Pennsylvania in partial shutdown amid budget impasse 

Pennsylvania Governor Edward Rendell and the Republican-controlled Senate remained deadlocked over a $27.3 billion budget, prompting an unprecedented furlough of 25,000 state workers and partial shutdown of government services.

Republican legislators want to reach a budget deal before considering Rendell’s proposals for a surcharge on energy bills, a statewide smoking ban, new mass transit and road funding and borrowing for a Pittsburgh hockey arena. Rendell, a Democrat, says those issues should be addressed as part of budget talks.

“I’m sorry we’re here,” Rendell said last night. “By this time tomorrow night I hope we can announce an agreement.”

Negotiations resumed today, Rendell spokesman Chuck Ardo said in a telephone interview. “We’re very hopeful that progress made yesterday will continue today and a budget deal can be reached,” Ardo said.

Without a budget the state has no authority to pay its workers, Rendell said in a July 3 letter telling employees they would be furloughed starting today if officials couldn’t agree on a spending plan for the fiscal year that began this month.

The furlough took effect at 12:01 a.m., idling about 25,000 “non-essential” workers and interrupting services including drivers license centers and state parks as well as the issuance of permits by transportation and environmental protection agencies.

Essential Workers

This is the first time a governor in Pennsylvania has issued a furlough order, Ardo said. The last prolonged budget impasse occurred in 1991 where workers went 34 days without being paid; state and federal courts have since ruled that the government can’t force non-essential employees to work without pay, he said.

Some 52,000 workers with the state police, corrections department workers and parole agents are classified as essential and will continue to work. The state’s five casinos will remain open after a Commonwealth judge issued a temporary restraining order last night and halted the closure of the casinos, Secretary of Revenue Thomas Wolf said in a statement.

A second hearing is scheduled for tomorrow. The temporary order rescinds the furloughs of eight state revenue department workers whose job is to monitor the central computer system that oversees gaming operations and links all slot machines, said Stephanie Weyant, a spokeswoman for Wolf. Pennsylvania makes about $1.7 million a day in taxes from its casinos, said Richard McGarvey, a spokesman for the state gaming control board.

The budget as proposed by Rendell would increase spending by $947 million, or 3.6 percent, from the current fiscal year. He also proposed a new assessment on electric bills to fund alternative energy sources such as wind power, a measure that would cost the average household $5.40 annually, Ardo said.

New Taxes

The state’s House of Representatives, controlled by Democrats, approved a budget bill in May. Republicans are “sincere about finishing a budget with no tax increases, no new taxes this or next fiscal year, no accounting gimmicks, and no excessive spending,” Senate President Pro Tempore Joe Scarnati, a Republican from Wayne, said in a July 3 statement.

In addition to the energy fee and arena funding, unresolved issues include a $500 million economic development plan and Rendell’s proposal to institute tax cuts for movie studios filming in Pennsylvania, said Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi, a Republican from suburban Philadelphia.

Arneson said Republicans also oppose the governor’s proposal to borrow against toll increases on the Pennsylvania Turnpike and extend tolls to Interstate 80.

“We are very disappointed and appalled by the governor’s decision to continue using state workers as pawns in a game,” Scarnati said following Rendell’s remarks. “We are going to continue in good faith to work on this budget.”

Deadline Missed

A state budget hasn’t been passed on time in the capital of Harrisburg since Rendell took over in 2003 from Republican Governor Mark Schweiker.

Rendell, 63, began a second term in January, after easily defeating former Pittsburgh Steelers wide receiver Lynn Swann, a Republican and first-time candidate, to maintain Democrat control of the nation’s sixth most-populous state.

Prior to his first election as governor, Rendell served as general chair of the Democratic National Committee in 2000. He also served as mayor of Philadelphia for two terms, as well as the city’s district attorney.

Pennsylvania’s general obligation bonds are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s, both the third-highest investment grade. The state’s economy continues to rebound, its population is at an all-time high of 12.4 million, and the unemployment rate has steadily decreased since 2002, S&P said in a May report.

By Terrence Dopp

Bloomberg

9 July 2007