Pennsylvania shuts services amid budget impasse

PHILADELPHIA (Reuters) - Pennsylvania idled about 25,000 state workers and shut down noncritical services early on Monday after Republican lawmakers and Democratic Gov. Ed Rendell failed to agree on measures he set as a precondition for signing a budget for the new fiscal year.

Rendell said the two sides were close to agreement on "three or four" items, but not close enough to allow him to call off the furlough of nonessential employees.

He said he was hopeful the remaining obstacles would be overcome within 24 hours.

"I sincerely hope that this will be a one-day furlough, and I have reason for optimism," Rendell said at a news conference late on Sunday.

The shutdown idled or restricted driver licensing, state parks, museums, road maintenance and a range of other services.

The state's five casinos did not close, after the Commonwealth Court issued a temporary restraining order keeping them open. Closing the casinos would cost the state some $1.7 million a day in lost revenue, state officials said.

State Republican lawmakers have balked at Rendell's plan to impose an electricity surcharge on residents and businesses to pay for energy-saving plans, including household appliance rebates and solar power grants, as part of a wide-ranging $850 million program introduced in February.

Rendell has insisted lawmakers approve the energy plan, a program to boost transportation funding and other non-budget items before he would sign off on the $27 billion 2007-2008 budget, which has not been agreed upon one week into the new fiscal year.

The governor declined to go into detail about the measures that had prevented agreement, saying such a disclosure might jeopardize a final pact. But he said the energy package was among the sticking points.

"The energy package is one of three or four issues that we made tremendous progress on but we are not at closure yet," Rendell said. "We are a lot closer to resolving the energy issue than we were yesterday."

Rendell has said Pennsylvania is legally unable to employ the idled workers unless it has the authority to pay them.

House Republican leader Sam Smith said Rendell is "misguided" in arguing that he doesn't have the legal authority to keep the non-essential employees at work. "I think the governor is using the state employees as a negotiating tool," Smith said in an interview.

Smith said he too was optimistic that an agreement to allow the budget to pass the legislature was "reasonably close."

The proposed energy surcharge would be 45 cents a month for householders, $3 a month for the average business, and $74 a month for a typical industrial user.