How the $28.2 billion is allocated remains a subject of debate, they said, but Democrats have already trimmed $800 million from the governor’s original $29 billion proposal.

“So far, it’s been all us,” the governor told reporters after a meeting with legislative leaders. “A round of cuts, a round of cuts, a round of cuts.”

He added, “Under $28.2 billion, I don’t see how we can go below that and fulfill our obligations to the people of Pennsylvania. So we’re going to have to talk about it.”

Speaker of the House Keith McCall (D-Carbon) echoed that sentiment.

“It’ll be very difficult to get below that number,” he said.

Senate Republicans have agreed to spend at least $27.8 billion, $300 million more than their original offer of $27.5 billion. Discrepancies between spending for education and economic development are said to account for nearly the entire $400 million gap.

A Senate Republican spokesman said both sides still have room to compromise on the total spend number.

“Talks are ongoing, and we’ll see how things go,” said Erik Arneson, spokesman for Senate Majority Leader Dominic Pileggi (R-Delaware). “I think there’s still room for both sides to move a little in this process.”

Negotiations on Thursday focused on Governor Rendell’s counter to the House Democrats’ $28.2 billion spending plan, which consisted of suggesting different ways to allocate the money. The four caucuses will meet again Thursday afternoon to review the governor’s proposals.

Last year’s budget process saw House Republicans almost unanimously oppose Democratic efforts to approve a budget they said spent too much money. But Minority Leader Sam Smith (R-Jefferson), an active participant during negotiations in 2010 unlike last year, said his caucus is now prepared to help its counterpart approve a budget, as long as spending doesn’t exceed $28.2 billion.

But the GOP leader emphasized his members would still like to see a lower spending number and cautioned that many of them still would not support possible new taxes, such as a levy on natural gas extraction.

The talks came a day after Democrats and Governor Ed Rendell announced they would pursue closed-door negotiations instead of trying to approve a tax package in the House. The latest failed attempt to approve new taxes in the House came Tuesday, after several rank-and-file members voiced dissent about the measure during floor debate.

But Wednesday’s negotiations focused less on possible taxes and more on how much the state can spend in the coming fiscal year. According to House Republican Minority Leader Sam Smith (R-Jefferson), the leaders agreed Pennsylvania will have $27.5 billion to allocate if Congress approves $850 million in FMAP funding, and about $26.65 billion if it doesn’t.

There was little discussion of taxes to increase the available revenue, said the GOP leader.

“Just straight, what does our current revenue under law allow us to do?” Smith said.

Governor Rendell’s budget proposed $29 billion in spending, and although Democrats concede that plummeting tax revenues through the current fiscal year have made that a difficult number to reach, they’re generally thought to support a budget bigger than $28 billion. The state is spending about $27.8 billion in its current budget.

“There’s still going to be give and take on the spend number,” said Drew Crompton, chief of staff to Senate President Pro Temp Joe Scarnati (R-Jefferson).

The leaders also discussed possible FMAP funding, a measure Congress is considering this week. Lawmakers are “confident but not convinced” the funding assistance will gain approval, Crompton said, and even if it does, he said some leaders raised questions over how it would be implemented.

The talks included mapping out contingency plans if the state doesn’t receive the $850 million, Rep. Smith and Crompton said.

Tuesday’s non-vote on the tax package raised questions over whether Democrats have enough votes to approve new taxes, even if that’s what the caucus’ leadership wants. That could give Senate Republicans, who have said they would prefer a budget that doesn’t include any new taxes, an advantage at during budget negotiations.

“From a neutral observer, I think it’s fair to say they’re having problems passing taxes,” Crompton said.

But Brett Marcy, spokesman for House Majority Leader Todd Eachus (D-Luzerne), said the caucus remains committed to balancing the budget, in part, by raising new revenue. Some members Tuesday were upset by the details of the tax package, such as percentage of a natural gas severance tax earmarked for local use, but the caucus is otherwise generally supportive of the taxes, Marcy said.

Negotiators now have just two weeks before the budget deadline, and memories of last year’s 101-day delay loom in the minds of many Capitol observers. Rep. Smith, however, said he doesn’t think this year’s talks will last nearly as long as last year’s.

“I sense it is different,” said the GOP leader. “The looming ugliness of last year, that memory isn’t that far in the past. I think that creates a lot more impetus to get it done.”

Legislative leaders were set to meet with the governor at 4 p.m. Wednesday, but one Republican aide said it’s questionable whether those talks will happen.

The federal government’s rejection of Pennsylvania’s Interstate 80 tolling application Tuesday left state government officials scrambling to come up with alternatives to fund the state’s transportation infrastructure, which could be left with a nearly $500 million gap in funding if a solution isn’t found by the new fiscal year.

Although the rejection was celebrated by some lawmakers, particularly those who represent areas alongside or near the highway, all of them agreed they still must find a way to fund the state’s decaying network roads, bridges and mass transit systems.

Their efforts to find common ground will likely come during a special legislative session called for Tuesday by Governor Ed Rendell, who said the state will immediately lose about $450 million in transportation funding when the new fiscal year starts in June if an a new solution isn’t in place. The loss of that money, among other things, would mean 300 fewer miles of roads and 100 fewer bridges repaired annually, according to the state’s chief executive.

The state’s largest mass transit agency, SEPTA, would receive $110 million less, he said.

“We simply cannot wait to replace these funds,” he said during an afternoon press conference.

Although he said he has to confer with legislative leaders before setting a firm date for the session, he said it would come soon.

The governor’s call for a special session was well-received by legislative leaders.

“We applaud Governor Rendell for his call for a Special Session on Transportation to carefully examine all possible solutions to the crisis, and we pledge to work in a bipartisan manner and give all reasonable ideas a fair hearing,” said Keith McCall (D-Carbon), Speaker of the House.

His Republican counterpart, House GOP leader Sam Smith (R-Jefferson), said his caucus would participate.

“It provides an opportunity to focus on the issue and that is definitely needed now,” he said.

Finding ways to raise the nearly half-a-billion in revenue during the session, however, could be easier said than done. Democratic leaders have said in recent months that the reason they sought to toll I-80 was because their original plan, raising the gas tax, received almost no support from lawmakers. They made public pleas to the federal government to approve the tolls because they said other ways funding mechanisms weren’t politically feasible.

“Plan A was to raise the gas tax,” said Joe Markosek (D-Allegheny), chairman of the House Transportation Committee, in an interview Tuesday. “And there was no support for that. We listened, and came up with what I think was an innovative way to capture a lot of out-of-state revenue that we could use for our own use in Pennsylvania. Without that we’re back to plan A, which I don’t think people are going to be very happy about.”

It could be particularly difficult to raise the money this year, with an election in the fall, when any such move by lawmakers could be tantamount to a tax hike in the eyes of a political opponent.

But officials, including the governor, still had an array of early suggestions for ways to raise enough money.

Governor Rendell suggested the state engage in public-private partnerships for the extra money, similar to his original plan in 2007 to lease the turnpike to raise the funds. He also suggested taxing oil companies’ gross profits but emphasizing that he supported any possible solutions to the funding gap.

“I come in with no preconceived notions; no one solution,” he said. “I’ll be flexible.”

Republicans voiced tentative support for some public-private partnerships as well shifting the cost burden onto local sources.

“House Republicans have long advocated long-term funding solutions, which include public-private partnerships, cost-cutting measures, ensuring adequate local funding; requiring transit riders to pay their fair share, and considering competitive contracting to help contain costs into the future,” said Rep. Smith.

Rep. Markosek also suggested the state might need to shut down some of its deficient roads and bridges to cuts costs, although he could not name which of them might be the first in line.

This week, John Micek of the Morning Call, Alex Roarty of PLS, and Scott Detrow of PA Public Radio delve into a suddenly heating up Democratic gubernatorial primary. Dan Onorato hit the air last week: How will the rest of the field respond?

The state’s revenue shortfall continues to grow, raising questions over whether this budget season will again wreck havoc. Will Democrats start to push a tax increase?

And finally, Gov. Ed Rendell receives a letter asking him to resign, sparking security concerns among some. Should we be worried?

Click here to listen to the podcast.

 ”It’s going to be a busy day, but we think we’re going to get a lot done,” said Bob Caton, spokesman for Keith McCall.

He said the House has no plans to abandon table games legislation, set to come up for a vote on third consideration later today.

Caton also said the House does not plan to suspend the rules to consider bill earlier today.

Legislative leaders and Governor Ed Rendell could be close to striking another budget agreement after the majority parties in each chamber revealed Monday that they support what appear to be nearly identical budget proposals. But they continue to remain divided about the best and fastest way to implement a possible deal, whether through a new bill in the Senate or the legislative Conference Committee.

The Senate Republican proposal, the details of which were sent to reporters Monday evening, includes a spend level of $27.835 billion. It delays phase-out of the Capitol Stock and Franchise, leases additional state land for natural gas drilling, redirects 25 cents of the cigarette tax to the General Fund, and allows table games in casinos, among other smaller proposals.

It does not include taxes on Marcellus shale drilling, tobacco products aside from cigarettes and “little cigars,” small games of chance, or cultural events.

The Senate plan’s provisions are the same as what House Democratic leadership described to reporters during an afternoon press conference. The leaders, who met with their caucus earlier in the day, said their members support a plan that spends $27.834 billion and does not include any taxes on small games of chance, tobacco products, natural gas extraction, or cultural events.

Speaker of the House Keith McCall (D-Carbon) said the Democratic plan includes a gross receipts tax on managed care, which his caucus devised.

The previous budget deal called for $27.945 billion in spending, as opposed to the $27.834 billion Democrats say they now support. Rep. McCall also said the roughly $110 million reduction came from cuts to the Department of Public Welfare.

House Democratic leadership disagreed whether a budget deal was in place but no one denied one was close.

Speaker McCall declined to say his caucus had reached a deal with Senate Republicans, but House Appropriations Chairman Dwight Evans (D-Philadelphia) said he could say “definitively” that an agreement was in place.

“All of the macro issues have been decided,” Rep. Evans said. “There’s no question on those issues.”

Governor Rendell, who asked legislative leaders to meet at his Harrisburg residence at 8 a.m. Tuesday to discuss the budget, said deciding how to approve a budget was the biggest obstacle.

“I think it’s very close to being a deal,” the governor said during a press conference. “… I think the only thing that’s really left to determine is what process we follow”

Erik Arneson, spokesman for the Senate Republican caucus, was more cautious about whether a deal existed.

“We have heard the word ‘agreement’ from the House Democrats before and everyone saw how that turned out,” he said. “What they do is much more important than what they say.”

Senate Republicans said during a press conference earlier Monday that they wanted to continue the budget process by approving new bills in their own chamber and sending them to the House. Democrats said they want to use the Conference Committee, which they argued would be a much faster process.

Speaker McCall said using the Conference Committee could mean the state has a budget by the end of the week. The Senate method, he said, might take “two, three or four weeks.”

“We want to get it done now,” Rep. McCall said.

Whichever method is used, House Democrats might have an easier time approving the budget bill. House Minority Leader Sam Smith (R-Jefferson) told reporters that the new proposal represents “significant movement” toward a budget plan that has been pushed continually by his caucus. He indicated his members might support it.

The leadership team spoke to reporters a half-hour before the Conference Committee was set to reconvene and possibly approve a spending bill. The two Senate Republican members part of the committee, Appropriations Chairman Jake Corman (R-Centre) and Majority Leader Dominic Pileggi (R-Delaware), said earlier in the day they would not attend the meeting, which has since been postponed to 4 p.m.

Senate Pileggi declined to give details about the proposal until he could discuss it in caucus with his members, saying only its total spending level is below the previously agreed to $27.945 billion. He expects the proposal’s legislative vehicles could be moved out of the Appropriations Committee Monday and approved in the Senate either later that day or Tuesday.

The senator has shared the plan with the governor, who indicated to reporters late Sunday night that he was happy with its contents.

But the majority leader didn’t hesitate to express his frustration with his House Democratic colleagues.

“The Conference Committee has been a very disappointing process,” Senator Pileggi said, “one that has been filled with delay and inefficiency. We don’t want to participate in that sort of delaying action.”

House Democrats broke the budget deal they had struck with Senate Republicans three weeks earlier when rank-and-file members in the caucus balked at the agreement’s tax increases on cultural events and small games of chance. The caucus approved a new proposal that swapped those levies in favor of ones on natural gas extraction and tobacco products.

When word leaked earlier Monday that Senate Republicans would use new legislation to advance their budget, Democrats blasted the idea because they said it would needlessly delay approving a budget by three week.

“I watched a few hours of their debate last night on the gaming bill, and with the speed with which they were handling those issues, it could be three months,” Senator Pileggi said.

He added later, “We are hopeful the House will be able to improve its performance.”

Governor Ed Rendell said Monday he will sign the legislative “three-caucus” $27.945 billion budget deal only if lawmakers increase its spending and include additional revenue streams – two changes legislators have made clear they won’t accept.

The governor’s declaration likely means he will be forced to veto the bill, and on that front the state’s chief executive offered a surprising prediction, at least coming from him: He expects the legislature will override his veto, and he’s not even sure he’ll work to stop it.

“I expect my veto will be overridden,” Governor Rendell told reporters at an afternoon press conference. “I will try to move fast when I veto it so that they can override it the next day and we can get money flowing to non-profits and others that are feeling the pinch.”

He clarified later that he not only expects lawmakers to try and override, he also thinks they will be successful.

Veto overrides require a two-thirds margin in each chamber — 33 votes in the Senate, and 136 in the House.

Despite his objections to the budget, Governor Rendell said he has “mixed feelings” about trying to prevent an override.

“I’m not sure at this stage we’re going to change any minds,” he said.

Lawmakers who crafted the legislative budget deal met with Governor Rendell late Sunday night to try and bring him on board with the agreement. The leaders, including Speaker of the House Keith McCall (D-Carbon) and Senate Majority Leader Dominic Pileggi (R-Delaware), said afterward they thought they could avoid a veto by allocating money differently while not raising the budget’s spend level or adding new taxes.

Governor Rendell made it clear Monday they thought wrong.

“I want to reiterate again, if there’s no change in the revenue estimates, if there is no change in the spend number, I will veto this budget,” he said.

He took issue particularly with lawmakers’ adherence to the $27.945 billion spend number – the governor said he thinks it needs only an additional $70 million.

“If that’s what holds this up eventually, that would be ludicrous,” he said.

Legislative leaders also were trying Sunday to justify the $1.2 billion in recurring revenue they project their budget will raise, a number Governor Rendell called “wildly optimistic.”

Although staffs from the caucuses and the administration continue to meet and discuss the different projections, the governor said he is “enormously skeptical” lawmakers will be able to convince him theirs are right.

“It’s like saying today is Tuesday,” he said. “You can show me all the data you want, but my guess is today is still Monday.”

Speaker McCall and Senator Pileggi said Sunday night they are confident in their projections.

The participants in the legislative budget agreement, including Senate Democrats, have called it a middle ground that, while not perfect, reflects a quality compromise that can end Pennsylvania’s longest ever budget stalemate.
Governor Rendell called it “phony” and a “get-out-of-town” budget.

Worse, he said, it puts the state in a fiscally weak condition to deal with two incoming “economic tsunamis”: the expiration of federal stimulus money and the coming pension crisis.

“Do difficult things now to get us ready to deal with those problems,” he said. “It’s the fiscally responsible thing to do.”

Governor Rendell has an unlikely ally in his fight against the budget deal – GOP House Minority Leader Sam Smith (R-Jefferson). His caucus could be the key to defeating a veto override in the House.

But Steve Miskin, caucus spokesman, said any possible override is too far way right now to talk about.

by Alex Roarty

 

House Democratic and Senate Republican leaders spent nearly two hours Sunday night trying to persuade Governor Ed Rendell to accept to the “three-caucus” budget agreement engineered late last week without his approval, and they told reporters afterward they are hopeful the governor could come on board before the bill reaches his desk.

 

But Democrats and Republicans reiterated they remain committed to the inter-party budget deal, its $27.945 billion spending number, and revenue-raising options despite the governor’s objections.

 

“I’m hopeful that we can get the governor on board,” said Jay Costa (D-Allegheny), Minority Appropriations Chairman. “I think this evening signals that we have an opportunity to do that.”

 

Republican and Democratic legislators said they are willing to compromise on how to allocate some spending in their budget. The governor had previously taken issue with certain reductions in the education spending and said he wanted to make about $55 million more in cuts.

 

But Speaker of the House Keith McCall (D-Carbon), continually peppered with questions by reporters, said any compromise wouldn’t include changing the budget’s total spend number or the way it raised about $1.2 billion in recurring revenue.

 

House Democrats broke from their Democratic governor when they joined with Senate Republicans to craft the budget deal. The unlikely alliance could disintegrate, however, if House Democrats agree to any of Governor Rendell’s demands.

 

Senate Majority Leader Dominic Pileggi (R-Delaware) said the night’s negotiations didn’t give him any reason to doubt the deal remains in place.

 

“We have a firm agreement, and they are honoring that agreement,” he said.

 

The budget negotiations’ next step appears to still be Monday’s 10 a.m. Conference Committee, which House Majority Leader Todd Eachus (D-Luzerne) said is still scheduled. Even if talks with the governor are ongoing, the majority leader indicated legislators will stick to to that time-frame.

 

“We’re trying to shoot for the deadlines,” he said. “We think deadlines are a good thing.”

 

Negotiations were expected to take place between the administration and legislative staffs through the night and into the early morning. Those talks are said to focus on several revenue-increasing projections the governor said are far too optimistic.

 

Speaker McCall said he is confident his budget’s projections are accurate but wants to work with the administration to “see what we come up with.”

 

Still, the lawmakers, Republican and Democratic alike, conceded that getting the governor to agree to the deal would make the budget process much easier. It’s why, they said, they’re focused on reaching a deal with him instead of speculating about whether they could marshal enough votes for an override.

 

“If we can get an agreement on both revenue and the spending that the administration and the other four caucuses can agree on, there will be no veto,” Rep. Eachus said. “And we’re working to avert that.”

 

House Republicans have opposed the budget deal, saying it unnecessarily raises taxes while spending far too much. They find themselves unlikely allies of Governor Rendell, although the two oppose it for opposite reasons.

House Majority Leader Todd Eachus (D-Luzerne) told reporters Friday evening that he has asked his caucus to return to the Capitol early Monday morning to discuss sending Senate Bill 850 to the governor’s desk so the chief executive can blue-line all line-items save basic government operations.

The move would allow the state to pay nearly 80,000 of its employees, who Friday experienced a payless payday because of the budget impasse

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