost Pennsylvania more money in the future as exploration companies flock here to drill into the potentially lucrative Marcellus Shale gas formation.

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