Rendell: No tax hikes in next year's budget

HARRISBURG - Gov. Rendell said yesterday that he would not propose any increases in the state's sales or personal income taxes in the next fiscal year's budget, despite a worsening financial outlook for Pennsylvania.

His promise to hold the line on such broad-based taxes comes as his administration is planning painful spending cuts and likely government layoffs in the multi-billion dollar spending plan he will unveil in two weeks.

"It's a sign of the times," Rendell said yesterday. "There will be some layoffs and there will be universal pain. And I don't want to hear whining. I think everyone has to tighten their belts."

The governor said his administration is facing a $2.3 billion gap in this fiscal year's budget alone - $700 million more than he projected a month ago. He will make up for that $700 million in several ways, including tapping anticipated federal stimulus aid to the states.

For Pennsylvania, that aid could range from $2 billion to $4 billion over two years, the governor said.

Rendell is also asking the four House and Senate caucuses to turn over some portion of the surpluses they have in their legislative accounts. Legislative leaders typically hang onto those reserves to keep operating in case there is a budget showdown with the governor and their operations are not funded.

As of July, the total surplus in all four legislative accounts was $200 million.

Rendell stressed yesterday that he would never be "punitive to the legislature," and said he wanted the legislature to give up the "lion's share" of those surpluses. That may lead to a fight.

Legislative leaders acknowledged that they will have to part with a portion of their surplus accounts, given the economic reality, but none would be specific as to how much they would be willing to give Rendell.

Steve Miskin, spokesman for House Minority Leader Sam Smith (R., Jefferson), said his caucus would want to hang onto enough money to keep operating for at least four to six months. "We're not going to give on that," he said.

The governor's figure on stimulus aid he thinks Pennsylvania could be granted over two years is well over the conservative estimate of $900 million he gave out in December.

Still, Rendell said, "regardless of the stimulus amount, we still have to make cuts."

"We have to make cuts ourselves, we have to absorb the pain ourselves," he said, later adding: "Although the cuts will be painful, none of them will be debilitating."

He would not say yesterday what he intended to cut in next year's budget. He will provide those details when he gives his budget address to the legislature in the first week in February.

"Everything is on the table," he said.

David R. Fillman, executive director of Council 13 of the American Federation of State, County and Municipal Employees, which represents 45,000 state workers, said furloughs, let alone layoffs, should be a last resort.

"There are many things we can do to bring in new revenues before we resort to that," Fillman said.

Sharon Ward, executive director of the nonpartisan Harrisburg-based Pennsylvania Budget and Policy Center, agreed that there were several taxes - aside from the sales and income taxes - the legislature could consider to generate money and offset the need for more budget cuts. For example, the state could enact a tax on extracting oil, gas or coal.

"Cuts in the state budget will likely lead to increased local property taxes, as the cost of services falls increasingly on local governments," Ward said. "It would be far better for state lawmakers to find a way to pay for state services . . . than to pass the cost of those services on to local taxpayers."

During the last few months, Rendell has announced a broad package of cost-cutting measures the administration has implemented to offset the impact of the national economic downturn on this year's budget.

Last month, Rendell said he would freeze salaries for 13,600 nonunion state workers and forgo his own cost-of-living adjustment while urging his top staff to do the same.

He has also called for a freeze on hiring and out-of-state travel, as well as asking most departments to scale back their budgets by roughly 4.5 percent.