Rendell introduces budget addition

Yesterday in Harrisburg, Governor Ed Rendell unveiled the second part of his state budget proposal, "Plan for a New Pennsylvania."

The $3 billion budget plan proposes a 34 percent rise in Pennsylvania's income tax, the first increase in 11 years. The tax hike would bring the state's flat rate from 2.8 percent to an unprecedented 3.75 percent.

To compensate for the historic hike in income tax rates, the governor also proposed a $1.5 billion cut in property taxes, including those to 500 local school districts, with the exception of Philadelphia.

"In Philadelphia, property taxes will not go down," Rendell said in his address to the state legislature. "They will not go down because we have decided to use the state resources to cut the long-reviled city wage tax that has inhibited growth in our largest city for far too long."

Cuts in the wage tax amount to a $130 million reduction, bringing it down to 3.89 percent for residents of Philadelphia and 3.38 percent for Pennsylvanians who commute and work in Philadelphia.

Rendell spokesman Tom Hickey said Philadelphia will also receive $912 million next year for the school district, according to the proposed budget. Based on these numbers, the state would fund 50 percent of public school education, an increase over the 35 percent of funding it currently provides.

Rendell's proposed budget also includes an increase of 2.5 percent to every school district in the state as a basic education subsidy. Additionally, a number of educational programs and initiatives will go toward schools statewide, including a $515 million student achievement fund.

The full-day kindergarten initiative, previously implemented by Rendell when he was mayor of Philadelphia, will now be a statewide program serving as another aspect of the education element in his proposal.

"I applaud Governor Rendell for his vision, passion and courage in honoring his commitment to take action to rescue the economic fortunes of our commonwealth," Mayor John Street said in a written statement. "The tax reform, education and economic development proposals contained in the budget plan will help our city and region be more competitive and provide dramatic new opportunities for all the citizens of Pennsylvania.

"Today, the governor proposed that the citizens of our region be the recipients of significant, additional reductions in the wage tax burden -- one of the biggest impediments to our ability to attract new workers and new businesses to our city," Street added. "The Rendell proposal will allow us to accelerate the rate of wage tax reduction in our Five-Year Plan, allowing taxpayers to see a total reduction of nearly 25 percent in our wage tax by 2008."

One of the budget proposals that will affect higher education funding is the Keystone Innovation Zone program -- an initiative providing tax incentives to start new business enterprises.

"This program will help to reap the benefits for being close to those institutions of learning and also reap the benefits of Pennsylvania students," Hickey said. "It's a tax break, basically."

Other aspects of the budget plan include legalizing slot machines at race tracks, new taxes on telephone service and closing business tax loopholes.

"All together, this kind of economic stimulus enhances our ability to attract new residents, create new jobs and make Philadelphia more competitive," Street said of the full plan in his statement.

Rendell delivered the first part of his budget proposal on March 4, a widely acknowledged bare-bones budget introducing a series of slashing cuts.

Ignoring Rendell's pleas to wait until the second part of his budget proposal, the Republican-controlled House passed the minimalist budget March 7 -- a mere 48 hours later. It was soon after passed by the state Senate as well.

Rendell, in an attempt to regain control of the budget proposal, signed the plan on March 20 -- but not before cutting $4 billion from basic education funding, effectively forcing the Republican-controlled legislature to consider the second part of his budget proposal for a new Pennsylvania.

The state legislature will have to rule on the second half of Rendell's budget plan before the fiscal year ends on June 30.

According to Hickey, "Everybody's belief is that the governor's plan will be brought forth for open and public debate."

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