Editorial: Crunch time for budget

Gov. Rendell has to make a better case if he wants Pennsylvanians to accept an income-tax increase.

The state cannot afford to make up shortfalls of about $4 billion over the next two years through spending cuts alone, which is what Senate Republicans propose. The harm to families who need services even more in this recession would be too drastic.

At least 32 other states have already increased taxes and fees, or are planning to do so. Rendell has asked for a 16 percent increase in Pennsylvania's personal income tax, worth about $1.5 billion per year.

The governor said that he arrived at this proposal as a "last resort." But at this point in the estranged budget process, it seems more like a layover on the way to the Poconos than a final destination.

The Democratic-controlled House has not approved a budget. Talks with GOP leaders have gone nowhere fast, largely due to Republicans' unrealistic insistence on no new revenue of any kind.

Do Republican legislators want to cut funding for state parks, for example, so they can preserve Pennsylvania's "proud" status as the only state in the nation without a tax on smokeless tobacco?

As tax collections decline, Rendell is making reductions to the $29 billion budget he proposed in February. He asked for cuts from his cabinet agencies yesterday that would bring the 2009-10 budget down to about $28.4 billion. This year's enacted budget was $28.2 billion.

But taxpayers expect even more belt-tightening from Harrisburg in this economic crisis. Many families are being forced to get by on smaller paychecks. The state is receiving extra federal aid over the next two years to help balance the budget. Rendell's proposed level of overall spending still doesn't reflect the crunch facing taxpayers.

Conversely, the Senate Republicans' $27.3 billion budget would impose cuts that go too far. Their plan would decimate the safety net of hospitals, nursing homes, and other services for vulnerable residents. And the GOP would be forced to cut even deeper than their budget suggests, in part because tax collections dropped since they approved their plan.

The fair way to balance the books is with cuts that spare the most vulnerable residents as much as possible, combined with tax increases that do the least harm to working families.

The GOP should accept Rendell's wise proposal to suspend the planned phase-out of the capital stock and franchise tax, which would bring in a about $1.5 billion over the next three years. It's not a tax increase; instead, it would postpone the date for eliminating the business tax altogether.

Combined with his proposals for tax increases on cigarettes and natural gas production, these measures would help to reduce the level of service cuts.

The deadline for approving a new state budget is June 30, which appears to be a faint hope. The longer the partisan posturing continues, the more harm this impasse will inflict on residents and state employees.