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PA Gov. Rendell’s Plan to Fix Budget Shortfall Relies Heavily on State Bailouts

2 min readBy: Mark Robyn

Pennsylvania is one of many states facing budget shortfalls. Last week Governor Ed Rendell proposed a plan to close the state’s projected $1.6 billion deficit. The plan includes no taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increases, but it does rely heavily on the proposal to bail out struggling state governments. The plan includes the following:

  • $464 million from the already announced budget cuts and other cost-saving measures, including a wage freeze for more than 13,600 non-union employees and the elimination of this year’s cost-of-living adjustment for the Governor and Cabinet members; a hiring freeze; and the curtailment of out-of-state travel;
  • $36 million in budget cuts by the General Assembly and other independent agencies – reductions that have yet to be identified by those entities;
  • $375 million from a portion of the commonwealth’s $750 million Rainy Day Fund – which will safeguard the remaining half of the Rainy Day Fund to meet future economic challenges;
  • $174 million in income from the Marcellus Shale natural gas drilling leases;
  • $450 million in anticipated federal fiscal relief; and
  • $101 million in unused funds left over in state accounts from prior-year budgets.

While it is good to see that the Governor has the discipline to cut $500 million of spending, over a quarter of the $1.6 billion he expects to raise comes from the “anticipated federal fiscal relief.” Rendell has been a strong proponent of state government bailouts, and had this to say:

[…] I fully expect that the commonwealth will receive the federal stimulus funding that President-elect Barack Obama spoke of last week,” the Governor said. “We anticipate receiving $450 million this fiscal year. Those funds will allow us to preserve the remainder of the Rainy Day Fund until 2009-10.

Many localities are also trying to get in on the deal. This ridiculous 600 page document details the 11,391 local infrastructure projects that would cost the federal government $73 billion and produce 850,000 jobs.