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Commonwealth of Pennsylvania House of Representatives COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE HEARING STATE CAPITOL MAJORITY CAUCUS ROOM ROOM 140 HARRISBURG, PENNSYLVANIA WEDNESDAY, MARCH 4, 2009 1:00 P.M. VOLUME II OF II PRESENTATION BY PENNSYLVANIA OFFICE OF THE GOVERNOR/ EXECUTIVE OFFICES BEFORE: HONORABLE DWIGHT EVANS, MAJORITY CHAIRMAN HONORABLE MATTHEW D. BRADFORD HONORABLE TIM BRIGGS HONORABLE H. SCOTT CONKLIN HONORABLE EUGENE DePASQUALE HONORABLE DAN FRANKEL HONORABLE JOHN T. GALLOWAY HONORABLE WILLIAM F. KELLER HONORABLE WILLIAM C. KORTZ II HONORABLE DEBERAH KULA HONORABLE TIM MAHONEY HONORABLE KATHY MANDERINO HONORABLE CHERELLE L. PARKER HONORABLE JOSH SHAPIRO HONORABLE JOHN J. SIPTROTH HONORABLE MATTHEW SMITH HONORABLE GREG VITALI HONORABLE JAKE WHEATLEY ————————— JEAN DAVIS REPORTING 7786 Hanoverdale Drive • Harrisburg, PA 17112 Phone (717)503-6568 • Fax (717)566-7760 2 1 BEFORE (cont.'d): HONORABLE MARIO J. CIVERA, JR., MINORITY CHAIRMAN 2 HONORABLE GORDON DENLINGER HONORABLE BRIAN L. ELLIS 3 HONORABLE JOHN R. EVANS HONORABLE MAUREE GINGRICH 4 HONORABLE THOMAS H. KILLION HONORABLE DAVID R. MILLARD 5 HONORABLE RON MILLER HONORABLE DAVE REED 6 HONORABLE DOUGLAS G. REICHLEY HONORABLE MARIO M. SCAVELLO 7 HONORABLE RICHARD R. STEVENSON HONORABLE KATIE TRUE 8 9 ALSO PRESENT: MIRIAM A. FOX 10 MAJORITY EXECUTIVE DIRECTOR EDWARD J. NOLAN 11 MINORITY EXECUTIVE DIRECTOR 12 13 DEBRA B. MILLER REPORTER 14 15 16 17 18 19 20 21 22 23 24 25 3 1 I N D E X 2 TESTIFIERS 3 NAME PAGE 4 MARY SODERBERG 5 BUDGET SECRETARY, PA OFFICE OF THE GOVERNOR.......................4 6 NAOMI WYATT 7 SECRETARY OF ADMINISTRATION, PA OFFICE OF THE GOVERNOR......................18 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 1 P R O C E E D I N G S 2 * * * 3 MAJORITY CHAIRMAN EVANS: I would like to 4 reconvene the House Appropriations Committee 5 meeting. 6 We have the Secretary of the Budget. And if 7 we have a little smile on our face, Madam Secretary, 8 it's only because it is the last hearing, but you are 9 very first in all our hearts. 10 I say that on a personal note, because 11 Madam Secretary, for those of you who don't know, 12 used to sit in this job that Miriam Fox has. She was 13 the Executive Director. And she knows this House 14 well, and she's worked very hard on a challenging 15 budget. 16 So I want to first start out with stating 17 how hard she has tried to manage this. I know it's 18 not easy; it's beyond your control. 19 So what I would like to do is have you 20 introduce the people around you for the purpose of 21 the record, and then we can kind of go directly into 22 the questions. 23 Madam Secretary, do you want to introduce 24 the people around you? 25 SECRETARY SODERBERG: Okay. Thank you, 5 1 Chairman Evans. 2 I am Mary Soderberg, the Secretary of the 3 Budget. 4 To my left is Secretary Naomi Wyatt, the 5 Secretary of Administration, and to my right is 6 Dave Donley, Director of the Governor's Budget 7 Office. 8 MAJORITY CHAIRMAN EVANS: Okay. 9 What I want to start out with, you know, as 10 the Governor has presented his budget -- first, let 11 me say this to the members. 12 Members, from 1 o'clock to 3 o'clock, we 13 will end at 3 o'clock today this session, so I just 14 want to make that announcement to all of the 15 members. 16 The Governor had proposed his budget back in 17 February, and obviously there have been some changes 18 because of what has happened with the Federal 19 stimulus, and that obviously has changed the 20 dynamics. That is one thing that has changed the 21 dynamics. 22 Secondly, there's a general sense, at least 23 that I'm hearing, you know, on both sides of the 24 aisle, and I would like for you to speak to it, what 25 would a no-tax budget be like? 6 1 So I want to first talk about the Federal 2 stimulus and what that means to the Commonwealth; and 3 then secondly, if there were no taxes or no kind of 4 increase in the budget, a potential, you know, 5 impact, what kind of decision you'll have to make. 6 So let's start out with the Federal stimulus 7 first. 8 SECRETARY SODERBERG: Okay. 9 Well, as everyone knows, this has been a 10 very unusual year for the budget, and I had no idea 11 what I was going to be facing when I agreed to take 12 this job last summer. It has been an interesting 13 ride. 14 MAJORITY CHAIRMAN EVANS: You're saying it's 15 under reconsideration? 16 SECRETARY SODERBERG: It has been a very 17 interesting ride. 18 As you will all remember, in December, the 19 Governor announced that we could likely face a 20 shortfall of $1.6 billion in this year's budget, and 21 at that point in time we assumed a number of actions 22 to fill that gap, and one of those was the Federal 23 stimulus. 24 At that point in time, we were using a very 25 conservative assumption that we might get what we had 7 1 received -- that Pennsylvania would receive something 2 similar to what we had received in 2003-2004, which 3 was about $900 million. 4 As the months went on and we were finalizing 5 the budget, the numbers kept changing, and we 6 actually delayed sending the budget to print so that 7 we could have the most accurate numbers in our book, 8 in our proposed budget. 9 And the numbers that we had are, there are 10 two basic flexible sources of funding in the State in 11 the Federal stimulus package. One is FMAP, which 12 increases the rate of reimbursement for Medical 13 Assistance, and that frees up State funds so that we 14 can use them elsewhere. 15 And we assumed a little over a billion 16 dollars in the current year for FMAP. For '09-10, we 17 assumed that we would get about $1.9 billion in FMAP 18 and approximately $493 million in State fiscal 19 stabilization funds. 20 Interestingly enough, it really looks like 21 our estimates were pretty much on target. We are 22 still anticipating that over a 3-year period, 23 beginning in the current fiscal year and rolling into 24 the beginning of fiscal year '10-11, we will get 25 approximately $4 billion in FMAP, Medical Assistance 8 1 relief, which will be flexible funds. 2 With regard to the State Stabilization Fund, 3 that has changed quite a bit from when we made our 4 assumptions, but the net result is that we will get 5 about $473 million in budgetary relief in '09-10 6 rather than $493 million, so a $20 million 7 difference. 8 But we are also looking at a number of other 9 programs such as early intervention, incentive funds 10 for child support enforcements, and a number of 11 programs like that that may possibly give us some 12 additional budgetary relief next year. 13 So this is still a work in progress. We 14 have all of the agencies involved. Later today, the 15 Governor is going to be speaking with a little bit 16 more detail on the system that we are going to have 17 in place to track this money to make certain that we 18 can get the money out as quickly as possible. 19 Chairman, your other question--- 20 MAJORITY CHAIRMAN EVANS: Well, let's go 21 into a little bit more detail. 22 SECRETARY SODERBERG: Sure. 23 MAJORITY CHAIRMAN EVANS: In your proposal 24 and the proposal at least recommended by the 25 Governor, he talked about in the category of 9 1 something in the ballpark of $500 million. He talked 2 about smokeless tobacco, the MCO, kind of the smart 3 policy or the Smart Pharmacy. 4 If those things do not happen -- all right? 5 -- which total somewhere between $500 million to 6 $700 million -- you tell me; maybe my math is off -- 7 where specifically would you happen to see reductions 8 that would have to take place? 9 Because I think, you know, one of the 10 things, and I'm not dropping this just all on your 11 lap or the Governor's lap, because we as the General 12 Assembly are equally as responsible, so we have as 13 much responsibility as you do in terms of moving this 14 State forward. 15 But, you know, some people have talked about 16 that as a potential option. Can you talk a little 17 bit about what that would mean to this current budget 18 if those recommendations that you all have made, if 19 the members decide not to vote for those 20 recommendations? 21 SECRETARY SODERBERG: This was a tough 22 budget to put together. We eliminated funding for 23 about 101 line items in the budget, about a billion 24 dollars in cuts throughout the budget. Numerous 25 operating lines have been reduced. 10 1 If you look at the total cost of 2 administering State Government for the '09-10 budget 3 year, it will actually be about equal to what it was 4 at the beginning of this Administration.
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