Governor Rendell announced on Wednesday, August 18 that he’s implementing budget reductions to close a $280 million budget deficit. His plan also relies on an estimate $70 million in additional revenues from a natural gas severance tax, which has yet to be enacted. And he plans to reduce a $250 million increase in the basic education subsidy, approved for this fiscal year’s budget, by $50 million  

Pennsylvania’s budget shortfall would have been far worse without Congress’s recent approval of over $600 million in Medicaid dollars. Still, the federal money wasn’t enough to bridge a $850 million gap pending when the Governor signed the budget in early July.  

Senate Republican leaders said they favor diverting $200 million of the $250 increase in the basic education subsidy to the teachers’ pension system (PSERS).  

“One of the best ways to help out the school districts is defray some of the pension costs,” said Senator Jake Corman, R-Centre, chairman of the Appropriations Committee. “Those costs are out of control.”

Corman added that beyond moving the additional basic education subsidy to the pension system the Senate is unlikely to act on any budget measure, except for perhaps a natural gas severance tax.  

“We believe with the addition of the federal money the Governor has enough to balance the budget, and that’s his constitutional responsibility,” he said.  

Legislative leaders have agreed with the Governor to enact a natural gas extraction tax by October 1. Under the Governor’s plan, the tax will raise $70 million for the General Fund by the time the fiscal year ends on June 30, 2011. But lawmakers have yet to agree on the tax rate and how that receipts will be distributed. It’s unclear if the Governor’s $70 million estimation will hold.  

The November General Elections could upend the Governor’s plan for any changes to the tax code.  

“They [lawmakers] didn’t vote for any tax code changes back in June when we were finalizing the budget. Why would they do it just a month or two before the elections, ” said a legislative budget expert.  

All 203 House members, and 25 of the 50 Senate members are up for re-election.