How the Pa. budget deal was sealed

Fumo helped break a deadlock over tax credits for moviemakers.

Posted: July 11, 2007

HARRISBURG - State Sen. Vincent J. Fumo bounded down a Capitol hallway late Monday night, fresh from a news conference during which Gov. Rendell praised him as the key envoy who made budget peace.

"You folded like a cheap suit," Fumo joked when he ran into his friend and hunting buddy, Sen. Gibson Armstrong (R., Lancaster), in the rotunda. Fumo grabbed Armstrong, one of the GOP negotiators, in a bear hug and they laughed.

Fumo (D., Phila.) was referring to what he said was the final sticking point in protracted budget negotiations: a surprise Rendell administration proposal to grant tax credits to filmmakers.

Pressure was mounting as 24,000 state workers had been furloughed, forcing a partial government shutdown.

To Republicans, the tax break was an exasperating example of what they call "issue creep" - Rendell's constantly changing priorities and growing list of items he had to have in order to agree to the $27.4 billion budget.

"We tried to negotiate in good conscience, and then another thing would pop up as a deal-breaker," Armstrong said, discussing the nine-day impasse in an interview yesterday. "The film tax credit was the straw that broke the camel's back."

In the end, the sides agreed to limit the tax break to $75 million a year; Republicans wanted a third as much, while Rendell sought no limit at all.

Yesterday, as state government reopened, politicos tried to figure out who won the budget standoff, who lost, and who blinked first.

"We all blinked a little bit," Rendell said. "Unless there is mutual blinking, there is no budget and no legislation that comes out of here."

Rendell's priorities, as set out in his spending plan unveiled in February, were long and broad. Many were tossed off the negotiating table. He dropped his push for a sales-tax hike as a way to provide property-tax relief. Gone, too, were his ideas to tax oil-company profits and to lease the Pennsylvania Turnpike to private investors.

Still, he was able to claim victory on many fronts. He got more than $900 million annually in new highway and mass-transit funding, several health-care-related initiatives, increased education funding, and a deal to consider energy policies in a special session.

Republicans say they held down the rate at which spending is growing and killed seven new taxes the governor wanted when he unveiled his budget in February.

All of this will still need to get final approval in the General Assembly. It was not until 9 p.m. Monday - after a meeting with Rendell in the governor's Capitol office - that the governor and Senate Republicans finally came to terms, said Senate Majority Leader Dominic Pileggi (R., Delaware).

"Our goals were to resist the proposals of the administration to enact seven new taxes and to reduce the rate of growth in state spending," Pileggi said. "We achieved those goals."

One of the last things on the table, Pileggi said, was a discussion on what parts of the energy plan Senate Republicans could agree on now and what they could sign off on later in the fall session.

Getting that framework, he said, "was, to me, the turning point toward a resolution."

Rendell's energy fund was to be financed through a surcharge on electric bills - $5.40 a year for the average residential customer - and the GOP saw it as a new tax.

The sides are now studying alternative ways to pay for the $750 million program for conservation and to expand the use of alternative energy. Those objectives will become the centerpiece of a special session on energy to start in September.

Both sides got something to savor, said Bill Patton, spokesman for House Speaker Dennis O'Brien (R., Phila.).

"For two weeks, they flailed away at the pinata before deciding to rip it open together and each share in the candy," said Patton.

Throughout the past two weeks, negotiators alternately reported progress and deadlock, hopefulness and pessimism.

On Friday, it seemed the two sides would be able to get together, but a meeting about 11 p.m. Saturday involving Republican and Democratic leaders and Rendell aides "blew up," said State Rep. Dwight Evans (D., Phila.), chairman of the House Appropriations Committee.

The Democrats walked out, he said.

"The Republicans said they were not willing to talk about any other issues except the budget," Evans said. "This was something different from what I've been used to, where you don't get everything you want. It was like they thought they were in charge of all the branches of government."

Then the furloughs turned up the pressure.

"One thing this process doesn't like is outside attention - and 24,000 people on the street focused attention in a big way," Evans said. "I think that was the real turning point. It forced both sides to face up to reality."

Fumo was brought in by Rendell's staff in the midst of the furloughs to break the stalemate. He said he drew on decades of negotiating budgets and his cordial relationships with Senate Republicans and with the governor to seal the deal - plus the freedom to tell Rendell exactly what he thought.

"I said, 'Eddie, this is it. You got to take this deal,' " Fumo said.

Budget at a Glance

Highlights of the budget package, which still must be approved by the General Assembly:

2007-08 budget: The $27.4 billion budget would boost spending by 3.3 percent.

Transportation: New money for highways and mass transit would increase next year by $750 million, rising to $900 million in fiscal 2009-10. It would grow by 2.5 percent a year after that. The plan relies on borrowing by the Pennsylvania Turnpike Commission until a 25 percent turnpike toll increase in 2009 and new I-80 tolls pick up the burden. Turnpike tolls would rise by 3 percent annually after 2009.

Health-care costs: Smoking would be banned in most indoor workplaces and public spaces. Health-care facilities would be encouraged to reduce infections contracted by patients. The scope of duties that can be performed by some medical professionals would be expanded.

Energy: A special legislative session beginning Sept. 17 would focus on promoting alternative energy and conservation.

Slots funding: Lawmakers would authorize the release of money for civic-development projects that represent 5 percent of the revenue from slots gambling. The bill includes $880 million to expand the Convention Center.

Biomedical research: The Senate would vote by Nov. 1 on Rendell's proposed Jonas Salk Legacy Fund to provide grants for biomedical research and laboratory equipment. The state would borrow $500 million against revenues from Pennsylvania's portion of the national tobacco settlement.

Environmental cleanups: Cleanups of hazardous sites would be guaranteed an additional $3.3 million per month from the state's realty transfer tax. The new funding for the Hazardous Sites Cleanup Fund would be diverted from a fund that matches money from governments, civic institutions and nonprofits for land preservation and other civic purposes.

SOURCE: Associated Press

Contact staff writer Thomas Fitzgerald at 215-854-2718 or

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