RENDELL BUDGET BETS ON THE FEDS

GOV. RENDELL's fondness for gambling was well-established long before his administration helped legalize gaming in the state. His latest budget has us wondering if he may want to find a support group.

For one thing, his budget assumes at least $2.4 billion in magic Obama money - also known as the federal stimulus. That could be a gamble, since the U.S. Senate may well vote as early as today on a plan that may strip state aid out of the $1 trillion stimulus bill.

That means that the relative calm with which Rendell's $29 billion proposed budget has been greeted - one that includes nearly $1 billion in cuts, no big tax hikes and increased funding for education - may be short-lived. If those federal billions don't come through, the budget will require serious revision, with lots more pain.

That's not to say there is no pain in the proposed budget. Although 2.5 percent higher than this year's, it calls for cuts in more than a hundred programs. But it is absent some of the draconian cuts that other states are forced to make.

He also has a new gaming idea: video poker. His latest scheme would legalize the video games popular in bars and taverns across the state in order to raise more than $500 million to provide tuition aid for students at 14 state-owned colleges and unversities.

Has his gaming addiction warped his good judgment? He insisted to critics yesterday that video poker wouldn't expand legalized gambling in the state - a concern for the casinos, which have paid millions for a license - but only legalizes the 17,000 illegal machines that are out there now. Although Rendell is to be commended for keeping his focus on education, should policy be based on capturing income from illegal activities?

With that kind of logic, can state-sponsored prostitution and narcotics sales be far behind?

Rendell is a smart man, and he has driven the state and its budget with many innovative ideas, particularly in health-care and energy issues.

The video-poker idea is not one of those.

Rendell is also taking a big gamble with his idea to save money by consolidating the number of school districts across the state. The likelihood that it will receive popular support is dicey. This idea could falter on people's fears that their beloved high-school-football rivalries would be redistricted out of existence.

But it is an idea that deserves study. And it's the kind of idea that we will need many more of as the country's economic crisis continues. States are no doubt counting on the federal stimulus money to help them avoid difficult choices, but we wish the bill were built with more incentives to find smart ideas. For example, the U.S. Senate's version added breaks on sales tax and interest for people buying new cars. But that hardly goes far enough.

One study by the Brookings Institution suggests that the governmnet could issue 14 million car-purchase certificates for $10,000 that people could use to buy cars getting an average of 55 miles per gallon. This would spark entrepreneurial innovation, and create jobs.

That same study recommended that the government pay the book value for any car 10 years or older. This would get energy guzzlers off the road and stimulate car sales.

If crisis is opportunity, we are at a unique moment for new thinking. Our leaders would do well to encourage more of it. *