2009-01-22 / Features

Rendell Says Estimated Pa. Budget Gap Has Grown

By Marc Levy ASSOCIATED PRESS WRITER

HARRISBURG, Pa. (AP) - Pennsylvania's 2008-09 budget shortfall could be as high as $1.9 billion as the national recession continues to take its toll on state tax collections, Gov. Ed Rendell said Thursday.

In a speech at the Pennsylvania Farm Show, Rendell boosted his deficit estimate and promised to advance proposals soon for plugging the latest budgetary hole, but provided no immediate details.

"There are no sacred cows,'' Rendell said afterward when asked what options his administration is considering.

The threat of reduced state funding for the next year or two has sent fear through county governments, hospitals, nonprofits and everyone else who relies on the state's generosity.

The Democratic governor said last month that his administration was projecting a $1.6 billion deficit by the end of the fiscal year in June. On Thursday, he said the administration now projects the deficit will be between $1.6 billion and $1.9 billion, and he repeated his warning that the state's ongoing efforts to close shortfalls projected for both this year and next year will inflict pain.

"Everyone has to understand that what has happened leaves us no option,'' Rendell told top state officials, lawmakers and several hundred members of the state's farming community. "We're going to have to cut virtually every program that there is.''

On Feb. 3, Rendell is scheduled to deliver his 2009-10 budget proposal to the Legislature, kicking off what some legislators expect will be the grimmest budgetmaking process in years, if not decades.

As of Dec. 31, the fiscal year's halfway point, state revenues were $815 million shy of projections.

Senate Republicans project this year's deficit will reach even higher - $2.1 billion - and one senator cautioned that efforts to patch over the deficit with reserves or found money will only postpone the inevitable.

"You're just delaying the day of reckoning to a later date,'' said Senate Appropriations Chairman Jake Corman, R-Centre. "We need to look at program spending reductions, if not eliminations, to bridge this gap.''

Rendell signed the $28.3 billion budget in July, but ordered a hiring freeze and banned outof state travel by employees even before the end of the first quarter. Subsequent cuts affected a broad array of programs, from highway improvements to services for the poor and disabled. Thousands of nonunion state employees also were forced to give up cost-of-living salary increases.

Rendell said last month that he hoped to offset the shortfall with additional spending cuts, cash from budgetary reserves, gas-drilling leases in state forests and a federal aid package.

Despite factory and store closings piling up across the state, Rendell has said he hopes to avoid any broad-based tax increase or state-employee layoffs, although that could be difficult as lawmakers contend with this year's shortfall and make spending decisions for the 2009-10 budget year that starts July 1.

With many business owners hurting and people losing jobs, Corman said it will be easier to find votes in the Legislature to cut spending, rather than raise taxes. Parsing the state's budget program by program in search of savings could end up improving the effectiveness of the way Pennsylvania spends money in the future, Corman said.

"This gives us the impetus and the mandate from the public, because they don't want a tax increase, to go through the budget and make sure that each program is justifiable,'' Corman said.

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