Pennsylvania Gov. Edward G. Rendell yesterday introduced a $28.3 billion general fund budget for fiscal 2009 that included a call for tax rebates to stimulate the economy and two proposals from last year that include bond funding. He also proposed a capital budget totaling $1.65 billion.

The proposed $28.3 billion general fund budget is an increase of 4.2% over fiscal 2008, and reduces spending by 2.1% in all areas of the budget other than education, public welfare, corrections and probation, and parole. Rendell proposed an increase of $291.3 million, or nearly 6% more from last year, in funding for education.

Rendell also proposed immediate enactment of "Protecting Our Progress" tax rebates, a one-time rebate of up to $400 per household that would be paid to more than 475,000 of the commonwealth's lower-income working families. The rebates would come from the state's rainy-day fund and be repaid to the fund at the end of the current fiscal 2008 year, ending June 30.

The general fund budget also has about $900 million for general obligation debt service costs, which includes debt service for all bonds Pennsylvania has issued to date, as well as debt service estimates for bonds it will likely issue going forward.

The proposed $1.65 billion capital budget includes funding for a variety of projects, including transportation, education, and projects for the environment. The capital budget essentially is a request for funding for capital projects for future years, according to Rick Dreher, director of the Bureau of Revenue, Cash Flow and Debt in the office of Budget and Administration.

First the projects have to be itemized and then approved by the state legislature. Once approved, Rendell would be able to pick which projects would get funding and the budget office would help determine what amount is needed for each project going forward. The process of the capital budget "keeps the pipeline of projects ready to go for future years," Dreher said.

Dreher noted that it's really the Capital Debt Act in Pennsylvania that shows what amount of bonds will actually be issued in any given year. The state legislature votes separately on the general fund budget, the capital budget, and the Capital Debt Act.

For fiscal 2009, Rendell has proposed issuing about $1.05 billion of GO debt. This is up from fiscal 2008's approved debt issuance of $888 million. Pennsylvania issued about $580 million of that debt in December, and it plans to issue about $300 million more in May, Dreher said.

The $1.05 billion of debt Pennsylvania plans to issue in fiscal 2009 includes $392 million for buildings and structures, $180 million for redevelopment assistance, and $165 million for transportation assistance, with about $125 million of that going to mass transit and the rest going to aviation and rail freight.

Additionally, about $200 million of the Capital Debt Act amount for fiscal 2009 is for bridge projects incorporated into Rendell's proposed "Rebuilding Pennsylvania" initiative.

Rendell has proposed repairing the commonwealth's infrastructure, and has proposed spending $200 million of GO bonds a year for the next 10 years to accelerate Pennsylvania's bridge repair program. This represents a departure from Pennsylvania's usual pay-as-you-go funding over the last 30 years for such infrastructure improvements, Dreher said, noting it is an attempt to accelerate the repair projects because Pennsylvania has thousands of structurally deficient bridges.

In addition to his new Rebuilding Pennsylvania proposal, two initiatives that Rendell proposed last year will be on the table again this legislative year. Rendell's Energy Independence proposal includes an $850 million Energy Independence fund, funded by revenue bonds, to invest in new technologies, businesses, and products that either reduce energy use or produce clean, renewable energy.

And for the third year in a row, Rendell has proposed the enactment of the Jonas Salk Legacy Fund, which would help foster research in biotechnology, pharmaceuticals, and medical devices. Under the proposal, the commonwealth would use part of the money it receives annually under the 1998 tobacco Master Settlement Agreement, leveraging about $35 million to $40 million of its settlement, to back a $500 million tobacco bond issue.

Rendell noted in his address that while Pennsylvania is not facing a deficit like many other states - in fact, the commonwealth's general fund revenues were $199.4 million over its estimate at the end of January - Rendell noted that Pennsylvania and the nation may be facing uncertain economic times. q

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