Rendell looks to the past on budget: The governor-elect picks Michael Masch, the expert who helped rescue the city, to direct the state's finances.

Gov.-elect Ed Rendell yesterday selected Michael Masch, the budget expert he credits with rescuing Philadelphia from financial ruin nearly a decade ago, to help the state solve its own financial problems.

Masch, a University of Pennsylvania administrator and member of Philadelphia's School Reform Commission, was budget director during Rendell's first term as mayor, and will become his budget secretary at a time when the state is expected to face a budget deficit that could be more than $1 billion.

"He did an absolutely superb job containing spending, reducing waste and finding new ways to generate revenue," Rendell said in a conference call with reporters yesterday. "He helped turn the worst deficit in Philadelphia history into the greatest surplus in Philadelphia history."

Masch, 52, will be responsible for finding ways to trim costs and encourage job growth at a time when state revenues are plunging.

"We'll be trying to do two things at once," he said: balance the budget and create spending plans that will help the economy grow. "It will be an enormous challenge," Masch said by phone from Rome, where he is visiting his son.

Rendell takes office having outlined an ambitious plan totaling $1.5 billion that would reduce property taxes, increase state funding for schools, and spur economic growth.

Which areas would be targeted for cuts had not been determined, Masch said.

"We will leave no stone unturned. We have to look at the size of the state workforce, look at contracting, procurement and revenue collection."

He said the state would have to make "very painful" decisions because the Rendell administration would not have the luxury of the onetime budget balancing initiatives, such as tapping the Rainy Day Fund and tobacco-settlement fund, that were used by Gov. Schweiker.

"What we are being handed is a budget balanced by onetime initiatives that can't be repeated," Masch said. "Now the challenge is how to maintain programs of vital importance to the people of Pennsylvania when we have the deepest recession in a decade."

But Masch said he was experienced at dealing with governments and institutions in financial crisis.

"I spent the early '90s working on the financial crisis in Philadelphia and spent the last few years working with the school district in Philadelphia. I'm happy to say things turned out well in both situations."

Rendell also named Masch as chairman of his budget crisis task force, a bipartisan team that will advise the administration on fiscal matters.

Last month, the Schweiker administration announced it would freeze $270 million in state spending and remove $50 million from the dwindling Rainy Day fund. The moves were an effort by Schweiker to reduce a $433 million shortfall projected by June 30, the end of the fiscal year. Democrats have disputed that figure, saying the shortfall could reach $1.8 billion.

Masch, the son of an industrial painter who grew up in Southwest Philadelphia, rose to become City Council's economic analyst and later a key player in the Rendell administration.

He attracted attention last year after Mayor Street appointed him to the School Reform Commission and Street's office issued a news release stating incorrectly that Masch held a bachelor's degree from Temple University and a master's degree from the University of Pennsylvania. Masch has no college degree. City officials attributed the error to the mayor's media office and said Masch's resume did not indicate he held those degrees.

As the city budget director from 1992 to 1996, Masch was credited with helping pare $750 million from the budget, in large part by raising fees, monitoring spending, and winning benefit concessions from the unions. When he left in 1996, Rendell called him the "unsung hero" of his administration.

As a member of the School Reform Commission, Masch helped draft a five-year financial plan last year that combines budget cuts with program expansion. The cumulative savings from budget cuts would amount to $640 million over the five years. He also was instrumental in negotiations that led to the state's contributing an additional $82 million to the Philadelphia schools last year.

Masch, who had served on the board of education, was one of two SRC appointments made by Mayor Street. Street now will have to name a replacement to fill the two years remaining on Masch's term.

"It will be huge shoes to fill," said Debra Kahn, Mayor Street's education secretary. "Mike has performed in an outstanding way as a member of the commission. But now we have another good friend in the commonwealth, who also will certainly be aware of the priorities for both the school district and the city."

Masch said he will take a leave of absence from his post as vice president of budget and management at the University of Pennsylvania. Rendell said Masch's salary, while still under negotiation, will be in the $130,000 range. Current budget secretary Robert Bittenbender is paid $122,000.

Contact staff writer Amy Worden at 717-783-2584 or e-mail [email protected].

Inquirer staff writer Susan Snyder contributed to this article.

Credit: By Amy Worden INQUIRER HARRISBURG BUREAU