Budget Crisis Keeps Gov. Rendell From Meeting

The nation's governors are gathering in Mississippi for their annual meeting. But the association's chairman won't be there. Pennsylvania Governor Ed Rendell is staying home to work out a budget stalemate with his legislature. He tells Steve Inskeep that he didn't think he should leave, considering state employees just had their first payless payday.

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STEVE INSKEEP, host:

The nation's governors are gathering tonight in Mississippi for their annual meeting, but the association's chairman will not be there. Governor Ed Rendell is staying home in Pennsylvania. He's got to work out a budget stalemate with his legislature. We have reached him in his office. Governor Rendell, welcome to the program.

Governor ED RENDELL (Pennsylvania): Good morning. Nice to be on and I am very sad that I'd not be in Biloxi with the NGA, but I thought there was no way to go to Biloxi when we just had our first payless payday for our state employees. Our state employees, by court order, have to work but they're missing paychecks. And I think it's incumbent upon all of us here - myself and the legislature - to stay up here and try to continue to drive this thing until we can reach some sort of an agreement.

INSKEEP: We've been reporting in recent months, as others have, on the budget nightmare in Michigan, the budget nightmare in California, other budget nightmares. Do you think the state governments are going to be seriously damaged by the end of this year?

Gov. RENDELL: Well, they're certainly not going to be able to do all of the things that we've done in the past. In the $2.2 billion of cuts that I've already proposed, there are some terrific programs, which under ordinary times, I'd be asking for increases. There are terrific programs that get totally eliminated and it is a gut-wrenching process.

But will this severely damage us? Not if we strike the proper balance between cuts and revenue enhancements.

INSKEEP: I'd like to know one other thing, governor, as you try to manage your state's economy. Obviously, it's a famous industrial state, Pennsylvania. Industry has been terribly hit in recent years.

Gov. RENDELL: No question.

INSKEEP: I know the Obama administration wants to bring back industries, green industries and so forth, but are you expecting a net gain in industrial jobs, realistically, over the next few years, or will you maybe gain a few jobs while losing a lot?

Gov. RENDELL: Manufacturing's been the biggest loss during this recession. There are so many companies in Pennsylvania that produce products that feed the housing industry. Like, we had one of the best in the nation, cabinetmakers -480 employees outside of Gettysburg. These are two artisans and craftsmen and it closed down because there are no new houses being built.

We have many companies that supply automobiles. They had to either close down or layoff workers. So, manufacturing's been hit hard. I believe over the long run - and I'm talking 15 years from now - if Pennsylvania holds its traditional manufacturing base - and I believe we can - and adds to it in green jobs, there can be a plus of manufacturing jobs. It'll be a mix of new and old.

INSKEEP: Governor, I want to ask about the federal budget stimulus, because a lot of the money went to states. And we heard yesterday on this program from Mississippi Governor Haley Barbour, a Republican, whose state used stimulus money to help balance the budget, but he's still dubious about it because he says there are expenses that I'm going to have to be committed to in future years and the federal government isn't going to pay for those.

Is that argument factually correct in Pennsylvania? Is Pennsylvania, even though you're a supporter of the stimulus, getting stimulus money that's going to lead to greater expenses in the future for you?

Gov. RENDELL: Well, I don't think so, because - let me give you an example -this past fiscal year and the next two will average about a billion-and-a-half dollars in stimulus money. Now, people say, well, that's going to leave a big gap when the stimulus goes away in two years. Well, it won't, because right now, this past year, we had negative revenue growth. Obviously, we lost $3 billion in revenue. For this year we're predicting zero revenue growth - flat, not a loss but flat; for the next year, a two-and-a-half percent revenue growth. But…

INSKEEP: Revenue growth - that's the actual money coming in from taxes and (unintelligible)…

Gov. RENDELL: Absolutely.

INSKEEP: …and so forth.

Gov. RENDELL: But by year three, when the stimulus goes away, we'll predicting we'll be up to five-and-a-half percent growth. So, that growth will replace the stimulus money when it goes away. If we had zero growth three years from now, then the loss of the stimulus money would create a huge gap. But everyone is predicting that we'll return to regular growth. And from my first six years as governor, we averaged five-and-a-half percent growth.

INSKEEP: So, if you have an economy recovery, you're okay, but if not, there's a problem.

Gov. RENDELL: Right. But I think it's fair to assume that three years from now there'll be a full-fledged recovery. I think most economists, and certainly our advisors, tell us that.

INSKEEP: Ed Rendell is governor of Pennsylvania. Governor, thanks very much.

Gov. RENDELL: Thank you.

(Soundbite of music)

INSKEEP: You're listening to MORNING EDITION from NPR News.

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