Budget Deal Keeps $27.945 Spend Level, Adds Some New Revenues

Pennsylvania’s longest-ever budget stalemate since at least the 1970s likely ended Friday night when a group of legislative leaders and Governor Ed Rendell announced they had agreed to a $27.945 billion spending plan that nobody said was perfect but everybody agreed satisfied their principles.

The legislative leaders declined to release many of the deal’s details, saying they needed to review them with rank-and-file lawmakers first. But, according to an e-mail sent to the Senate Republican Caucus and obtained by PLS, it includes a tax on small cigars and eliminates $36 million in tax credits.

Those changes and a few others are in addition to the array of revenue increases included in the “three caucus” budget deal unveiled last week, all of which this agreement retains. The budget also increases education spending by $300 million.

“The budget preserves education funding in a way that almost no state in the union did. That’s a big plus,” Governor Rendell said. “It preserves our ability to compete economically with other states … It preserved health care for most Pennsylvanians. And at the same time it produced sustainable revenues that will give us no budget deficit this year or next – and it constrained spending.”

The budget bill still must be approved by the legislative Conference Committee and pass each chamber of the House, where lawmakers cannot amend it. Senate Majority Leader Dominic Pileggi estimated the entire process, if it does not face any problems, will take seven to ten days.

House Republicans remain opposed to the deal, and their lack of support could make the budget’s passage a little tricky. To read more about their lack of support, click here.

The budget, according to the governor, spends $400 million less than last year. Without federal stimulus money, it spends $2 billion less.

Spending less than last year and not adding a broad-based tax increase were necessary for Senate Republicans to agree to a deal, Senate Majority Leader Dominic Pileggi (R-Delaware) said repeatedly throughout the summer-long negotiations.

“The fact it’s done without broad-based tax increases and the fact it’s sustainable over next year is really a remarkable feat in this economy,” Senator Pileggi said. “And it would not have happened without a spirit of compromise among all parties.”

According to the e-mail sent to Senate Republicans, the deal eliminates the sales tax exemption on theater, dance, music concerts and performing arts admissions, and the exemption on museums, historical sites, zoos and parks. The money raised with that exemption will be placed in a fund that supports those activities, it said.

The governor also raised his projected revenue estimate for a tax amnesty plan to $190 million, the e-mail reported, and the deal will at least temporarily divert 2 percent of slots revenue from the Race Horse Development Fund to the General Fund.

Also of note, the tax on small cigars is not the same as a tax on so-called “cigarillos,” which are not the same thing, according to a Senate Republican spokesman.

Speaker of the House Keith McCall (D-Carbon) said despite the state’s $3.2 billion shortfall, the budget meets the “needs of Pennsylvanians.” But it also includes cuts, he added.

“You know, you talk about winners and losers – I think it’s about winners and survivors,” he said. “They’re still a lot of cuts in this budget and that’s because of the economic times we’re in.”

The deal comes exactly a week after three caucuses – Senate Republicans, Senate Democrats, and House Democrats – announced they had reached at tentative agreement. Governor Rendell promptly threatened to veto the deal because, primarily, he said its $1.2 billion in new recurring revenue estimate was “wildly optimistic.”

The governor, legislators, and their staffs met almost around-the-clock since then to negotiate those differences. At Friday’s press conference, Governor Rendell said they closed the new revenue gap by about $400 million by adjusting the estimates and adding new sources.

The governor became personally involved in the negotiations again Thursday night after a long absence. He and Senate Republican leadership met again Friday afternoon and once more in the evening, when the deal was struck.

Negotiations among House Democrats, Senate Republicans, and the administration slowed nearly to a halt in early August after the governor signed an $11 billion “bridge budget” whose primary goal was to allow the state to begin paying nearly 80,000 of its employees. But the temporary budget did not authorize payments to many social service programs, including day cares, which again put pressure on lawmakers to approve a budget.

Governor Rendell said, as Speaker McCall did last week, that he wanted to apologize to Pennsylvania’s citizens for the delay. When asked if the nearly three-month delay was worthwhile, the governor responded that it was a tough question to answer.

“Should it have been done faster? I think we all think the answer to that is ‘yes,’” he said. “But is the end result good for the people of Pennsylvania? I think all of us agree the end result is absolutely yes.”

The deal, as it did in the “tri-caucus” version, includes allowing table games in casinos. Senator Pileggi said allowing table games would not have been possible in a July 1 deal, but the hearings held and public comment made in the 80 days since allows it now.

But each leader, including House Majority Leader Todd Eachus (D-Luzerne) and the governor, said gaming reform is needed before a table games bill is approved.

The governor said he is hopeful this year’s budget will make next year’s easier – and on time.

“We got to do better next year,” he said. “I’m resolved that we will do better next year. And all of us share in that resolve. The fact that we have a balanced budget for next year should make it easier for us to move swiftly and enact a budget next year and avoid the pressure stress we put Pennsylvanians through.”