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But something momentous is afoot: Gov. Ed Rendell and lawmakers have entered the down-to-business negotiating phase of the budget after weeks of posturing, name-calling, finger-pointing and positioning.

It may be the most delicate time for Rendell and his fledgling administration, when he must decide whether to face the summer with half-a-loaf's worth of accomplishments or engage the Republican-controlled Legislature in a battle of inches that could last all summer.

"I'm optimistic we can work out something that meets my goals and satisfies the leadership" in the Legislature, Rendell said. "We're doing OK so far."

However, left to be resolved is the most ambitious legislative agenda in decades, including:

Property tax reform: Rendell wants to raise the state income tax 34 percent, partially to pay for an average 30 percent reduction in local school property taxes. Republicans prefer a local tax shift. They would mandate district-by-district referendums on raising local earned income taxes to pay for corresponding property tax decreases.

Education reforms: Rendell is seeking $668 million in new education programs, including all-day kindergarten, preschool, lower class sizes and tutoring funds. Republicans have approved $40 million for tutoring and $15 million for Head Start, a preschool program. The fight is over how much to spend.

The administration's economic stimulus package: Rendell wants to float $2 billion in bonds to lend to companies, including high-risk start-ups. The Republicans passed a package that starts at $1.1 billion but isn't capped. Lawmakers say this is the easiest problem to fix in negotiations. Both sides want it, and negotiations will be over relatively minor details.

Slot machines: Rendell has pressed for 3,000 heavily taxed slot machines at each of the four horse racetracks in the state, which he says will raise $770 million a year to pay for his programs. Republicans in the Senate passed it, after a strenuous two-month behind-closed-doors battle. But House Republicans are prepared to try to kill it by adding land-based casinos, riverboat gambling and other gaming options to the bill.

Democrat Rendell and the Republicans who control the House and Senate disagree over why so much remains to be done on the eve of the 2003-04 fiscal year. The two sides have met just a few times so far.

Rendell said that's because the heavy lifting is just starting. "We've made real progress in our talks," he said.

But GOP officials complain that the administration isn't taking the deadline serious enough.

"I'd say for the most part, these meetings have been basically formalities," said Steve Miskin, spokesman for House Majority Leader Sam Smith, R-Jefferson. "That's just my opinion."

And Drew Crompton, a top aide to Senate President Pro Tempore Robert Jubelirer, R-Blair, has been so frustrated at the lack of progress that for the last two weeks he has made mention of the budget deadline date every chance he gets.

"I start every meeting shaking hands and saying, "Hello, today is June 24th, or today is June 25th,"' he said. "Negotiations are not nearly as far along as they should be and we don't think it's our fault."

Late last week, House leaders acknowledged that their summer vacation plans may be shot, and scheduled 22 voting sessions for the month of July. Every weekday except the Fourth of July is scheduled for possible votes.

Conversations with political experts suggest that the state drifts into difficult straits at least once a decade, dating to at least the 1970s, when former Democratic Gov. Milton Shapp and a Democratic General Assembly wrestled over a summer-long budget crisis.

Circumstances repeated themselves in 1983 under Republican Gov. Dick Thornburgh and again in 1991 under Democrat Robert P. Casey Sr. Both men faced income tax hikes from legislatures not controlled by their parties, said Millersville political analyst G. Terry Madonna.

Both years the debate raged through the summer and ended with income tax hikes.

Although Rendell in 2003 also is seeking an income tax hike, he faces the additional challenge of ramming an ambitious reform package through a General Assembly that, when it accepts change at all, accepts it only begrudgingly.

"In those days, it was the fiscal stability of the state," Madonna said of the Thornburgh and Casey budget wars. "This is about Ed Rendell's agenda and whether the Legislature adopts some or all of it."

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http://articles.mcall.com/2003-06-30/news/3464045_1_slot-machines-tax-reform-tax-shift