The Senate Appropriations Committee this week heard estimates the state budget structural deficit for next year could be as high as $3 billion. The Committee invited Budget Secretary Mary Soderberg to discuss the impact of declining state revenues in the face of a worsening national economy.

Senate Appropriations Committee Majority Chair Sen. Gib Armstrong (R-Lancaster) and Sen. Vince Fumo (D-Philadelphia) said the budget shortfall could be from $2.5 billion to as high as $3 billion. Both Senators are due to end their service this year.

Budget Secretary Mary Soderberg did not speculate on what the ultimate shortfall may be, but only acknowledged the $280 million reduction in state revenues so far. She also catalogued the steps the Rendell Administration has taken to reduce costs by $200 million and eliminate or not fill about 2,900 state worker positions.

Secretary Soderberg said she is continuing to work with agencies to cut operating costs by 4.25 percent across the board and freeze state employment. She also noted that recent investments in alternative energy, sewer and water infrastructure and bridge repairs will help spur Pennsylvania's economy.

She said agencies have been instructed to prepare their 2009-2010 budgets with these cuts in mind and if they request any increases in staff, those increases would have to be offset by decreases elsewhere.

Last week Acting Department of Environmental Protection Secretary John Hanger told the House Environmental Resources and Energy Committee that his agency needed 68 more people to handle the workload from increased natural gas drilling.

Other critical environmental programs are also facing a major funding issue next fiscal year as monies from the Growing Greener II bond issue run out and funds to pay the debt service on the Growing Greener II bonds take an increasing bite out of the Environmental Stewardship Fund which had funded the original Growing Greener watershed and mine reclamation programs.

At the same time, Pennsylvania is also facing significant watershed cleanup mandates to reduce nutrients from farms and wastewater plants, not only in the Chesapeake Bay Watershed, but as Total Maximum Daily Load (TMDL) Plans are finished across the state and implemented. (See the PA Fair Share for Clean Water Plan)

In addition to the $750 million Rainy Day Fund that helps cushion budgetary shortfall, there are over $700 million in unused monies now in the MCare medical malpractice insurance fund, since the program has not yet been reauthorized. Some legislators may feel that since doctors across the state have been paying their own insurance bills this entire year, those funds might be better used to balance the budget next year.

As the Senate and House wrapped up their legislative business, Gov. Rendell said at a press conference he was "alarmed" at the prospects of a $3 billion state budget deficit, but wasn't panicking.

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10/10/2008