Governor Rendell Visits Erie City School District; Calls on Legislators to Enact State Budget that Meets Current and Future Fiscal Challenges

ERIE, Pa., April 5 /PRNewswire-USNewswire/ -- Governor Edward G. Rendell today began a five-county tour to bring western Pennsylvania residents up to date on the state budget and the opportunities and challenges that lie ahead.  

The Governor called on the General Assembly to approve a budget that continues to make strong investments in education and economic development programs. He pointed out that significant cuts have been made to keep the budget in balance and the budget he proposed -- which has been passed with bipartisan support in the House of Representatives -- currently requires no additional taxes. He stressed that further cuts would have painful and lasting consequences.

Speaking at Irving Elementary School in Erie, the Governor said school funding is just one example of what is at stake.

"If the state backs away from its obligation to fund schools, local taxpayers will feel the brunt of the legislature's actions with higher property taxes and less school quality," he said. "I have an obligation to the citizens of Pennsylvania to ensure that our state is prepared to weather the fiscal challenges that will arise when federal stimulus funding ends. My budget sets forth a realistic and reasonable approach to compensate for the loss of federal funds."  

As part of his budget proposal, Governor Rendell offered a tax fairness plan to close tax loopholes and impose taxes on large companies selling cigars and drilling for natural gas in the state.  

"It's time for some real tax fairness. Our citizens are carrying unfair burden of our taxes because too many large companies are not paying taxes in our state.  

"Pennsylvania is the only major fossil fuel producer state that does not impose a tax on natural gas extraction. Pennsylvania is also the only state in the nation that does not tax cigars and other smokeless tobacco. Two-thirds of Pennsylvanians are in favor of placing new taxes on smokeless tobacco and cigars. The only reason this hasn't happened yet is because of the influence of big tobacco and their highly paid lobbyists," the Governor said.

Governor Rendell also said that his plan would ensure big corporations no longer can escape paying the full amount of taxes they owe simply by establishing offices in the state of Delaware.

"We need close tax loopholes and implement several other business tax reforms to make sure that big corporations start paying their fair share of taxes," he said. "Today, 71-percent of the firms subject to the Corporate Net Income Tax pay no tax at all. And of those that do pay, 79 percent pay less than $10,000 in taxes a year."

The Governor has also proposed lowering Pennsylvania's sales tax rate from 6 percent to 4 percent starting in September and eliminating 74 exemptions that have been enacted through the influence of special interests.

"Our current sales tax system if flawed and unfair. Some items – mostly things like cars, appliances and other tangible goods – get taxed at too high a rate, while other items – like lawyers and accountants fees – pay no tax at all," Governor Rendell said. "My plan is to lower the sales tax rate from 6 percent to 4 percent, while continuing to shield food, clothing and medications from taxation."  

The Governor's proposal would set aside revenue generated by the sales tax change in a Stimulus Transition Reserve Fund that could not be touched until July 2011 – after Governor Rendell's term of office has ended - to help cover the estimated $2.4 billion budget gap that will result from the end of federal Recovery funding.

"A year from now the Commonwealth will be facing an extraordinarily difficult budget situation.  I will not be Governor then, but I -- like all citizens -- believe it makes sense to prepare today for troubles we know are coming. Otherwise it will be impossible to keep the promise to our students that we will provide adequate resources to their schools in order for them to succeed," Governor Rendell said.

For details of Governor Rendell's budget proposals, visit www.pa.gov. For specific information on the proposed education budget, visit www.education.state.pa.us.

Media contact: Gary Tuma; 717-783-1116

SOURCE Pennsylvania Office of the Governor