PHILADELPHIA (AP) Facing a budget crunch, Gov. Ed Rendell has taken the unusual step of asking private vendors that do business with the state to voluntarily give back some of their profits. His request had few immediate takers.
Rendell did not say how much he hopes to save, but contends that businesses with state contracts should consider shouldering some of the burden of eliminating a $2.4 billion budget deficit.
”By and large, people who have done business with the state of Pennsylvania have done quite well. Pennsylvania is in a time of need, and he’s asking those same people to volunteer to give back 5 percent of this year’s contract,’ spokesman Ken Snyder said Friday.
Rendell, who offered the proposal during his budget speech to lawmakers Tuesday, will formally communicate his request to the vendors at a later date, Snyder said.
But vendors said they are unlikely to agree to any givebacks, arguing that their profit margins are too low to justify sending money back to Harrisburg.
The 500 member companies of the Associated Pennsylvania Constructors collected about $2.3 billion from the state last year for highway and bridge construction work. A 5 percent giveback would mean a whopping $115 million returned to the state treasury.
But Rendell shouldn’t count on the money just yet, industry officials said.
”This would essentially penalize private industry that does work for the commonwealth of Pennsylvania,’ said Ron Geist, the association’s vice president. ”If you elect not to do business with the (state), you’re not penalized.’
Highway contractors that count on a 5 percent profit margin would essentially be working for free if they accepted the Rendell proposal, he added.
Rendell’s $21 billion budget, passed by the House on Thursday and sent to the Senate, would cut spending by $1.6 billion and tap one-time revenues to help eliminate the deficit. But the budget does not assume any savings from vendor givebacks, Snyder said.
Still, that Rendell is even asking may be unprecedented. Millersville University scholar G. Terry Madonna believes he is the first governor in modern Pennsylvania history to ask for givebacks from private companies. And a spokeswoman for the National Association of State Facilities Administrators said she didn’t know of any other state making a similar request.
James Sanders, who sells commercial kitchen equipment, said there’s no way he could afford a 5 percent giveback, even if he wanted to. The 67-year-old owner of SW Food Service Equipment Co. of Philadelphia, who sold about $40,000 worth of equipment to the state last year, said his profit margin is a mere 3 percent.
”The markup is on the factory end,’ Sanders said. ”He should ask the factories for the kickback.’