HARRISBURG Rendell plan proposes borrowing $2.8 billion

Part of the package would include raising waste-hauling fees in the state.
HARRISBURG (AP) -- With a hard-fought agreement in place to raise taxes and spend more on public education, Democratic Gov. Ed Rendell is pressing other major agenda items in the Republican-controlled Legislature that involve $2.8 billion in borrowing.
It's a lot of money, no doubt: Pennsylvania already has $7 billion in taxpayer debt, a figure that is scheduled to rise to $8.9 billion in five years. Although taxes would repay a portion -- perhaps half -- of the $2.8 billion, the prospect of adding that much to the debt has Republicans squirming.
"We can't fool ourselves by saying we're not up to the [constitutional debt] limit yet, because we're doing the same thing the average consumer is by going out and getting another credit card ... and running up another set of bills," said state Sen. Robert J. Thompson, the Chester County Republican who chairs the Senate Appropriations Committee.
Republican's view
Republicans say they are willing to do some borrowing: For instance, Rendell has agreed to their proposal to include $250 million in a bond package to improve water and sewer lines in small towns.
And they are not quarreling with the intent of Rendell's spending targets. Among other things, Rendell wants to clean up abandoned mines, give small- and medium-sized businesses the cash to expand, preserve farmland, and improve downtowns and state parks. His hope is to create a more vibrant Pennsylvania that will reverse the trend of young, educated professionals leaving.
For now, Pennsylvania's annual debt payments are well below the level that Standard & amp; Poor's considers prohibitive. And the credit-rating and research firm puts Pennsylvania's per capita debt level in the middle of the pack when compared with other large industrial states.
To repay the $2.8 billion in borrowing -- about $1 billion would have to be approved by voters -- Rendell is proposing several methods.
Payment from taxes
Taxes would finance about $700 million plus interest for projects that are generally proposed by municipalities or other public agencies.
Businesses and taxpayers would share the repayment of about $1.3 billion plus interest, although negotiators say they have not finalized an exact split. One part would be spent on low-interest loans that businesses ultimately repay, albeit at a lower interest rate than the original bonds. Taxpayers would foot the other part -- business grants and revolving loans -- although the Rendell administration said it may not be necessary to float some bonds that cover loan guarantees.
The remaining $800 million plus interest would be covered by raising per-ton fees on waste haulers. That fee would likely be passed on to residents and businesses.
, meaning that many Pennsylvanians, New Yorkers and New Jerseyans would pay an extra $5 per person each year to have trash dumped in Pennsylvania.
Taxpayers' cost estimate
Aside from the waste-hauling fee, Senate Republicans estimate that the eventual cost to taxpayers will be at least $3.3 billion over the 20 years or so it could take to repay the original bonds and interest, said Erik Arneson, a senior GOP aide.
If that's right, annual debt service payments could rise to more than $850 million in the next few years, or nearly 4 percent of the $22.7 billion budget that Rendell is proposing for the fiscal year that begins July 1 -- still within Standard & amp; Poor's healthy range.
The Rendell administration declined to release a long-term cost projection, but spokeswoman Penny Lee contended taxpayers would owe significantly less than $3.3 billion.
Plus, she said, the borrowing would leverage billions more in economic investment by businesses and municipalities, resulting in an improving economy and a broader tax base to share the cost.
Still, Republicans say they are disinclined to raise waste-hauling fees after increasing taxes by more than $1 billion in a December agreement with Rendell. And they want the governor -- who has said he is open to compromise -- to whittle down the borrowing.
"I think there's room for compromise on the whole thing," Thompson said.