HARRISBURG Rendell defends borrowing for environmental programs

The governor's 2004-05 budget represents an increase of about 4.5 percent.
HARRISBURG (AP) -- On the eve of his budget address Monday, Gov. Ed Rendell defended borrowing to finance environmental protection measures, as leaders of the Republican majority in the General Assembly warned that they would look hard at how much they are willing to add to the state's debt.
Rendell is expected to call for an $800 million environmental bond issue as part of the $22.7 billion budget proposal for fiscal 2004-05 that he was to present to lawmakers today. He said he believes it is important to make a major investment now in Pennsylvania's air, water and land quality.
"What we're doing tomorrow is the right thing to do," Rendell told reporters who asked about the bond proposal after an unrelated event at the Capitol.
The borrowing, which would bolster environmental programs and funnel money toward open space and various clean energy projects, among other things, would require legislative and voter approval.
Economic stimulus
Rendell also is expected to renew the push for his $2 billion economic stimulus package, which he first proposed last year and is currently being negotiated with Republicans. Most of that borrowing would not count against state debt because it would be floated through an independent state authority.
GOP legislative leaders said they were willing to consider taking on more state debt, but how much remains to be seen.
"There is a limit to how much is wise," said the House Republican leader, Sam Smith, of Jefferson County.
Sen. Robert J. Thompson, the Chester County Republican who chairs the Senate Appropriations Committee, said he was concerned about budget makers "putting wants above our needs."
Pennsylvania's approximately $6 billion in taxpayer-obligated debt is relatively low and manageable, said Jeffrey Panger, a public financing analyst with Standard & amp; Poor's.
The state's $670 million in debt service payments scheduled for the 2003-04 fiscal year is about 3 percent of the overall budget. Generally speaking, Standard & amp; Poor's believes that state spending on debt service in excess of about 12 percent of the budget begins to constrain spending flexibility, Panger said.
"Anything over that starts getting a little onerous," Panger said, "and it starts getting difficult to make changes should they present themselves."
Spending increase
Overall, Rendell's 2004-05 budget represents an increase of about 4.5 percent from spending for fiscal 2003-04, which is expected to total $21.7 billion.
Previously, the administration had estimated 2003-04 spending at $21.4 billion. On Monday, reacting to an Associated Press report that Rendell's 2004-05 budget would push General Fund spending up by 6 percent, they acknowledged that their estimate of this year's spending should have been higher.
The original estimate excluded $370 million in spending for medical assistance programs that will be offset through a federal bailout package for the states that was part of President Bush's 2003 tax-cut package, said Budget Secretary Michael Masch. The 2004-05 budget total includes $377 million that will qualify for a similar federal offset next year, he said.
While the governor is not expected to advocate any major tax increases next year, Masch has said he will propose fee increases totaling tens of millions of dollars.
'Tipping fee'
Legislative staffers briefed by the administration Monday said they were told the governor's budget proposal would include "tipping fee" increases -- $5 per ton on municipal waste, and $4 per ton on industrial waste -- on trash being dumped in Pennsylvania.
A current $7.25 per ton fee on waste mostly supports environmental and recycling programs. In 2002, there were 19.6 million tons of municipal waste dumped in Pennsylvania and 2.5 million tons of industrial waste.
Republicans were wary that fee increases proposed by the Rendell administration would amount to stiffer business taxes.
"We certainly can't just substitute fees for taxes," Thompson said.