The speech called on everyone to share the pain by tightening their belts.
The budget totals $29 billion. But isn't calling for any broad-based tax increases.
Breaking news and the stories that matter to your neighborhood.
Rendell's proposal saves nearly a billion dollars by cutting over 100 line items from the budget.
The budget calls for a $300-million dollar increase for public education. But, the governor proposes consolidating school districts, eliminating 400 of the state's 500 districts to improve efficiency.
There are also cuts in spending on higher education and the state health department.
The plan is also to raise the state cigarette tax by 10 cents to $1.45 a pack.
Don't expect new taxes.
"One thing this budget doesn't do. It does not require a tax increase on hard working Pennsylvania families it does not require a personal income tax, state sales tax or any business tax increase," said Rendell
The budget still must be approved.