Pennsylvanians can expect an ambitious spending agenda and possible tax increases when Gov. Ed Rendell delivers his proposed state budget this morning.

Rendell is scheduled to address a joint session of the Legislature at 11:30 a.m. During the speech, he will deliver his first proposed budget since winning re-election in November.

The Democratic governor, elected with 60 percent of the vote, has spent the last several weeks unveiling sweeping changes to health care and alternative energy programs in an attempt to build momentum for the initiatives.

Lawmakers and citizens today can expect a budget proposal that "holds the line on spending, as the governor has in the last four years, and responsibly invests taxpayer dollars in programs that work," Rendell spokeswoman Kate Philips said Monday.

She declined to offer specifics, even on how taxes will be affected.

"That will all be part of the overall budget address," Philips said.

Published reports, however, quote lawmakers including state Sen. Gibson Armstrong of Refton, who say Rendell will propose increasing the state's sales tax by 1 percent.

Rendell, they say, wants to use the new revenue to reduce property taxes for homeowners and pay for other skyrocketing costs, including health care for the elderly.

Currently, the state sales tax is 6 percent and 7 percent in Pittsburgh and Philadelphia.

"I think a sales tax increase will be a tough sell in the Legislature," Armstrong, a Republican, told the Pittsburgh Post-Gazette Sunday "I don't think legislators from Pittsburgh and Philadelphia would be for it."

Armstrong did not return several telephone calls Monday.

There are four major areas Rendell is expected to address:

• Property taxes. Revenue from a sales-tax increase would complement an expected $1 billion from slot-machine gambling targeted at property tax reductions.
• Alternative energy. Rendell last week pitched a plan that would include an $850 million bond to boost alternative energy development and energy conservation. A new per-kilowatt-hour fee on the use of electricity — costing about $5 a year for residents — would be used to pay back the bond.
• Transportation. About $1.7 billion is needed to fix state roads, bridges and mass-transit systems. A government study group appointed by Rendell recommended last year a variety of new revenue sources, including gasoline taxes, driver's-license fees, vehicle-registration fees and realty-transfer taxes.
• Health care. The governor wants to reduce health care costs through regulatory changes and new laws overseeing how health care is delivered in Pennsylvania and to expand state-sponsored health care to cover the 800,000 uninsured adults living in Pennsylvania.

To pay for it, Rendell proposes increasing the $1.35-per-pack cigarette tax, taxing cigars and smokeless tobacco for the first time and levying a 3 percent payroll tax on companies that don't offer health insurance.

"It's already more ambitious than any other governor we've known," said G. Terry Madonna, director of Franklin & Marshall College's Center for Politics & Public Policy. "Now it's time to pay the piper."

The Legislature Rendell will face looks dramatically different from the one that greeted him last year.

The top two Senate Republicans from 2006 — David "Chip" Brightbill of Lebanon and Robert Jubelirer of Blair County — were ousted in the primary election after voter outrage over the legislative pay raise of 2005. Also, Democrats, who had been in the minority for 12 years, now hold a one-vote majority in the state House, and one of every five lawmakers is a freshman.

There are new chairmen of the appropriations committees — Armstrong in the Senate and Democratic Rep. Dwight Evans of Philadelphia in the House. There's also a new discussion about reforming how state government is run, brought about by new lawmakers, citizen activists and voter outrage last year.

"He's going to have to juggle the popularity of these (new proposals such as health care) with the pain of paying for them," Madonna said. "That will be interesting with a Legislature that is besieged and can't go a week without something plaguing it."

For example, lawmakers last week revealed that from 2005 to 2006 legislative staffers from both parties received more than $3 million in work-related bonuses, an issue that prompted calls for change and pledges by some legislative leaders to end the practice.

The current budget includes about $26 billion in revenues and expenditures and features a 6 percent increase in state spending from the 2005-06 fiscal year without raising new taxes.

Dave Pidgeon's e-mail address is dpidgeon@lnpnews.com.