Governor Rendell Proposes Temporary Tax Increase; Cutting Billions in State Spending...

Governor Rendell Proposes Temporary Tax Increase; Cutting Billions in State
Spending to Balance $3.2 Billion Budget Deficit

Governor: 'There are No Shortcuts Out of This Crisis'

HARRISBURG, Pa., June 16 /PRNewswire-USNewswire/ -- Facing a national
recession and a growing state budget deficit that imperils Pennsylvania's
long-range economic well-being, Governor Edward G. Rendell today proposed a
mix of remedies, including a temporary increase of one-half percent in the
state's personal income tax to 3.57 percent. The law would require the tax to
return to 3.07 percent after three years.

The temporary increase proposed by the Governor would raise approximately $1.5
billion per year in new revenue. A temporary tax has been implemented
successfully to address a fiscal crisis in Pennsylvania on three prior
occasions.

Pennsylvania's current personal income tax, or PIT, rate of 3.07 percent is
the second lowest in the nation among the 41 states that impose one. During
the three-year period that the PIT would be at 3.57 percent, Pennsylvania
would still have the third lowest such tax in America.

Rejecting Republican calls to balance the budget solely with deep and extreme
cuts that would damage the state's education, economic development and job
training programs, Governor Rendell said the proposed PIT increase, coupled
with hundreds of budget reductions that he has already implemented, are
necessary to address a projected $3.2 billion budget shortfall. Failure to
raise additional revenue at this critical time would risk making
Pennsylvania's overall economy worse.

"Wall Street's greed and need for instant gratification created a global
economic crisis which led to giant budget deficits in almost every state in
America. Our families did not create this mess yet we are the ones who must
clean it up. But, we shouldn't balance the budget by eliminating more job
opportunities or by shortchanging our children's future with drastic cuts to
public education," said Governor Rendell.

"I proposed eliminating hundreds of line items from our budget and made
billions of dollars of cuts to important programs that I have always
supported. I've previously proposed putting a levy on smokeless tobacco and
cigars, adding 10 cents to the cost of a pack of cigarettes, and asking energy
companies who extract natural gas from our state to pay their fair share. I
also proposed using hundreds of millions from our Rainy Day Fund to help
bridge the gap."

"Still, even with all of these proposals added together, we are more than one
billion dollars short of balancing our budget by the end of June," Governor
Rendell added.

This morning, Governor Rendell visited the new headquarters of Westinghouse
near Pittsburgh, and was scheduled to visit Erie, Scranton/Wilkes-Barre and
Montgomery County later in the day to highlight critical economic development
programs that created and retained tens of thousands of jobs in the state over
the past several years. While thanking business leaders for locating or
expanding in Pennsylvania, the Governor pointed out that the very same
economic incentives offered to Westinghouse and other employers would not be
available under the Senate Republican budget proposal.

At the same time, he said, the business community must do its part to help out
in the crisis, and he renewed his call for the General Assembly to approve his
proposals to raise revenue from the tobacco, insurance, energy and
pharmaceutical industries.

"I am not asking our citizens to carry the burden of this crisis alone.
Companies doing business in Pennsylvania must pay their fair share," the
Governor said.

He said he was confident that the General Assembly would live up to the
commitment that he is asking for in statute to eliminate the tax increase
after three years, as it has done in the past. On three occasions -- in 1983
and 1991 on the PIT, and in 1991 on the Corporate Net Income tax -- the
planned reductions took effect as scheduled. The other time an automatic
reduction was enacted with a tax increase -- on the CNI in 1977 -- the
legislature delayed the scheduled rollback for several years but ultimately
passed a bill that lowered the CNI to its 1977 level again.

Governor Rendell addressed the alternatives to his tax increase proposal --
which will cost the average Pennsylvania family less than $5 a week -- and
found them to be far worse.

"Making deep cuts in state spending on schools would most likely cause
property taxes to rise and the quality of education to fall. Eliminating our
job training programs and other efforts to attract and grow businesses is
likely to cause more Pennsylvanians to lose their jobs, lengthening the
recession here while creating greater demand for government services.

"Letting state prisoners out of jail early -- as some other states have done
-- could cause rising crime in communities across the state. Ending vital
programs for sick children and adults with disabilities would simply increase
unfunded costs to hospitals and nursing homes, many of which are already near
the brink of financial collapse.

"The simple truth is we have no good choices," said the Governor. "There are
no shortcuts out of this crisis, no magic bullets, no painless path out of
this morass. We can do the easy thing for the moment or the right thing for
Pennsylvania's future. The fairest plan is to spread the pain across the
board, and let our economic recovery begin."

CONTACT:
Chuck Ardo
717-783-1116

SOURCE Pennsylvania Office of the Governor

Chuck Ardo of the Pennsylvania Office of the Governor, +1-717-783-1116