Pennsylvania lawmakers reach budget accord

HARRISBURG, Penn. (Reuters) - State legislators reached a tentative agreement on Friday on a fiscal 2010 budget, ending a deadlock that left the state without a full spending plan more than two months into the new fiscal year.

The $27.945 billion plan includes no broad-based tax increases, as originally proposed by Democratic Governor Ed Rendell and opposed by Republican lawmakers.

But it provides a $300 million increase in education funding, meeting Rendell's demand of no further cuts in education spending and for at least $1.1 billion in recurring revenue.

The plan assumes $200 million in the current year from the addition of table games in casinos; $171 million from cigarette taxes, and $100 million in increased leases by energy companies drilling for natural gas in the Marcellus Shale formation.

Legislative leaders said the plan was the result of compromise by both sides.

"This is not the budget we would have written if our budget had total control, but it is time to resolve our differences and come together on a final budget," Senate Republican majority leader Dominic Pileggi said.

"This budget is far from perfect," said House Speaker Keith McCall. "But Democrats and Republicans alike are coming together in order to end the pain that hundreds of thousands of people are feeling."

Most state spending, including help to school districts, has been halted since the July 1 start of the fiscal year because of the budget deadlock. Rendell on August 5 signed an $11 billion stopgap budget that allowed state employees to be paid, but halted most other spending, totaling $12.9 billion.

The agreement uses spending cuts to help close an unprecedented $3.5 billion deficit, and lays the foundation for sustainable state finances. Lawmakers said there were not enough votes to raise taxes to fill the $3.5 billion void.

"We are comfortable that next year we will not be facing a deficit," said Senator Robert Mellow, leader of the minority Democrats in the upper house.

But the deal includes a series of one-time revenue sources for the fiscal 2010 general fund including $755 million from the rainy day fund; $708 million from a surplus in the health care provider retention account, and $211 million by accelerating the due date for sales tax collections.

Rep. Dwight Evans, chairman of the House Appropriations Committee, said a bipartisan conference committee would resume work as early as Sunday on budget legislation.

(Editing by Daniel Trotta and James Dalgleish)