HARRISBURG Collection reports bolster fight against raising taxes

The state has large surpluses for the first two months of the fiscal year.
HARRISBURG (AP) -- Personal income taxes helped fuel better-than-expected state tax collections in August, giving Republicans another reason to oppose increased taxes and fees proposed by Democratic Gov. Ed Rendell that have stalled budget negotiations two months into the fiscal year.
The monthly reports on collections of tax revenue have been a political football, with Republicans accusing Rendell of low-balling revenue projections as leverage for his proposals to boost taxes to help finance new programs.
Republicans hailed the new numbers as a sign that the economy is picking up.
"We see a much stronger recovery and a much bigger economic growth than the governor has estimated," said Thomas Starke, an aide to Sen. Robert J. Thompson, who chairs the Senate Appropriations Committee.
"It gives us more flexibility to do a number of things fiscally than what the governor proposed."
J. Andrew Crompton, an aide to Robert C. Jubelirer, the Senate's president pro tempore, noted that though the numbers are a positive sign, "we still have some holes we need to fill."
"They're solid. They're not extraordinary, but I think they show real signs that the economy in Pennsylvania is turning around," Crompton said.
Rendell's spokeswoman, Kate Philips, said it is premature to draw conclusions from the revenue numbers.
"It's good news, but two months of positive receipts does not signal an economic recovery," she said.
For the first two months of the state fiscal year that started July 1 -- a period that both Democrats and Republicans say does not typically bring in much revenue -- the state is showing a $19 million surplus. Revenues for August alone were $21 million ahead of administration estimates.
In July and August, the state collected nearly $11 million more in personal income taxes than what the administration projected, and about $65 million more than what Pennsylvania collected during the same period a year ago.
What's helping
One reason could be improving unemployment numbers.
Based on surveys of employers, the state's seasonally adjusted numbers showed that 348,000 Pennsylvanians 16 and older were unemployed in July, compared with 381,000 in January, according to the state Department of Labor and Industry.
The number is slightly lower than it was last July, when unemployment stood at 355,000, but significantly higher than in July 2001, when it was 294,000.
Before Rendell signed a proposed $20.8 billion budget in March, he vetoed more than $4 billion in education funding in an effort to force the Republican-dominated Legislature to consider $560 million in new education initiatives that he wants, such as reducing class sizes and adding full-day kindergarten.
The administration is also looking for $220 million to help doctors with their malpractice liability insurance premiums.
Other holes remain in the budget.
Despite about $600 million in cuts to close budget gaps, about $767 million in new taxes and fees included in the budget have not been enacted with legislation, said Anthony Wagner, the administration's deputy secretary for the budget.
In addition, Rendell lowered his revenue estimates for the year by about $700 million when he signed the bill, creating another hole, Wagner said.