BUDGET!!

HARRISBURG _ Gov. Ed Rendell signed the $27.8 billion Frankenbudget bill into law late tonight, effectively KARLOFF bringing down the curtain on one of Pennsylvania's longest and most bitterly fought political dramas.

The new budget plan provides a modest increase in state support for kindergarten through twelfth-grade education and it restores funding to a host of non-profit and county-operated social service programs that have been relying on loans and reserves to provide services to the ill, the aged and children, among others.

It avoids hikes in major taxes, such as the sales and personal income tax, relying for funding instead on increased business and cigarette taxes, a new levy on “little cigars,” and the legalization of table games at casinos.
The budget plan, which reduces overall state spending by 1 percent from 2008-09 levels of $28.3 billion, also includes a host of one-time infusions and $2.6 billion in federal stimulus money.

"This budget is a good one. It's a realistic one," Rendell said tonigh as he apologized for what he called an "unconscionable delay" in delivering the finished spending plan.
While he credited budgeteers for boosting spending for education and avoiding hikes to the state's personal income tax or sales tax, the Democratic governor said state government has "to do better. We must do better. And next year, we will do better," when it comes to passing an on-time spending plan.

Still unresolved, however, was the fate of a bill legalizing table games at Pennsylvania's slot-machine casinos, including the Sands Casino Resort in Bethlehem.

House and Senate negotiators were still working out the tax rates on the games and the one-time license fees that casino operators would be required to pay. A vote is expected as early as Tuesday.
The Senate's version of the table games bill imposes a collective tax rate of 14 percent - 12 percent to the state and 2 percent to host governments - and sets a one-time licensing fee of $15 million for free-standing casinos and horse-racing tracks. The House version imposes a $20 million fee, and leaders there are seeking a tax rate of 34 percent.

"We're making sure we're filling a budget hole," House Majority Leader Todd Eachus, D-Luzerne, said of the tax dispute. "We're not into giveaways in the House Democratic Caucus."

Although the budget will not balance without the presence of table games, the spending plan gets around that problem by putting off funding for discretionary, "non-preferred" items such as state support for Penn State University and the other state-related universities.

Eachus rejected suggestions that Democrats were holding college students hostage while his caucus sought a deal on table games, noting that the budget includes student grant money.
Rep. Mario Civera, R-Delaware, the ranking Republican on the House Appropriations Committee, mostly agreed, but said that situation could change if the debate over table games becomes protracted.

"On the Republican side, on gambling, it's hard to get votes," he said.

Unlike his preceding six budgets, Rendell signed the seventh budget of his administration behind closed doors in his Capitol offices.

When he emerged to brief reporters on what he had done, he said he had undertaken the action because "I believe this is no reason to celebrate. It's not that this wasn't a good budget, it was. But it took entirely too long."

And even though Rendell described the state's current process for approving a spending plan as "screwed-up" and "broken," he declined to assess blame.
"There's plenty of blame to go around," he said.

Lawmakers finally ended the stalemate in a flurry of votes in an epic 101st day of activity, with bills flying back and forth between the House and Senate and high-level talks on the budget continuing until just hours before the final votes were cast.
In a budget season marked by spasmodic fits and starts, as well as horrific derailments in negotiations, the budget's final day began frenetic and stayed that way.

The Senate voted 42-7 on Friday afternoon to send the main budget bill, which was approved by the House earlier in the week, to Rendell's desk.
There it joined a tax bill that pays for the spending plan by imposing a quarter-a-pack increase in the state cigarette tax and a new tax on so-called "little cigars;" boosting the capital stock and franchise tax paid by some businesses, and levying a gross receipts tax against managed care organizations.

The tax bill does not include unpopular proposals that generated heated debate in the weeks that the state went without a completed spending plan plan.
Those jettisoned levies include a proposed hike in Pennsylvania's personal income tax; a tax on arts and theatre tickets; a natural gas "severance tax," a new tax on small games of chance operated by private clubs and volunteer fire companies with liquor licenses and a new levy on cigars and smokeless tobacco.

All told, the budget package includes more than $2.3 billion in new revenue, with $909 million coming from recurring sources - including new taxes and fees -- and $1.4 billion in one-time sources, including a full, $755 million withdrawal from the state's Rainy Day Fund savings account.

The spending plan also includes $2.6 billion in federal stimulus funding this year, according to Republican staff on the Senate Appropriations Committee.
In a statement, state Treasurer Rob McCord said his office was fast-tracking payments to school districts and social service agencies. State cash would begin flowing within four to six days after Rendell signed the spending plan.

"My team and I stand ready to work the weekend and holiday to process these priority payments as fast possible. And, we have created a new, temporary system that allows organizations to track the status of these payments online," McCord said
At Rendell’s news conference, Budget Secretary Mary Soderberg said the state will catch up next week on roughly $3 billion in unpaid invoices.

The budget agreement finally coalesced on Friday afternoon, when legislative leaders of both parties in the House and Senate, along with the Democratic administration, reached an accord on a complex piece of legislation known as the fiscal code.
The two sides resolved their differences over a new "independent fiscal office," crafted by Sen. Pat Browne, R-Lehigh, which would serve as a political counterweight to the governor's Budget Office by certifying the revenue estimates that pay for the budget.

Legislative leaders and the administration also resolved their difference on expanded leasing of state forest land for natural gas exploration, agreeing to language that sets a target of $60 million in leased land in 2009-10.

The Department of Environmental Protection and the Department of Conservation of Natural Resources would be responsible for entering into the lease agreements, Senate Republican spokesman Erik Arneson said.
The sprawling bill also includes language authorizing the creation of a special taxing district that would be used to pay off the bonds that would underwrite the construction of a new minor-league hockey arena in Allentown.

The revenue from the taxing zone is "projected to allow for the redevelopment of the [Lehigh River] waterfront," said Browne, who crafted the language. "It will be a successful tool for the city to redevelop that site."
The new stadium would house the former Philadelphia Phantoms of the American Hockey League. The Philadelphia Flyers affiliate is playing this season in Glen Falls, N.Y., as the Adirondack Phantoms.

The cost of the 8,000-seat stadium, which would also be used for concerts and other events, is still not clear. But a similar 12,500-capacity arena built for the Hershey Bears in 2001 cost $75 million. The Phantoms' owners have said they'll front 20 percent of the cost.

The House approved the fiscal code bill 173-25 on Friday night. It cleared the Senate minutes later on a vote of 35-14.
Rep. Craig Dally, R-Northampton, voted against the fiscal code bill, saying he was concerned about raids on state reserve funds.

"Draining all those accounts doesn't bode well for the future," he said.
Though the budget package includes the possibility of a new hockey arena in Allentown, rare was the area of public life that went without reduction in state funding in the spending plan.

The state's basic education subsidy rose by $300 million to $5.5 billion, but funding for public libraries ($76 million to $60 million); Penn State University ($333 million from $354 million) and the state System of Higher Education ($546 million to $503 million) all decreased.

Likewise, the Human Services Development Fund, which provides assistance to county social welfare programs, was reduced from $35 million to $29 million.
State funding for the Department of Environmental Protection was reduced from $229 million to $159 million. And after a nearly a decade of consistent growth, the appropriation for the state prisons dropped from $1.34 billion to $1.3 billion.

Other areas impacted included state parks ($61.6 million to $50 million); state forests ($18 million to $17 million); customized job-training ($19 million to $9 million), and tourism marketing ($17 million to $6 million).
The appropriation for the 50-member Senate dropped from $101 million to $92 million, while the appropriation for the 203-member House drops by $7.3 million from $191 million to $184 million.