Rendell Defends Cuts, Pressures Lawmakers To Act

Gov. Ed Rendell said Pennsylvania's state budget can't be balanced without new taxes and said there's enough time to get a deal before the fiscal year ends June 30.

The governor's Capitol news conference was his third budget-related public event in as many days. He defended his proposed 16 percent increase in the personal income tax and said the $2 billion in cuts he has identified are real, even if the bottom-line number has barely budged.

"We should get to work," Rendell said. "We get paid for working."

Pennsylvania is facing a projected $3.2 billion revenue shortfall for the current year, and Rendell is proposing a mix of spending cuts and tax increases to weather the financial storm.

He also said he's willing to consider a stopgap budget that would prevent state employees from having to work without being paid immediately.

"We have to have increased revenues," said Rendell, who this year has floated higher taxes -- or new taxes -- on health insurance premiums, retail sales, tobacco, natural gas extraction and video poker. "When you look at the numbers, the numbers drive the discussion."

Rendell said no lawmakers who voted for the last state income tax increase, in 2003, lost re-election the following year. This year, he said, the decline in tax revenues and other factors have left them little choice, he said.

"I know that recommending a tax increase is not going to do much for my popularity," said Rendell, who is barred by the state constitution from seeking a third consecutive term.

Legislative Republicans have said they oppose any tax increases and want the 2009-10 budget to be balanced by reducing expenditures.

Rendell said he has adapted his plan with additional cuts based on his review of the no-new-taxes budget bill that passed the Republican-controlled Senate on a party-line vote before House Democrats killed it.

House GOP spokesman Steve Miskin said Rendell's cuts are more like accounting shifts, because his proposed level of total spending has remained static at about $29 billion.

"The governor has not cut a single dime, a single penny, out of his budget," Miskin said.

Rendell proposes to raise the state personal income tax rate to 3.57 percent. After three years, he said the tax rate will return to its current 3.07 percent.

Families currently making $50,000 a year, at the current state income tax rate, pay $1,535 in taxes. The new rate will increase a $50K family's tax bill to $1,785, or $250 more in taxes to the state.

Channel 11 News looked up the latest census data on Pennsylvania and found that the median household income was slighting under $50,000 at $49,145. A household with this income would pay an additional $245.73 a year in state taxes.

The tax increase would generate $1.5 billion a year to deal with the severe downturn in state revenues, the governor said.

"The simple truth is we have no good choices," Rendell said. "There are no shortcuts out of this crisis, no magic bullets, no painless path out of this morass."

Without the tax increase, Rendell said funding for education would be affected and 800 state troopers would be laid off.

Rendell blamed the Wall Street mess for the state’s $3.2 billion deficit and said there are no shortcuts around this crisis.