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1 1 HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA 2 * * * * 3 Treasury Department * * * * 4 5 House Appropriations Committee 6 Main Capitol Building 7 Majority Caucus, Room 140 Harrisburg, Pennsylvania 8 9 Thursday, February 23, 2017 - 10:00 a.m. 10 --oOo-- 11 MAJORITY COMMITTEE MEMBERS PRESENT: 12 Honorable Stanley Saylor, Majority Chairman 13 Honorable Karen Boback Honorable Jim Christiana 14 Honorable Sheryl Delozier Honorable George Dunbar 15 Honorable Garth Everett Honorable Keith Greiner 16 Honorable Seth Grove Honorable Marcia Hahn 17 Honorable Sue Helm Honorable Warren Kampf 18 Honorable Fred Keller Honorable Jerry Knowles 19 Honorable Nick Miccarelli Honorable Jason Ortitay 20 Honorable Michael Peifer Honorable Jeffrey Pyle 21 Honorable Marguerite Quinn Honorable Brad Roae 22 Honorable Jamie Santora Honorable Curt Sonney 23 24 1300 Garrison Drive, York, PA 17404 25 717.764.7801 Key Reporters keyreporters @comcast .net 2 1 MINORITY COMMITTEE MEMBERS PRESENT: 2 Honorable Joseph Markosek, Minority Chairman Honorable Kevin Boyle 3 Honorable Tim Briggs Honorable Donna Bullock 4 Honorable Mary Jo Daley Honorable Madeleine Dean 5 Honorable Maria Donatucci Honorable Marty Flynn 6 Honorable Edward Gainey Honorable Patty Kim 7 Honorable Stephen Kinsey Honorable Leanna Krueger-Braneky 8 Honorable Michael O'Brien Honorable Mark Rozzi 9 Honorable Peter Schweyer 10 11 NON-COMMITTEE MEMBERS: 12 Honorable Brian Ellis Honorable Frank Ryan 13 Honorable Craig Staats Honorable Matt Baker 14 Honorable Mike Tobash Honorable Ron Marsico 15 Honorable Jesse Topper Honorable Todd Stephens 16 Honorable Mark Longietti Honorable Ed Neilson 17 Honorable Tom Caltagirone 18 19 20 21 22 23 24 25 Key Reporters keyreporters @comcast .net 3 1 STAFF MEMBERS PRESENT: 2 David Donley 3 Majority Executive Director 4 Ritchie LaFaver 5 Majority Deputy Executive Director 6 Miriam Fox 7 Minority Executive Director 8 Tara Trees, Esquire 9 Minority Chief Counsel 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Key Reporters keyreporters @comcast .net 4 1 INDEX OF TESTIFIERS 2 TREASURY DEPARTMENT 3 4 Secretary Joseph Torsella State Treasurer 5 6 Christopher Craig, Esquire Chief Counsel 7 8 Keith Welks Deputy State Treasurer for Fiscal Operations/ 9 Senior Advisor for Policy 10 11 12 13 14 15 16 17 REQUEST FOR PRODUCTION OF DOCUMENT 18 19 PAGE LINE PAGE LINE PAGE LINE 20 24 20-24 29 9-15 30 4-7 21 67 21- 70 25 22 23 24 25 Key Reporters keyreporters @comcast .net 5 1 MAJORITY CHAIRMAN SAYLOR: Mr. 2 Secretary, I want to welcome you to your first 3 appropriations hearing. Anyway, what I'm asking 4 all the Secretaries and row officers to do is not 5 to read their statement; to kind of summarize 6 whatever you'd like to tell us before we start the 7 questioning round. If, whoever is going to give 8 testimony, would rise and raise their right hand. 9 (All speakers were duly sworn by the 10 Majority Chairman). 11 Thank you. And, Mr. Secretary, you may 12 start. 13 SECRETARY TORSELLA: Thank you, Mr. 14 Chairman. I will not begin what I hope is a long 15 and happy relationship with you by reading my 16 testimony. Mr. Chairman, members, just to briefly 17 say a few words about the department, as well as my 18 priorities for it. 19 Let me introduce our Chief Counsel, 20 Christopher Craig, known to many of you, and our 21 Deputy Treasurer for Fiscal Operations and Policy, 22 Mr. Keith Welks. 23 First, unlike many departments that come 24 before you, we are not essentially program-driven. 25 We are, in fact, revenue-driven. The Treasury Key Reporters keyreporters @comcast .net 6 1 accounted for more than $400 million in investment 2 gains last year. Our fiscal review function, our 3 pre-audit function, generated approximately 4 $74 million, and our unclaimed property program, 5 which is primarily a consumer program, 6 nevertheless, returns a significant amount to the 7 General Fund. 8 As to the priorities that I see for the 9 Department, I want to briefly mention three. 10 First, to make us known far and wide for the 11 highest standards of ethics, integrity, 12 accountability and transparency, we've taken steps 13 to do this already, including a ban on placement 14 agents, new ethics policy and real -- some 15 significant steps for budgetary transparency. I'll 16 be happy to talk further about it. 17 Second, we will continue to be a 18 vigorous fiscal watchdog, remembering that every 19 dollar under our supervision comes from the hard 20 work of a taxpayer; whether that's saving 21 $6 million in the consolidated management of three 22 funds, or whether that's through things like having 23 our automobile fleet we intend to manage the 24 taxpayer's dollar wisely. 25 And then, finally, we want to broaden Key Reporters keyreporters @comcast .net 7 1 and continue our historic mission of financially 2 empowering Pennsylvanians, as well as Pennsylvania, 3 through things like Expanded College Savings, the 4 ABLE program we're about to roll out and other 5 things. In particular, if there's an opportunity, 6 I'd love to tell you about the pilot program we 7 have around college savings. 8 But with that, I want to just thank you 9 for the privilege of appearing before you today, 10 and I welcome your questions. 11 MAJORITY CHAIRMAN SAYLOR: Very good. 12 The first questioner today will be Representative 13 Dunbar. 14 REPRESENTATIVE DUNBAR: Thank you, Mr. 15 Chairman, and welcome, Treasurer. 16 I wanted to focus a little bit on the 17 Governor's budget proposal, and specifically the 18 Farm Show lease-leaseback, I guess you would call 19 it, which is $200 million that the Commonwealth 20 would receive and then, in return, lease back the 21 Farm Show, and we've heard different numbers. 22 Anywhere from 11 to $11.9 million a year would be 23 our rental or lease cost. 24 First off, is there any type of 25 agreement already in place? And if there is, what Key Reporters keyreporters @comcast .net 8 1 is the effective interest rate that we're looking 2 at? 3 SECRETARY TORSELLA: Thank you, 4 Representative. It's an important question. It's 5 one that we're asking as well, and the short answer 6 is, we do not have more details than you do. We 7 hope to, obviously. And it's a transaction that if 8 it, in fact, proceeds as a leaseback, the lease 9 would come before us in our capacity on the Board 10 of Public Grounds and Buildings where Treasury has 11 a role. 12 Historically, our view of our role on 13 that board has been, in part, to ask questions, 14 such as you've asked about, any lease that comes 15 before us, especially something of such 16 significance; whether there was a robust process; 17 whether there are appropriate terms; whether the 18 Commonwealth is getting the appropriate value. 19 REPRESENTATIVE DUNBAR: So, as 20 Treasurer, then, is there -- do you have a -- I 21 assume you started to work on this already. Do you 22 have some type of idea of what you would like to 23 see the interest rate to be, or not? 24 SECRETARY TORSELLA: I don't wanna to -- 25 I don't wanna dictate lease terms. Key Reporters keyreporters @comcast .net 9 1 REPRESENTATIVE DUNBAR: Okay. 2 SECRETARY TORSELLA: I will tell you, we 3 are awaiting further detail on this, and we have, 4 in fact, those questions. 5 REPRESENTATIVE DUNBAR: And to follow up 6 where you just were, I assume, then, there's been 7 no buyer or lessor type of person identified yet? 8 SECRETARY TORSELLA: Not to us, sir. 9 REPRESENTATIVE DUNBAR: Any type of 10 structure, RFP or anything like that? 11 SECRETARY TORSELLA: Not that we know 12 of. 13 REPRESENTATIVE DUNBAR: Would there be 14 one? Will there be one? 15 SECRETARY TORSELLA: I would assume that 16 there to determine -- and to determine value and 17 terms, that there would be some sort of a process. 18 If there's not some sort of a process around, that 19 raises questions about determining whether the 20 values are appropriate. But I'm -- I do not know 21 of any further details other than what we've read 22 in the proposal and what you've heard. 23 REPRESENTATIVE DUNBAR: And certain, we 24 all would like those details as well. Would you 25 classify this as prudent fiscal management? Key Reporters keyreporters @comcast .net 10 1 SECRETARY TORSELLA: Representative, I'm 2 in a happy position of, unlike you, sort of being 3 able to comment on these without doing the hard 4 work of trying to bridge the gap. The question 5 raises, this is a kind of debt and is the use of 6 this sort of debt a good idea to bridge our gap; as 7 opposed to, are we getting kind of long-term value 8 for the debt? 9 Having said that, I understand and 10 appreciate the position that everyone is in trying 11 to find ways to make a difficult set of numbers 12 work without asking more of the taxpayers. So, 13 really, the prudence of this comes down to those 14 details and whether -- first of all, whether this 15 is a lease-leaseback, or it's something else; and 16 second, what, in fact, those terms are and what the 17 rationale is for the particulars of the 18 arrangement.