Calling for Pennsylvania Senate Republicans to "get real," Democratic Gov. Edward Rendell yesterday said he is looking into short-term actions to keep the state government operating and will announce details of those options tomorrow as lawmakers continue their disagreement over the fiscal 2010 budget.

Meanwhile, state officials are considering issuing $500 million to $1 billion or more of tax anticipation notes in the fall or winter to help with Pennsylvania's cash flow as the state ended fiscal 2009 on June 30 with a more than $3 billion deficit, according to Rick Dreher, director of the bureau of revenue, cash flow and debt in the Budget and Administration Office. The state last sold Tans in 1998, he said.

"The erosion caused by the recession and the national economy has adversely impacted our cash reserves," Dreher said. "We had accumulated significant cash operating reserves over the past 10 years just because of the nature of when commonwealth revenues come in and when expenditures are made. We have not been in a position to need to borrow on a short-term basis for operating for really the last 10 years, but just running a $3 billion revenue shortfall in the recently completed fiscal year has basically eroded our operating cash flow reserves."

If the final budget incorporates new or additional revenue that the state can tap into immediately, officials would issue the Trans in the winter. Conversely, if the approved budget does not include tax increases, the state would need to sell the short-term notes as early as September.

The nature of the budget will also affect the deal size as new or additional tax receipts would result in a smaller borrowing transaction, while a spending plan without tax hikes would beget a larger note sale, Dreher said.

Pennsylvania has been running without a fiscal 2010 budget since July 1. The governor said a temporary initiative would allow for state employees to receive pay and enable the state to provide essential services to its citizens.

Rendell did not detail what short-term options he is considering but said he will announce his decision on Wednesday. One option would be to allow the state a stop-gap spending authority.

"I've asked the staff to present me with options for getting the government back to work," Rendell said during a press conference. "And I hope to have a decision made on that in the middle of the week."

Lawmakers and the administration met over the weekend in an attempt to unravel the budget impasse, but the stalemate continues. The governor proposes roughly $3 billion in cuts along with a three-year hike in personal income taxes that would raise it to 3.57% from 3.07%.

Senate Republicans, who control the upper chamber, favor cutting the budget even further to balance spending with recurring revenue and believe increasing the personal income tax by 16% would strain families in light of the state's 8.3% unemployment rate.

Still, the governor and Democratic legislators believe the state must raise additional revenue somehow to help support necessary programs.

"It is time for them to face the facts," Rendell said. "It is time for them to be willing to absorb some pain because if they don't, we're never getting out of here."

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