Is Rendell’s rebate legal?

John Micek in the Morning Call raises some key issues as to Governor Rendell’s proposed “rebate” for low-income Pennsylvanians.

First, that the using the Budget Stabilization Reserve (or “Rainy Day”) Fund requires a two third vote, and tapping it for new programs is inconsistent with the law creating the Rainy Day Fund – Act 91 of 2002:

“Money in the Budget Stabilization Reserve Fund shall not be used to begin new programs but to provide for the continuation of vital public programs in danger of being eliminated or severely reduced due to financial problems resulting from the economy.”

Budget Secretary Michael Masch reponds by noting laws don’t matter to the Rendell administration when spending money is at stake

”If the General Assembly agrees, they have the power to make the withdrawal,
notwithstanding any language with respect to intent that may have appeared in a
prior statute,” Masch said.

Second, Micek raises the question of whether the rebate would be taxable at the federal level. My read on this is that the $400 rebate would be considered taxable income, but anyone receiving it would still have no tax liability after standard deductions, personal exemptions, and child tax credit. (Tax Calculator)

However, recipients could lose a portion of what they may from the refundable federal Earned Income Tax Credit (EITC Calculator).