In the 2008-2009 budget, Gov. Ed Rendell may have been the author, but Senate Republicans proved they were a ruthless editor, and one who usually got its way.

In a rare occurrence, they got Rendell to pass not only the first budget that was less than inflation, but only the second budget since the Shapp administration which spent less than the governor’s original budget proposed.

Nor were those their only victories. The new basic K-12 education funding plan pumped unheard-of bounties into the district of Senate Majority Leader Dominic Pileggi, R-Delaware, and both Pileggi and Senate President Pro Tem Joe Scarnati, R-Jefferson, each got to name a statewide judge. After turning down Rendell’s first slate of judicial candidates, Scarnati got to pick a local judge for Superior Court, while Pileggi got to select new Commonwealth Court Judge Johnny Butler, the former state Labor Secretary under Gov. Tom Ridge. Pileggi won his battle to make sure Conoco-Phillips, which makes alternative gas in his district, was included in the alternative energy mandates and plan, against tough administration and House Democratic opposition. Pileggi and Scarnati also ensured the $1.35 billion the state will borrow for the H2O water and sewer improvements program and for alternative energy industry attraction and job-creation will be apportioned by the Commonwealth Financing Authority. That is the board on which their appointee holds a key veto. Scarnati also became the Senate champion of bio-fuels and his strong support ensured that became part of the energy package. His support of the administration plan to add cellulosic ethanol kept that part of the package, while his support for his own caucus’ disdain for corn-based ethanol, helped keep that out of the package. And that was despite the administration’s vigorous effort to have the law provide an incentive for corn-based ethanol now, then transition to cleaner forms later.

Dominic Pileggi Joe Scarnati

Scarnati and Pileggi, strongly backed by their caucus, also got the governor to agree to cut $34 million from Philadelphia’s education funding, and give half of it to rural and suburban districts, mostly represented by their members, to increase their school districts’ state funding from a 1.5 percent increase to a 3 percent increase.

This budget also contained big increases for charter schools and raised the limits on who can fund private, tax-credited scholarships for students, and on how much they can each contribute. The vouchers crowd was crowing big and very thankful for these wins by House and Senate Republicans.

The two GOP caucuses teamed up to ensure Rendell and House Democrats, who announced the budget would be hard to finish with taking up to $350 million of the $744 million Rainy Day Fund, and using it to fund this year’s budgets, did not do so.

Rendell had many big wins, don’t get us wrong: he got to rewrite the basic education formula, a goal many governors sought, but only Rendell has achieved.

He will also get to borrow more than $3 billion and spend it in the rest of his term, if he lives up to his goal of borrowing $700 million more in the next two years to continue bridge repairs. And he passed his energy plan and will get to spend $500 million of it in the next two years, which is as much as he proposed for the rest of his term, anyway.

And while some say he proposed a $28.33 billion budget, and they passed a $28.26 billion budget, the Senate Republicans won a lot more cuts than that mere $72 million difference.

Remember, Rendell’s budget did not include any of the $400 million or so of programs he cuts out every year – black fly spraying, West Nile Mosquito defense, tourism, a program that lets colleges take a science van to high schools with cool equipment and 70 more things like that – which legislators have forced into the budget over the years.

So while the net cut of the budget was $72 million from the governor’s February proposal, Rendell had to cut about $435 million of stuff he cared about, while the Legislature sliced about $25 million of their stuff, plus another $40 million of stuff that former legislative leaders cared about more than the current ones do.

House Speaker Emeritus John Perzel, R-Philadelphia, had legislatively-controlled budget items sliced to the bone, in particular. Then they put back into the budget about $430 million of legislative priorities, close to half of which got back into the budget because Scarnati or Pileggi said so.

Rural hospitals also had a better budget than the governor proposed, thanks to Senate Republicans.

The Senate GOP even struck a blow for reform by announcing they would end sine die post-election sessions, where members who are leaving still get to vote, and much mischief can be created.

They tried to strike another blow for reform by having each caucus cough up some of its surplus to fund property tax reduction or other one-time expenditures, but the other three caucuses gave them a big thumbs-down.

Hard-core critics note that the Senate Republicans did not manage to enact legislation limiting budget increases to inflation or removing benefits from illegal aliens or banning gay marriage, three hot-button conservative issues.

But none of those three measures would pass the House and all would be vetoed or blocked by the governor in various ways, most insiders agree.

One House Democrat sighed: “I wish our caucus got as much of what they wanted to get done as they did.”

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How a state budget happens
This year’s budget was a series of serious compromises between the governor, Senate GOP and House Democrats

It wasn’t until late the night before state lawmakers voted on the budget bill that they actually got to see what was in it.

It was July 3, nearly four whole days after Gov. Ed Rendell and legislative leaders had announced a budget framework agreement. The legislative Appropriations Committees had just released budget spreadsheets for lawmakers and others to review.

And House Appropriations Committee Chairman Dwight Evans, D-Philadelphia, insisted that a vote on the budget bill planned for the next day wasn’t unreasonable. “You don’t know … you may have people who are speed-readers,” Evans quipped, when asked by reporters how lawmakers could plow through 1,400 budget lines in less than 24 hours and then vote on the plan. Speed-readers or not, lawmakers in both chambers voted on the $28.26 billion budget by the afternoon of the next day – the Fourth of July.

Dwight Evans

The only outcry came from a contingent of fiscally conservative House Republicans who cautioned that there was too much borrowing and that the budget spent too much in the face of an economic downturn. They said this budget would doom the state to deficits and tax increases next year.

But Democratic leaders and some Republicans, including House Speaker Emeritus John Perzel, R-Philadelphia, strongly defended the spending plan, which included a record increase in education funding, a rewrite of the education funding formula, an energy plan, economic development and infrastructure borrowing, and a host of other ancillary bills.

The budget itself increased state spending by a relatively modest 3.97 percent, at least by the standards of Rendell’s previous budgets. It was the first budget of Rendell’s tenure to actually decrease spending by any amount from what the governor had proposed in February, in this case by $72 million.

That was because Rendell and legislative leaders knew an economic downturn was slowing the revenue stream into Pennsylvania. In February, Rendell predicted a $427 million budget surplus by July; but it turned out to be a much smaller -- $159 million. And revenue projections for 2008-09 had to be adjusted downward.

So with the revenue projections tightening, and lawmakers clamoring to restore program funding Rendell had cut, he had to agree to hundreds of millions of cuts to his own spending proposals.

The dire economic conditions on the horizon actually prompted Senate Appropriations Committee Chairman Gib Armstrong, R-Lancaster, and Paul Dlugolecki, a top staffer for Sen. Vince Fumo, D-Philadelphia, to tell The Associated Press that the state could see a deficit in the neighborhood of $1 billion next year.

That prompted House Republicans like Rep. Paul Clymer, R-Bucks, to say he didn’t think the new budget was balanced.

“We could have done better looking at those line items and eliminating what’s not necessary,” he said during floor debate on the plan.

But Perzel and others said the economy wasn’t as doomed as Clymer and other naysayers believed it was.

“I believe in America, and I believe we’ll be better off,” Perzel said.

Most House Republicans agreed, joining with Democrats to approve the budget bill 170-32. It got all but one Republican’s vote in the Senate.

Most Republicans were also OK with the $2.9 billion in borrowing for infrastructure, energy programs and economic development. They cited the need to repair bridges, water and sewer systems, and to spur the state economy to stave off the effects of the market downturn.

Make no mistake, that big borrowing figure is a clear victory for Rendell, who will get to play some hand in how 90 percent of it gets spent. That’s $2.065 billion of $2.665 billion that lawmakers and the governor are agreeing to borrow, which will be spent before Rendell leaves office in January 2011.

In the coming fiscal year alone, the state will spend a total of $1.215 billion: $400 million on water and sewer through the H2O PA legislation; $350 million on bridge repairs; $200 million of redevelopment capital assistance (RACP) projects; $250 million on alternative energy programs; and $15 million on railroad hubs and airports.

And Rendell has promised to seek more bridge borrowing money in his next budget.

Within the current borrowing plan is $500 million for alternative energy, but the energy plan goes beyond that. Lawmakers also agreed to spend $155 million over the next seven years on energy programs and to encourage conservation.

Plus, lawmakers agreed to legislation providing 75-cent-per-gallon subsidies for in-state biodiesel producers, capped at $1.9 million per producer, and measures requiring biodiesel and cellulosic ethanol requirements at the pump.

The fuel content mandates depend on the level of in-state production on both biodiesel and cellulosic ethanol, with the latter being still in the research stages.

With biodiesel, the mandate starts when production levels hit 40 million gallons, with at least 2 percent of diesel sold in the state required to contain biodiesel. Those mandates ramp up until in-state production is at 400 million gallons, when 20 percent of diesel must contain it.

On the cellulosic ethanol mandate, 10 percent of gas sold at the pump will have to contain it one year after production levels reach 350 million gallons.

Another big victory for Rendell was the $274 million increase in the K-12 public school basic education subsidy and a revision of the funding formula to drive out more money to poorer, overtaxed districts. Rendell believed so strongly in seeing that done that he gave up a component of the plan that allowed the Philadelphia School District to get an extra $34 million out of the formula.

Rendell may not have gotten the six-year, $2.6 billion commitment to up state basic education aid to schools, as suggested by a legislative study, but you can expect Rendell to keep pushing for big education increases in his two remaining budgets.

Other key action in the course of the budget week rush to finish included: passage of -legislation requiring insurers to cover autism services for children, which also gave the state more oversight of a merger proposed by two Blue Cross/Blue Shield plans; a rewrite of the state’s coal mine safety law; a measure consolidating 560 local tax collectors to 69; legislation extending and expanding the Keystone Opportunity Zone program; and Senate confirmation of two Public Utility Commission members and four appeals court judges.

Rendell lost his fair share of budget and legislative priorities, too. Chief among them was his plan to allow the Department of Public Welfare to take over the prescription drug benefit for Medical Assistance recipients enrolled in managed care. It was the third year Rendell tried to accomplish that change. Rendell said it would have saved the state up to $100 million a year through prescription drug rebates only available to the states and not to private managed care companies. But lawmakers questioned that figure and whether the department had the necessary staff and procedures in place to adequately manage the benefit. Rendell also had to defer his health care agenda until the fall, which prompted a minor kafuffle with Senate Republicans in the days before summer recess.

The Pennsylvania Health Care Cost Containment Council (PHC4), a well-regarded state agency that tracks important medical data, was set to expire at midnight on June 30. Legislation needed to be enacted to continue its legal authorization.

The Senate GOP, meanwhile, was still miffed at Rendell and House Democrats for holding up a medical malpractice coverage subsidy for doctors saddled with high premiums. So when Sen. Wayne Fontana, D-Allegheny, proposed amending the PHC4 reauthorization bill to include an extension of the so-called MCARE abatement, the GOP jumped aboard.

Rendell promised to veto the bill, but it never made it past House Democrats. Both Rendell and House Democrats have refused to continue the MCARE abatement until the Senate passes a health care expansion program.

So, without a law to continue its existence, Rendell shuttered PHC4 on July 1 – a move criticized by legislative Republicans who say the governor was trying to create a crisis to gain leverage on the issue.

Rendell relented a week later, issuing an executive order to keep the agency running through Nov. 30, hopefully giving Rendell and the Legislature enough time to work out all their issues on health care and the MCARE subsidy.

Another item on the unfinished business list: electric rate mitigation. Lawmakers have been warning for years that Pennsylvania energy customers are going to be saddled with major rate hikes in 2010 and 2011 when current rate caps expire.

Some plans to address the rate spike include a phase-in approach of any increases over periods of between three and seven years. But lawmakers simply ran out of time without being able to craft a bill that everyone could agree to.

The issue is especially complicated because utilities are pushing hard for provisions that allow them to recover from customers any monetary losses from such a phase-in. Senate Democrats, meanwhile, are proposing to cap any future rate hikes at the rate of inflation or 5 percent, whichever is less.

So brush up on your speed-reading skills now. It’s going to be a quick – just 9 to 11 session days – and busy fall.