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Commonwealth of Pennsylvania House of Representatives Committee on Appropriations

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Commonwealth of Pennsylvania House of Representatives Committee on Appropriations COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES COMMITTEE ON APPROPRIATIONS In re* Department of Commerce Regional Federal Block Grant 1991-1992 Budget Hearing * * * * Stenographic report of hearing held at the Cranberry Motor Lodge, Warrendale, Pennsylvania Thursday March 14, 1991 9:30 a.m. HON. DWIGHT EVANS, CHAIRMAN Hon. Victor J. Lescovitz, Vice Chairman Hon. Joseph W. Battisto, Secretary Hon. Gordon Linton, Subcommittee Chairman on Education Hon. Thomas C. Petrone, Subcommittee Chairman, Health & Welfare Hon. Gaynor Cawley, Subcommittee Chairman on Capital Budget MEMBERS OF COMMITTEE ON APPROPRIATIONS Hon, William F. Adolph Hon. Alice S. Langtry Hon. Paul J. Angstadt Hon. Edward J. Lucyk Hon. Robert E. Belfanti, Jr. Hon. Nicholas J. Maiale Hon. Kevin Blaum Hon. Dennis M. O'Brien Hon. Karl W. Boyes Hon. Richard D. Olascz Hon. Alvin C. Bush Hon. Merle H. Phillips Hon. Nicholas A. Colafella Hon. Joseph R. Pitts Hon. Jeffrey W. Coy Hon. Jere W. Schuler Hon. Robert C. Donatucci Hon. Paul W. Semmel Hon. Robert J. Flick Hon. Thomas M. Tigue Hon. Jon D. Fox Hon. Terry E. Van Home Hon. Michael Gruitza Hon. Peter C. Wambach Hon. Richard A. Kasunic Hon. John N, Wozniak Reported by Dorothy M. Malone.RFR _ Dorotki, M M«lone Registered Professional Reporter 135 5 Landie otre*t |—iummelstown, |Jennr(jlvania 17036 / Also Present: Hon. Patricia Carone Hon. Ronald E. Black Richard Willey, Executive Director Roy Wells, Budget Analyst Dorotk4 M Malone Regirt«t*e<J Proj-eseional l^epoTtoi1 135 S L«™'* Sti^*^ J—|umm«lrtown, Pennsijlvania 17036 INDEX PAGE Laurie Stern, Allegheny Valley Development Corporation 6 John Skiavo, Central Westmoreland Development Corporation 6 George Howley, Butler Community Development Corporation 6 Dr. Susan Hansen, University of Pittsburgh 37 Timothy Parks, Pittsburgh High Technology Council 54 Dr. Rodney Erickson, Pennsylvania State University 75 Hans Koehler, Wharton Export Network 75 Dr. Michael Luger, University of North Carolina 107 Daniel Pilcher, National Conference of State Legislatures 107 Dr. Bennett Harrison, Carnegie Mellon University 108 Raymond R. Christman, Department of Commerce 185 Carmine Scotece, Butler County Human Services 222 Pat Brexmen, United Cerebral Palsy 228 Jessica Eichner, Hospice Services Incorporated 230 Marty Friday, Women's Center and Shelter of Greater Pittsburgh 231 Martha Haverstick, Butler Family Counsel Center of Lutheran Services 236 CHAIRMAN EVANS: I would ask that the panel move to the table, please. I would like to first say good morning to you, the panel. We appreciate your coming this morning. This is a reconvening of the House Appropriations Committee. Prior to me making a few statements, I would just like to have the members introduce themselves to the audience, REPRESENTATIVE LUCYK: I am Representative E. J. Lucyk. I am from Schuylkill County. REPRESENTATIVE BATTISTO: I am Representative Joe Battisto. I am from Monroe County, the Poconos. REPRESENTATIVE VAN HORNE: Representative Terry Van Home, Westmoreland and Allegheny County. REPRESENTATIVE LESCOVITZ: Representative Vic Lescovitz, Washington and Beaver County. REPRESENTATIVE KASUNIC: Representative Rich Kasunic, Fayette County. CHAIRMAN EVANS: Dwight Evans from the City of Philadelphia, Chairman of the Appropriations Committee. REPRESENTATIVE GRUITZA: Mike Gruitza, Representative from Mercer. REPRESENTATIVE PETRONE: Representative Thomas Petrone from Pittsburgh, 27th Legislative District. REPRESENTATIVE COLAFELLA: Nick Colafella, Representative from Beaver County. CHAIRMAN EVANS: Today we are here in Butler, particularly in Cranberry, Representative Fat Carone's district, who also will be here who has helped bring the Appropriations Committee here. The reason the Committee has traveled to western Pennsylvania for the Economic Development Hearing is because few parts of the state were as hard hit by the shifting of the industrial economy to a more service base economy. We want to hear firsthand how effective our state investment has been in Economic Development. This recession requires new solutions. It is not enough to simply review the economy, development, department budget. We have to get a- firsthand, review of how successful the state investment has been in Economic Development. The Appropriations Committee is investigating how successful the state Economic Development programs have been. We want to know what is working and what is not working. Then and only then can we make budget decisions that appropriately invest the taxpayer dollars in Economic Development programs. The Appropriations Committee is taking the hearing process a step further this year. We are hearing not only from state officials, but we have invited national experts to share with us what is working in other states. In this recession we must be aggressive in our search for solutions. This morning on the panel we have for the next half hour individuals from the Industrial Development Corporation. What I would like to do is ask the panelists to introduce themselves and maybe say a word about themselves and maybe we can kind of start with questioning, MS. STERN: I am Laurie Stern. X am the Executive Vice-President of the Allegheny Valley Development Corporation. That is in the northeast corridor of Allegheny County and I have been with that organization for the past eight years. I have also served as the President of the local Chamber of Commerce in the Allegheny Valley. MR. SKIAVO: I am John Skiavo. I am the Secretary for the Central Westmoreland Development Corporation. I am also President of the Central Westmoreland Chamber of Commerce. We are located in the central part of Westmoreland, which by the way, includes the current Sony project, which I am sure you are all familiar with. MR. HOWLEY: My name is George Howley. I am the Executive Director of the Community Development Corporation for Butler County. I have been with that post for about the past three and a half years. We cover all of Butler County and we work hand in hand with Laurie also. CHAIRMAN EVANS: I would like to start off with a question to all of you since we're talking about Industrial Development Corporation. Each of you have worked with a number of Economic Development programs that make loani to small, medium and large companies. In your opinion have these programs been successful? Let me go on further. Have you had any problems in administering these programs? Are there any programmatic changes that should be made in order to make these programs more responsive to a changing regional economy? MS. STERN: I think that there are lots of things that are working well and there are some things that aren't working at all in regards to IDCs, Again, that is all we will be able to speak to from our perspective, I want to commend you as well for taking the hearings a bit further and getting some input from other states. I think that is a wise idea. But we sort of put our heads together a little bit prior to this meeting so that we could be a little bit more cohesive in our comments since they need to be brief. And I think that the PEDA Program, which is pretty much the bread and butter of most IDCs, has worked well for the Commonwealth for a number of years. I still think it continues to work well. That being said, I think there are a couple things we need to look at if we are given this opportunity to share some input in terms of broadening that program. In fact, making it more responsive to the current I economy. We are still living with a $15,000 per job formula, new job created for $15,000 of state funds and I think those of us in the field are finding that that is just too small a dollar amount for inflationary reasons, for reasons of how capital investments are made today, how jobs relate to capital investments on a pro rata basis, and I think that it is a fair assessment to say that we would suggest at least doubling that to a $30,000 per job formula in the PEDA Program. The concept behind it works well. I just think the dollars are too low. CHAIRMAN EVANS: Can I follow up on that? When you say double it from 15,000 to 30,000, is that a national norm in terms of cost of developing a job at 30,000? MS. STERN: There is a program we do right now that is 25,000. MR. SKIAVO: We also have the PEDFA Program that is 50,000. BY CHAIRMAN EVANS (To Mr. Skiavo): Q 50,000, one job? A Yes. Q How much do those jobs pay, the Industrial Development job? A Well, I think what we are talking about here when you are talking about job development, not necessarily how much the job pays but to create one job or to have a new need for one job oftentimes companies have to spend quite a bit of money as far as equipment and building expansion. That $15,000 per job requirement from FEDA has been around for some time, at least 15, 20 years. Just by virtue of inflation you can see what has happened to building and equipment costs as well. Businesses are not utilizing the FEDA fund or not expanding because they can't get capital because they are afraid that they are not going to be able to meet the job requirements that they have. So, therefore, there is no incentive for them to create as many jobs, and rightfully so. We have a penalty now for those companies that do not meet their job requirements. So, therefore, we kind of, in the past what happened, there was an encouragement. If a company thought that they could create 20 or 25 jobs, even though they didn't have to say that many in order to get the dollars they wanted, let's say for example they wanted $100,000 out of FEDA or $150,000 out of FEDA, that would require ten jobs.
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