Projected Pa. budget gap grows to $3.2 billion

House Appropriations Committee Chairman Dwight Evans (D., Phila.) says continued slumping state revenue figures have bumped this year's projected deficit up to $3.2 billion, $1 billion more than Gov. Rendell predicted three months ago, and have raised the prospect of an increase in the personal-income tax.

"In order to address the financial crisis we are in, clearly we need to raise revenue," Evans' spokeswoman, Johnna Pro, said yesterday. "We've talked about taxes being part of the mix; practically speaking, the [personal income tax] makes the most sense."

She said even a modest general tax increase would generate a substantial amount of guaranteed funding and that Rendell's limited-tax proposals on natural-gas extraction and tobacco sales would yield much less predictable revenue.

Rendell's proposed new taxes would produce an estimated $200 million. An increase in the 3.07 percent state income tax of 3/10 of a percentage point, for instance, would bring in $1 billion, Pro said.

No specific income-tax proposal is under consideration, she said.

House Majority Leader Rep. Todd Eachus (D., Luzerne) said yesterday that he was willing to look at an income-tax hike as one of the options on the table.

Rendell has maintained that the state could squeak by with spending cuts, federal economic-stimulus money, taking money from the Rainy Day Fund and his proposed limited taxes. He said he would consider an income-tax hike only if all other options failed.

"The governor has said all along that a broad-based tax increase is the option of last resort," Rendell spokesman Chuck Ardo said.

With one month to go before the budget deadline, negotiations in the Capitol are set to begin again next week after a primary-election break. House and Senate budget negotiators will have to grapple with more bad news as preliminary reports for May show revenue coming in $300 million below estimates, according to Senate Republican staff. The final monthly figure is to be released next week.

Rendell's $29 billion budget proposal has so far met with resistance from the Republican-led Senate, which approved its own no-tax budget earlier this month.

This week Rendell promised "hundreds of millions" in additional spending cuts on top of the $250 million he already had made to his spending plan, details of which will be released next week, Ardo said.

"The governor is a realist," he said. "He understands revenue shortfalls require further cuts."

In their budget proposal, Senate Republicans cut deeper, slashing more than $1 billion from Rendell's budget by reducing funding for programs across the board.

Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi (R., Delaware), praised the governor's decision to make deeper cuts as "a needed step forward that should help budget discussions."

He said the Republican budget was "a workable starting point, but Democrats and Gov. Rendell made it clear they don't like that."

Arneson challenged House Democrats to put the income-tax hike details on the table if they were "serious about it."