HARRISBURG - With Pennsylvania finances still suffering the effects of the most stubbornly challenging national economy since the Great Depression, Governor Edward Rendell today proposed a fiscal year 2010-11 General Fund budget that spends $26.3 billion in state money, augmented by more than $2.7 billion in federal stimulus funds.

Requiring no tax increases to balance, the plan holds the line on spending in most areas where cost increases are not mandated by law. It keeps the state on pace to meet its adequate school funding targets, and it continues Pennsylvania's commitment to meet the health care needs of seniors, those with disabilities, and children.

It provides a blueprint to close the budget gap expected when federal stimulus funds are no longer available in 2011. Toward that objective, Governor Rendell proposed a plan to cut the state sales tax while broadening the tax base, to help cure a potential budget deficit beyond 2011.

The sales tax would drop from six to four percent, but 74 items and services, currently exempt, would lose the exemption.  Clothing and food, however, would remain exempt.

At $29 billion, the size of the General Fund in 2010-11 would increase by $1.15 billion, or 4.1 percent, over the current year. Spending of state dollars, however, would still be $2 billion less than in the 2008-09 fiscal year.

"The budget that I introduce today is a budget that works. It keeps the cost of state government down while still investing in our future," Governor Rendell said. "It balances the needs of our citizens with the financial pressures that the national economic downturn has imposed. It readies our young people and businesses for the opportunities a reviving economy will bring."

The Governor's 2010-11 budget contains administrative spending that is four percent lower than it was the year before he took office in 2002-03.  If it had grown at the rate of inflation since that time, it would cost $458 million more to operate state government next year.

Overall, Governor's Rendell's new budget reduces spending by an average of one percent in all areas other than Education, Aging and Long Term Living, Public Welfare, Corrections, Probation and Parole, and debt service.

"We eliminated nearly 4,500 positions from the state payroll, and last year alone we reduced the size of the Commonwealth's fleet by 500 vehicles in the last year alone.  We reduced government's energy consumption by 20 percent, a year ahead of schedule, and we are purchasing our energy smarter so that the state budget is not burdened by spikes in energy costs," Governor Rendell said.