Surprise: Pa. facing $1B budget deficit

The Associated Press is reporting that Pennsylvania could see a $1 billion budget deficit in the coming fiscal year if the Legislature approves the $28.2 billion proposed by Gov. Ed Rendell.

The Legislature is in session today and most likely will remain in Harrisburg over the Fourth of July holiday and into the weekend.

The governor and Legislative leaders announced a handshake deal on the budget on June 30, the Constitutional deadline for approving the budget, but a vote hasn't taken place yet in either the House or Senate.

If the Legislature OKs all of Rendell's proposed spending, the state would go into the red over the course of the 2008-09 fiscal year, according to Senate sources.

Since the Constitution requires a balanced budget, that means the Legislature will have to enact $1 billion in new taxes or find $1 billion to cut from the budget.

Under Rendell, state spending has increased by $8 billion since 2003.

With the economy weakening, tax revenues have slowed. Pennsylvania missed its tax collection projections in both May and June of this year.

So why is the Legislature giving Rendell what he wants in spending?

Sen. Gibson E. Armstrong, who chairs the Senate Appropriations Committee, told The Associated press that he anticipates a deficit at the end of the fiscal year of between $800 million and $1.2 billion.

If that should materialize, the Rendell administration can put off hiring, scrounge cash that is sitting unspent in state accounts or dip into the state's main emergency fund, nicknamed the "rainy day fund," the Lancaster Republican told the wire service.

From Marc Levy of The Associated Press:

Rendell and his advisers have refused to discuss specifics about the budget since closing a handshake deal on the spending plan early Monday. Legislative leaders have released few details about it, but have held closed-door briefings for rank-and-file lawmakers. The House and Senate were in session Thursday, with votes on a final document expected by Friday's end.

Paul Dlugolecki, a senior Democratic staff aide to the Senate Appropriations Committee, said he and others expect a $1 billion deficit that could require a tax increase.

"If this economy continues its downturn, we could easily get up that high," Dlugolecki said. "Two billion is not out of the question."

Republican lawmakers have been warning for years that Rendell's runaway spending would catch up to him. It appears they were right.