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

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 tax 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.