Oct. 10 (Bloomberg) -- Pennsylvania Governor Edward Rendell signed a $27.8 billion budget more than three months into the state’s fiscal year, ending the longest-running financing delay of any U.S. state.

The plan, which the Senate approved yesterday and the House passed Oct. 7, raises cigarette taxes and permits gambling on poker, blackjack and other so-called table games at casinos, which were previously limited to slot machines. Lawmakers continue debating how much to levy on the new betting.

The governor’s approval ended a 101-day stand-off between the Republican-led upper chamber and the Democratic-controlled House over the mix of taxes needed to fund state spending.

“The process is screwed up and the system is broken,” Rendell, a Democrat, told reporters in Harrisburg, the state capital, after the signing the budget behind closed doors. “This is something for which I’ve already apologized to the people of Pennsylvania, and this is something for which I want to apologize again.”

The plan is $500 million smaller than last year’s and avoids Rendell’s previous call to raise the income tax rate to 3.57 percent from 3.07 percent.

“It took a while to bring those down,” said Senate Majority Leader Dominic Pileggi, a Republican from Chester.

The budget impasse prompted Moody’s Investors Service in August to revise to negative from stable its outlook on $9 billion in Pennsylvania debt. The state delayed $1.5 billion in planned general obligation borrowing this year intended to fund prison construction and expand the convention center in Philadelphia.

Interim Plan

Pennsylvania, the sixth-largest U.S. state by population, has relied on an interim $11 billion budget since August to pay salaries and bondholders and fund operations. Several school districts also turned to short-term borrowing after the state skipped $1.45 billion in aid payments since the July 1 start of the fiscal year.

The state will begin sending out 12,000 missed payments, including ones to vendors and non-profit agencies, totaling $3 billion on Oct. 13, Budget Secretary Mary Soderberg said.

Lawmakers in the House stripped the budget of planned taxes on tickets to arts and cultural events as well as a proposed new levy on charity raffles.

“This has been a long and grinding process. Unfortunately that has been a dislocating one for the people of Pennsylvania,” said House Majority Leader Todd Eachus, a Democrat from Hazleton. “It has to add up to fairness for our taxpayers.”

To contact the reporter on this story: Terrence Dopp in Trenton, New Jersey, at tdopp@bloomberg.net.

Last Updated: October 10, 2009 00:01 EDT