Rendell Freezes Wages, Cuts Another $128 Million As State Revenues Fall

Gov. Rendell this week announced additional budget cuts and cost-saving measures to help balance the state budget as the national economic downturn continues to affect revenue collections.

These steps were taken in the wake of another state revenue drop in November which has resulted in a total revenue drop of $657 million for the fiscal year so far.

At a press conference, Gov. Rendell expressed a willingness to look for more targeted tax initiatives, like a levy on smokeless tobacco to help fill some of the revenue gaps. He noted he was also looking to tape the state's $750 million Rainy Day Fund and direct $190 million in royalties already received by the Department of Conservation and Natural Resources for leasing drilling rights to natural gas in the Marcellus Shale formation to help balance the budget.

He did not mention the $700 million available in the MCARE medical malpractice insurance subsidy fund available for use since that program has not been reauthorized.

Also mentioned at the press conference was the potential to do some tax structural reforms, like combined income reporting which would require companies to report all their income in Pennsylvania.

At his swearing in ceremony as Lt. Governor, Sen. Scarnati reiterated is opposition to any increases in taxes and fees to help balance the budget. He said tax increases do not bring jobs into Pennsylvania. He applauded Gov. Rendell for taking additional steps to cut state spending.

More than $600 million in environmental funding has been diverted to balance the budget or to fund another environmental program that did not have funding of its own over the last seven years reducing the state's overall commitment to environmental improvement.

"In light of our revenue shortfalls, we already cut 4.25 percent of our spending, instituted a hiring freeze and curtailed out-of-state travel," Gov. Rendell said. "These steps saved $311 million. However, I believe we must take further action and today I am announcing another $128 million in cuts, which will bring the total we have in budgetary reserve to $439 million.

"The detailed list of budget reductions is still being finalized, but the cuts will be broad-based across a multitude of agencies and programs. I expect nearly 400 out of a total of 500 appropriations under my jurisdiction will be reduced.

"If the General Assembly and other independent agencies meet the goal I laid out in September of reducing their spending by 4.25 percent (an additional $36 million), we will have frozen $475 million in state spending this fiscal year.

In addition, Gov. Rendell announced a wage freeze for more than 13,600 non-union employees and directed 51 cabinet and executive officials to donate back, after state and federal taxes, the net amount of a 2.8 percent cost-of-living increase mandated by a 1995 law. The wage freeze will save $14.3 million through the end of this fiscal year.

Senate Republican and House Democratic leaders also recommended turning back the COLA legislative members receive which could mean a savings of less than $1 million over the next year, according to Senate President Pro Tempore Joe Scranati (R-Jefferson). Legislators were also scrambling to suggest more steps to cut spending.

"Today I pledge that I will donate the net amount, after deductions, of the cost-of-living increase back to the Commonwealth. I have directed my cabinet to do the same," the Governor said. "We could not ask our employees to accept a wage freeze at the same time we would be accepting a COLA."

"In addition, I am going to ask the unions to meet with me at the start of the new year to discuss options for reducing costs relating to our unionized employees.

"Everything is on the table for consideration and review. We have to balance our budgetary restraint measures with our obligation to provide quality public services to the citizens of the Commonwealth. We don't have a crystal ball, so we don't know what to expect moving forward," Gov. Rendell said of the current weakness in the economy and the outlook for recovery.

In a letter Wednesday to the 13,600 employees affected by the wage freeze, Gov. Rendell said, "The decision to freeze your salary was a very difficult one. You often make other sacrifices for the betterment of the Commonwealth and those we serve. It is that character which sets you apart as a leader and it is what makes me proud to serve with you as part of this administration. None of that changes the difficult fact that you are giving up an anticipated pay increase to help resolve our fiscal challenges. You have already been part of our efforts which have taken over $1.5 billion out of the cost of operating the government and we have redirected that money into programs that do so many good things for the citizens of the Commonwealth. Thank you for all you do in the name of public service and for the sacrifice you are bearing on behalf of Commonwealth citizens."

Commending Commonwealth employees for their hard work, Gov. Rendell said Pennsylvania is now saving $1.5 billion a year as a result of his efforts to enhance government services while improving efficiency and cutting waste. Among the measures taken:

-- There are nearly 3,000 fewer Commonwealth employees than in January 2003, which saved the Commonwealth approximately $240 million last year;

-- The Commonwealth has saved $272 million by developing smarter purchasing policies;

-- The Commonwealth has reduced the size of the automobile fleet and is keeping vehicles longer, saving approximately $33 million;

-- The Governor's recent directive to halt the purchase of new Commonwealth vehicles will save an estimated $40 million this year alone;

-- The Commonwealth has kept average annual employee health care cost increases to less than 3 percent over the past five years – far below the growth in private health care costs; and

-- Adjustments announced last year to the Retired Employees Health Program will save $94 million a year.

The national economic downturn is affecting most states. During a meeting with President-elect Obama in Philadelphia on Tuesday, the National Governors Association announced that 41 states now face serious budget deficits.

Next week, Gov. Rendell will meet with legislators to outline his plan to finish the 2008-09 fiscal year on June 30 with a balanced budget. In addition, the required mid-fiscal year review of the budget will be held on December 9.

NewsClips: Rendell Whacks $128 Million More From State Budget

Governor Adds To Budget Cuts As Revenues Lag

Fiscal Woes Zap 13,600 State Raises

Rendell Freezes Nonunion State Wages

PA Chopping Block Grows As Deficit Get Bigger

Editorial: Selecting Stimulus Projects, Focus On What's Truly Needed

Editorial: Legislature Can Lead The Way On Budget Cuts

Online Audio: Sen. Jake Corman, Senate R Chair Of Appropriations On Budget Challenges

Links: Rendell Acknowledges Deficit, $600 Million In Environmental Funded Diverted In Last 6 Years