COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES
APPROPRIATIONS COMMITTEE HEARING
STATE CAPITOL MAIN BUILDING ROOM 140 HARRISBURG, PENNSYLVANIA
WEDNESDAY, FEBRUARY 13, 2019
PRESENTATION FROM AUDITOR GENERAL EUGENE A. DePASQUALE
BEFORE:
HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMAN HONORABLE MATT BRADFORD, MINORITY CHAIRMAN HONORABLE ROSEMARY BROWN HONORABLE LYNDA SCHLEGEL-CULVER HONORABLE SHERYL DELOZIER HONORABLE GEORGE DUNBAR HONORABLE JONATHAN FRITZ HONORABLE MATT GABLER HONORABLE KEITH GREINER HONORABLE SETH GROVE HONORABLE MARCIA HAHN HONORABLE DOYLE HEFFLEY HONORABLE LEE JAMES HONORABLE FRED KELLER HONORABLE JOHN LAWRENCE HONORABLE JASON ORTITAY HONORABLE CLINT OWLETT HONORABLE CHRIS QUINN HONORABLE GREG ROTHMAN HONORABLE JAMES STRUZZI HONORABLE JESSE TOPPER HONORABLE RYAN WARNER HONORABLE MARTINA WHITE
————————— JEAN DAVIS REPORTING POST OFFICE BOX 125 • HERSHEY, PA 17033 Phone (717)503-6568 1 BEFORE (cont.'d): HONORABLE DONNA BULLOCK 2 HONORABLE MORGAN CEPHAS HONORABLE AUSTIN DAVIS 3 HONORABLE MARIA DONATUCCI HONORABLE ELIZABETH FIEDLER 4 HONORABLE MARTY FLYNN HONORABLE EDWARD GAINEY 5 HONORABLE PATTY KIM HONORABLE STEPHEN KINSEY 6 HONORABLE LEANNA KRUEGER HONORABLE STEPHEN McCARTER 7 HONORABLE BENJAMIN SANCHEZ HONORABLE PETER SCHWEYER 8
9 ALSO IN ATTENDANCE:
10 DAVID DONLEY, REPUBLICAN EXECUTIVE DIRECTOR RITCHIE LaFAVER, REPUBLICAN EXECUTIVE DIRECTOR 11 MIRIAM FOX, DEMOCRATIC EXECUTIVE DIRECTOR TARA TREES, DEMOCRATIC CHIEF COUNSEL 12 HONORABLE KEVIN BOYLE HONORABLE TIM BRIGGS 13 HONORABLE ROB KAUFFMAN HONORABLE ERIC NELSON 14 HONORABLE FRANK RYAN HONORABLE TODD STEPHENS 15
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17 JEAN M. DAVIS, REPORTER NOTARY PUBLIC 18
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2 TESTIFIER
3 NAME PAGE 4 EUGENE A. DePASQUALE, AUDITOR GENERAL 4 5 COMMONWEALTH OF PENNSYLVANIA
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3 1 P R O C E E D I N G S
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3 MAJORITY CHAIRMAN SAYLOR: I'd like to call the
4 Appropriations Committee to order. And I'll ask the Auditor
5 General, Eugene DePasquale, to please rise and raise your
6 right hand.
7 Do you swear and affirm that the testimony you're
8 about to give is true to the best of your knowledge,
9 information, and belief? If so, say I do.
10 AUDITOR GENERAL DePASQUALE: I do.
11 MAJORITY CHAIRMAN SAYLOR: Thank you.
12 We will start off with Representative Greiner.
13 REPRESENTATIVE GREINER: Thank you, Mr. Chairman.
14 Over here.
15 AUDITOR GENERAL DePASQUALE: How are you doing,
16 Keith?
17 REPRESENTATIVE GREINER: I'm doing great, Mr.
18 General. Thank you for being here.
19 As you're aware, the last number of years I've
20 been very interested in trying to deal with the municipal
21 pension crisis in the Commonwealth. I know my colleague
22 from York County, Representative Grove, has also been
23 reviewing this.
24 And I wanted to maybe get a quick overview,
25 wanted to get a feel about where we're going. I'm having a
4 1 hard time fixing this problem statewide and getting the
2 support that I need. And maybe you can maybe provide a
3 background. I know your office issues a biannual report
4 which is required going back to 1984.
5 And I wanted you to maybe provide some input.
6 You know we've had a healthier economy.
7 AUDITOR GENERAL DePASQUALE: Right.
8 REPRESENTATIVE GREINER: So I think the numbers
9 might be improving for some municipalities, but we still
10 have a problem actually with some of our larger areas,
11 Chester and Scranton. And still we're dealing with things
12 that -- you know, we've got to deal with this problem.
13 AUDITOR GENERAL DePASQUALE: Right.
14 Three things, Representative. First of all, I
15 want to -- I guess a fourth. First of all, I want to thank
16 you and Representative Grove and a lot of the members in
17 both Chambers that have been committed to this issue because
18 it is a ticking time bomb in Pennsylvania.
19 So let me start off with part of the good news.
20 When the Governor eliminated PERC, we took over a lot of the
21 operations. And while it was a challenge initially -- and
22 again, through bipartisan cooperation here and through the
23 Governor's Office, we have now streamlined a lot of those
24 operations. That did not happen previously. So we're able
25 to get out. We're helping municipalities. It's easier for
5 1 them to get their data in. And we're able to much more
2 efficiently get them their State aid out. So that's good
3 news. We think that's been a win for municipalities.
4 The other good news is that because of the recent
5 economy and stock market, a lot of the funds are healthier
6 now than they had been when I first came into office
7 2013-2014. However, that leads to what is the bad news,
8 which is why this needs to be addressed, and that is that
9 them being -- remember what I said -- healthier. Compared
10 to where we were in '01-'02 and certainly '06 before we had
11 the big stock market, we have not nearly come close on these
12 stock funds of recovering to those levels. So while we're
13 healthier than we were in 2012-2013, not nearly to the level
14 of making me comfortable, which means that if we have
15 another downturn in the economy, the situation will actually
16 be worse than it was originally because the municipality has
17 not recovered.
18 And just so other members of this Committee know,
19 this is not just a Philadelphia or Pittsburgh problem.
20 These are townships and boroughs all over Pennsylvania. And
21 a reason why a lot of municipalities get rid of their police
22 force and go to the State Police, which I know creates
23 another budget issue for the General Assembly and certainly
24 a management issue for the State Police, is that they don't
25 want to have the pension obligations anymore.
6 1 So I do think there are some solutions out there.
2 I did lead a task force on this a couple years ago. I think
3 the more municipalities that could have their management --
4 I'm not saying combine the actual pension, but have
5 Pennsylvania Municipal Retirement System manage the funds,
6 which lowers the fees, gets more money back into the fund,
7 and force a more conservative investment approach, I think
8 it would be better for all taxpayers in Pennsylvania.
9 REPRESENTATIVE GREINER: Just following up on
10 that because I do -- I want to commend you on your report.
11 I guess it goes back to 2015. I think there's a lot of
12 great things in there. I think Representative Grove and I
13 are looking at that and maybe even trying to get some of the
14 more straightforward -- I think we can get bipartisan
15 support on.
16 AUDITOR GENERAL DePASQUALE: Absolutely.
17 REPRESENTATIVE GREINER: Do you have any other
18 recommendations? I agree with you. I think consolidation
19 is not going to fly in a Commonwealth such as ours, you
20 know, when you try to bring a lot of healthy plans together.
21 But is there something that we -- like I said, there's some
22 good recommendations with some of the distressed ones. But
23 is there anything we can do outside of that?
24 At some point, you know, I think it would be good
25 for us to maybe sit down again as session begins.
7 1 AUDITOR GENERAL DePASQUALE: I think, A, I'd
2 certainly be more than happy to sit down with you and any
3 member that's interested. But I throw this out as an idea,
4 which will certainly get my team fully panicked on this, but
5 I think maybe a joint meeting with Urban Affairs and Local
6 Government where we can just have an info session on our
7 report and maybe try to pick three or four ideas that we can
8 accomplish in this term on that and try to ride them
9 through.
10 Look, admittedly some of that stuff is a heavy
11 lift and I get that. But I do think there's some ideas in
12 there that aren't a heavy lift. And maybe we can pick some
13 bipartisan ideas in there that we can drive forward and at
14 least improve the situation.
15 REPRESENTATIVE GREINER: And it's like you had
16 said. There's a number of municipalities statewide that
17 have issues. It's not necessarily each amount but, you
18 know, whether it's funding issues and contract issues and
19 different things like that, it's something that just hasn't
20 gone away because we've had two good years.
21 AUDITOR GENERAL DePASQUALE: Absolutely.
22 REPRESENTATIVE GREINER: Two fairly good years in
23 the stock market.
24 AUDITOR GENERAL DePASQUALE: Absolutely.
25 REPRESENTATIVE GREINER: I look forward to
8 1 continue to work with you on this. I think it's a very
2 critical issue for the Commonwealth.
3 AUDITOR GENERAL DePASQUALE: Absolutely,
4 Representative. Thank you for your leadership. And I look
5 forward to working with you on that as well.
6 REPRESENTATIVE GREINER: I appreciate it.
7 Thank you, Mr. Chairman.
8 MAJORITY CHAIRMAN SAYLOR: Before we move to the
9 next questioner, we've been also joined by Representative
10 Frank Ryan from Lebanon County.
11 With that, we will move to Representative Sanchez
12 for questioning.
13 REPRESENTATIVE SANCHEZ: Thank you, Mr. Chairman.
14 Welcome, General.
15 AUDITOR GENERAL DePASQUALE: Great to see you,
16 Representative.
17 REPRESENTATIVE SANCHEZ: I wanted to thank you.
18 Included in your report was a reference to -- your report,
19 your office's report, on the special report on firearm
20 safety. And I thank you for highlighting the statistics
21 that over the past decade the firearm-related injuries cost
22 Pennsylvania taxpayers about 1.5 billion in health costs
23 because 76 percent of shooting victims were either uninsured
24 or publicly insured.
25 In 2016, more than 1,500 Pennsylvanians died
9 1 because of firearms. On average, that is four funerals a
2 day. And that's from page 13 of your report.
3 Did you want to comment on the report or not?
4 AUDITOR GENERAL DePASQUALE: Obviously, when it
5 comes to the issue of firearms in Pennsylvania, we all know
6 that there are a myriad of opinions.
7 One of the things I tried to stress in my report
8 on firearms in Pennsylvania was focusing on existing laws,
9 how we could better enforce existing laws, and also letting
10 people know the economic impact to our state from what
11 already happened.
12 So for example, two-thirds of firearm deaths in
13 Pennsylvania are suicide-related. So that's something for
14 us to get a grip on. That means that we've got to improve
15 our mental health services. In a lot of rural areas, access
16 to those mental health services is not adequate. We've got
17 to do a better job as a state on that. So I put that out
18 there as one area.
19 The second one is -- and there is -- and again,
20 there's obviously a human toll that is the most important.
21 But just on the money, I was at Einstein Medical Center
22 about two weeks ago. From the Montgomery County
23 Philadelphia Line until you get to Einstein Medical, there
24 are about 290,000 people just in that geographic range that
25 are on Medicaid, 290,000 people, almost equal to the
10 1 population of the city of Pittsburgh. And about 90 percent
2 of the people that come in with a gunshot wound at Einstein
3 Medical have either no insurance or they are on Medicaid.
4 So again, the human toll is dramatic. And one of
5 the things I talked about with a lot of the members of the
6 Trauma Unit there is many of those are obviously
7 drug-related in addition to the firearm-related injury and
8 how many of them keep coming back.
9 And so obviously if you're tragically shot and
10 killed, we're not talking about that. But there are a lot
11 of gunshot wounds where people keep coming back because
12 we're not doing an effective enough job of trying to get
13 people out of that -- what in many times is an addictive
14 lifestyle.
15 REPRESENTATIVE SANCHEZ: Thank you.
16 And I think there were great recommendations that
17 came out of the report. Have you heard any feedback from
18 some of the stakeholders that those were directed at?
19 AUDITOR GENERAL DePASQUALE: I think the best
20 feedback I got -- and I say this not to be tongue in cheek
21 in any way -- is that there were a couple people that
22 contacted me directly that are staunch Second Amendment
23 supporters. And they said when they went to start to read
24 it, they thought they were going to hate it. And when they
25 read it and read all the recommendations, they said, yeah,
11 1 we can support the vast majority of these.
2 I don't think that my report should be viewed as
3 a left/right issue. Obviously, we all have our opinions on
4 that. But that's why I focus on better enforcement of
5 existing laws and how we can reduce gun deaths in
6 Pennsylvania.
7 REPRESENTATIVE SANCHEZ: Okay.
8 Thank you, General.
9 Thank you, Mr. Chairman.
10 AUDITOR GENERAL DePASQUALE: Thank you.
11 MAJORITY CHAIRMAN SAYLOR: Representative Grove.
12 REPRESENTATIVE GROVE: Thank you, Mr. Chairman.
13 Good morning, Gene. How are you?
14 AUDITOR GENERAL DePASQUALE: Good to see you.
15 How's it going, Seth?
16 REPRESENTATIVE GROVE: Good.
17 When you started your tenure as Auditor General,
18 you had a backlog of audits, correct?
19 AUDITOR GENERAL DePASQUALE: Correct.
20 REPRESENTATIVE GROVE: That's been closed?
21 AUDITOR GENERAL DePASQUALE: Right.
22 REPRESENTATIVE GROVE: Your employee complement
23 has dropped from -- is it over 700 to about 400?
24 AUDITOR GENERAL DePASQUALE: When I came in, it
25 was just under 600. The previous Administration had in the
12 1 mid-sevens. And now we're down to about, you know, 450.
2 Actually, slightly under that.
3 REPRESENTATIVE GROVE: And you're at a level
4 where you can complete kind of the mandated audits, all the
5 fire and school and --
6 AUDITOR GENERAL DePASQUALE: Yes.
7 REPRESENTATIVE GROVE: How many audits do you
8 normally do?
9 AUDITOR GENERAL DePASQUALE: We do about 5,000
10 audits a year.
11 REPRESENTATIVE GROVE: Okay.
12 In your budget from last year, there was a line
13 for special financial audits.
14 AUDITOR GENERAL DePASQUALE: Yes.
15 REPRESENTATIVE GROVE: My understanding is that
16 was a legislative add if my memory serves me.
17 AUDITOR GENERAL DePASQUALE: Yes. We are set to
18 launch that audit. But, yes, that came from the Senate and
19 it was a legislative add-on to our budget.
20 REPRESENTATIVE GROVE: Okay. So that will be
21 completed this fiscal year?
22 AUDITOR GENERAL DePASQUALE: This fiscal year,
23 yes.
24 REPRESENTATIVE GROVE: Okay. That brings in
25 another question. Your office has probably seen an increase
13 1 of legislative requests for audits, correct?
2 AUDITOR GENERAL DePASQUALE: There is a very
3 strong inclination to believe that's accurate, yes. About
4 32 just in the past year.
5 REPRESENTATIVE GROVE: Okay. So it's a good
6 thing as members are looking at the finances and the
7 performance of State agencies. It does another thing. It
8 puts added stress. That's the first time I've actually seen
9 legislative approval outside of the Susquehanna River Basin
10 Commission and was it the Delaware River Basin?
11 AUDITOR GENERAL DePASQUALE: It was a two-basin
12 commission.
13 REPRESENTATIVE GROVE: So those are the only
14 three, quote, funded audits from the legislative branch?
15 AUDITOR GENERAL DePASQUALE: Right.
16 REPRESENTATIVE GROVE: How much additional
17 pressure is that putting on? It's not like we're asking for
18 a contract audit. If you can kind of break it down of cost
19 of legislative requests coming into your office?
20 AUDITOR GENERAL DePASQUALE: Let me put it in a
21 broader context. And then if we want to get it down even
22 further, we can.
23 According to Governing Magazine, my department
24 has been cut more than any other State Auditor in the entire
25 United States. Despite that, we now are 30 percent more
14 1 efficient per employee, per year. In not this past budget
2 but the budget before, my department was the only State
3 agency in the Commonwealth that received any cut and we were
4 cut 7 and a half percent. Despite that, we still met every
5 single obligation.
6 Part of this is I've eliminated the car fleet.
7 You know, we went from -- 90 percent of our costs were
8 employee driven and now we're about 97 percent. But all of
9 the audits we do are intended to help drive change in
10 Pennsylvania.
11 You know, some of them find everyone is doing
12 fine. But a lot of them, as you know -- and you've been
13 about as good as anybody in the entire state at pointing out
14 what our audits show and how it can improve state functions.
15 The more requests we get with the funding, the
16 more we have to say no to things because we are a
17 people-driven entity, meaning we have to have human beings
18 to do the audit.
19 So if there are -- and again, we have 32 requests
20 from the Legislature right now that we are looking at. The
21 more funding we get, the more our ability to do those
22 audits. But I also want to put a word of caution in. And
23 that is, it is more helpful if I'm actually able to add some
24 staff as opposed to minimize the staff reductions.
25 So if we were to get added, for example, $1
15 1 million, I could hire about 10 new people. And that would
2 be about three audits, three additional audits, that we
3 could do. So if in the work of the General Assembly you
4 think there's three high-priority audits that you want us to
5 do, my response is, happy to do them but we need some staff
6 to do that. If we can add about 10 people, that would
7 enable us to do it.
8 REPRESENTATIVE GROVE: Okay. And I know there's
9 some General Assemblies that do have audit provisions within
10 the Legislative Branch. I'm not sure we need to necessarily
11 start a new wing with the working relationship that we have
12 with you, but I would love to continue that conversation of
13 trying to get a better approval process and making sure
14 legislative requests are done efficiently and without
15 necessarily hurting the other thousand audits that you have
16 to do.
17 AUDITOR GENERAL DePASQUALE: My pleasure.
18 And I also know that each of you from your
19 districts, you hear from the ground floor what constituents
20 are concerned about, which means a lot of those ideas are
21 good ideas.
22 REPRESENTATIVE GROVE: Thank you.
23 MAJORITY CHAIRMAN SAYLOR: Representative
24 Donatucci.
25 REPRESENTATIVE DONATUCCI: Thank you, Mr.
16 1 Chairman.
2 And thank you, General, for being here today.
3 AUDITOR GENERAL DePASQUALE: Absolutely. Thank
4 you.
5 REPRESENTATIVE DONATUCCI: I want to discuss
6 Pharmacy Benefits Managers. Okay. It's my understanding
7 that they administer prescription drug plans to, you know,
8 different health plans to self-insured employee plans. They
9 look for cheaper ways, I think. They recommend home
10 delivery. They negotiate drug rebates.
11 But it's also my understanding that there's a
12 pharmacy chain that is also a PBM. So your office completed
13 and released a report on Pharmacy Benefit Managers in
14 December. Very few people seem to have a clear idea of what
15 they are and what role they play in our health care system.
16 So could you please take a moment and explain
17 what PBMs are and summarize the findings of your audit?
18 AUDITOR GENERAL DePASQUALE: First of all, there
19 is one thing that we did last year -- and I'd like to think
20 there's more than one. But one thing that I believe is a
21 definition of non-idealogical and can help the State budget,
22 help lower prescription drug prices, and bring more
23 transparency to the pharmaceutical industry, it would be
24 looking at our report on Pharmacy Benefit Managers and how
25 we can move Pennsylvania forward.
17 1 So for starters, Pharmacy Benefit Managers are
2 the middle people in how you purchase your prescription
3 drugs. Most people, you know, they hear about big Pharma
4 who make the drugs, get the patents, and do the research.
5 Then you go to the retail and buy it.
6 The Pharmacy Benefit Managers are these middle
7 people that negotiate with big Pharma and with the retail
8 entities on really what drugs are going to be on the
9 formulary for your insurance plan and also what the price is
10 and what the rebates are going to be.
11 This is a critical point to keep in mind. That
12 in 2012, the State spent about $1 billion to Pharmacy
13 Benefit Managers through MCOs, Managed Care Organizations.
14 And because the State contracts with MCOs and not PBMs --
15 and sorry for all the alphabet soup here. If I get off
16 kilter, tell me to go back through -- the Managed Care
17 Organizations that the State contracts with, they then
18 contract with the Pharmacy Benefit Manager to do this work.
19 Here's the problem. Because of that, I'm not
20 able to audit the Pharmacy Benefit Managers, even though in
21 2012 they got about $1 billion in State tax dollars and in
22 2017, yes, $3 billion. And I have yet to find $2 billion in
23 benefit to the people of Pennsylvania for that increase.
24 So I've called for more accountability for
25 Pharmacy Benefit Managers, I think whether it's the
18 1 Department of Human Services or my department, to at least
2 have the authority to oversee that portion of money because
3 this is part of public healthcare now. The cost of
4 prescription drugs is directly tied to the health of the
5 people of Pennsylvania.
6 And the No. 1 -- or I'd say one of the top stock
7 increases over the last 10 years have been these
8 corporations. Why? Because they are making so much money
9 and it's out of the public light. Regardless of what we
10 feel about big Pharma -- and we all probably have a
11 multitude of views on that -- they do have to produce the
12 drugs and they do have to do the research.
13 The retail entities, particularly our independent
14 pharmacists, are getting killed by these entities, basically
15 being forced out of business, which I think is going to hurt
16 competition all through Pennsylvania, particularly in our
17 small towns. Meanwhile, the Pharmacy Benefit Managers are
18 not getting the appropriate scrutiny I believe they deserve.
19 And I think that that's something that both sides of the
20 aisle can and I think should embrace in this legislative
21 term.
22 REPRESENTATIVE DONATUCCI: Okay. So what kind of
23 impact is it causing to our budget?
24 AUDITOR GENERAL DePASQUALE: They will say that
25 it is leading to lower drug prices. I am about as convinced
19 1 that we are getting lower drug prices as I am convinced that
2 the Pirates are going to sign Bryce Harper. We can all
3 hope. We can all pray. But it's not happening, right?
4 But I also do know this. That the cost to the
5 General Assembly continuously rises because of this. And I
6 just think from a common-sense standpoint if I'm going to
7 spend $2 billion of taxpayers' money, I think having
8 somebody from the State, again whether it's myself or DHS,
9 have the ability to look at the books is only good
10 government.
11 REPRESENTATIVE DONATUCCI: Okay. So then what
12 kind of savings can be generated through reforms to the PBM
13 business model and what can we, as the Legislature, do to
14 help you?
15 AUDITOR GENERAL DePASQUALE: I think there's
16 probably two things. Number 1, if we bring more
17 accountability and transparency to them, I think we can help
18 hold the line on prices and actually increase the rebates
19 and ensure more competition. I do not like some of the big
20 PBMs. What they do is they lower the rebate for some
21 retailers. And then two weeks later they'll send a letter
22 to that retailer saying, hey, by the way, we can buy you
23 because we know it's tough for you businesswise.
24 The reason why it's tough for them businesswise
25 is because that bigger operation is lowering their ability
20 1 to make any money.
2 REPRESENTATIVE DONATUCCI: Thank you.
3 I'm out of time.
4 Thank you, Mr. Chairman.
5 AUDITOR GENERAL DePASQUALE: I see you're really
6 being tough with the lights now.
7 MAJORITY CHAIRMAN SAYLOR: I didn't know we were
8 going to talk about the Pirates and the Phillies.
9 AUDITOR GENERAL DePASQUALE: Well, I know my team
10 is shocked that I brought up a sports analogy.
11 MAJORITY CHAIRMAN SAYLOR: General, I kind of
12 agree with you. But the Phillies are hoping -- certain
13 people are hoping the Phillies get that.
14 Moving on to Representative James.
15 REPRESENTATIVE JAMES: Good afternoon.
16 AUDITOR GENERAL DePASQUALE: Good to see you,
17 Representative.
18 REPRESENTATIVE JAMES: Circling back to some
19 discussion on pensions. I want to move up the ladder a
20 little bit and talk a little bit about PSERS and SERS. And
21 I think in search of best practices a couple years ago, you
22 conducted performance audits of both of those.
23 As a result of that, your office made certain
24 recommendations which would improve, theoretically improve,
25 what they're doing. I'm wondering if you know if either of
21 1 those organizations have followed any of your
2 recommendations and what were the outcomes.
3 AUDITOR GENERAL DePASQUALE: In my last two years
4 in office -- so obviously we started some of this work.
5 We're going to be doing a lot of follow-up reports on the
6 audits I did in my first six years and see how well the
7 recommendations have been implemented. SERS and PSERS are
8 two of those entities that we'll be doing follow-up reports.
9 So I don't want to, you know, prejudge what we're
10 going to find but I am convinced that both entities can and
11 should be doing better.
12 REPRESENTATIVE JAMES: Would it be okay if you
13 gave us, say, two examples of recommendations which you have
14 made that we might look into?
15 AUDITOR GENERAL DePASQUALE: I still think the
16 fee structure is too high at both entities. I have not been
17 for saying put all the money in passive funds at that level.
18 Some municipalities I think that's appropriate. But I do
19 think more needs to be moved into more stock indexed funds
20 to lower the fee structure. So that's one area where I
21 think on the fee structure it could be better.
22 I also think there should be more investment
23 experience at the board level for both. I mean, the people
24 that have done this before but should be doing this on
25 behalf of the public, obviously making sure that it's people
22 1 that have -- that aren't doing it for a company, but having
2 people with that type of experience that, to be blunt, know
3 the game of how some of these companies, how these
4 investment firms make money so they can help the State do a
5 better job negotiating to lower those fees I think would be
6 a win for the taxpayers as well.
7 REPRESENTATIVE JAMES: I would agree with that.
8 What kind of background did you discover on some
9 of the Board members that were offering their expertise?
10 AUDITOR GENERAL DePASQUALE: I just think
11 regardless of -- I just think it's a pattern that more
12 political appointments over the last -- I think since those
13 boards have been created. And that's not to say they're not
14 good people. I think there's a lot of good people in there.
15 I just don't think they have expertise.
16 Again, I think there should be a balance. But I
17 think more expertise in those areas would be helpful.
18 REPRESENTATIVE JAMES: Right. And years of it.
19 Thank you very much.
20 AUDITOR GENERAL DePASQUALE: Sure.
21 REPRESENTATIVE JAMES: Thank you, Mr. Chairman.
22 MAJORITY CHAIRMAN SAYLOR: Representative
23 Bullock.
24 REPRESENTATIVE BULLOCK: Thank you, Mr. Chairman.
25 Good afternoon. How are you doing, Auditor
23 1 General?
2 AUDITOR GENERAL DePASQUALE: Good to see you,
3 Representative Bullock.
4 REPRESENTATIVE BULLOCK: I'm going to start my
5 questions with my usual question around workforce diversity
6 within your agency. Can you share briefly those numbers in
7 comparison to last year?
8 AUDITOR GENERAL DePASQUALE: Yes. So we've
9 increased slightly in each area on the diversity side. We
10 are at about 13 percent of our employees, not including
11 white females, are minorities. And we are at about just
12 under 30 percent of management employees. And on the Board
13 side -- when I say the Board, meaning our actual bureau
14 directors, we have doubled that.
15 Now, I want to say in full disclosure, that's one
16 to two out of six, because I shrunk from eight to six, our
17 bureaus and went from one to two on minorities, again, not
18 including white females.
19 REPRESENTATIVE BULLOCK: Okay. What is your
20 number on women altogether?
21 AUDITOR GENERAL DePASQUALE: We are just under 50
22 percent. I think it's at a little over 46 percent of female
23 employees. And that number has steadily risen during my
24 tenure.
25 REPRESENTATIVE BULLOCK: Thank you .
24 1 I appreciate your commitment to diversity. As
2 the Treasurer mentioned earlier this morning, we all benefit
3 from diversity in our departments.
4 AUDITOR GENERAL DePASQUALE: Absolutely.
5 REPRESENTATIVE BULLOCK: Switching gears to
6 another set of questions. I took a look at your report over
7 the last couple of months and particularly in Philadelphia
8 looking at issues and concerns with our local DHS. It's
9 concerning. I have a lot of issues in regards to
10 particularly the disproportionate number of children of
11 color who are in the system and every step of the way are
12 unfortunately at the wrong end of any statistic, whether
13 it's through being involved in the system, being removed
14 from their families, their families not receiving the
15 services they need, and all of the way through foster care
16 placement or group home placement.
17 I also noticed that you were looking recently to
18 continue that effort by looking at the Bureau of Hearings
19 and Appeals. Can you tell me your reasoning behind that and
20 what are some of your concerns as you move forward with this
21 very important work?
22 AUDITOR GENERAL DePASQUALE: First of all, we
23 should all be outraged at how many citizen children in
24 Pennsylvania, city, suburban, rural, are not getting the
25 necessary protection. And these are kids in the shadows of
25 1 our society. It's simply outrageous. So we've obviously
2 done a lot of work on that. I know the General Assembly has
3 been looking at the report, the Administration has, the
4 Department of Human Services has, and we've been visiting
5 counties all over the State to at least raise awareness.
6 It started with my audit of ChildLine where we
7 found 58,000 unanswered phone calls at the Child Abuse
8 Hotline. Because of the good work of my team and also a
9 bipartisan commitment of the General Assembly, we fixed
10 ChildLine. We made it a lot better. It's not perfect. I
11 know nothing will ever be perfect.
12 Now we've stemmed out across the State to try to
13 improve the county structure. The Appeals Board audit is
14 very simple. As challenging as it is for many of our
15 dedicated caseworkers, regardless of what part of
16 Pennsylvania you're in, they are overworked and underpaid,
17 regardless of what part of Pennsylvania you are.
18 When they finally make a decision to remove a
19 child from the home, there certainly should be an appeal
20 process. There's no question about it. But this Appeals
21 Board, while hearing thousands of other appeals, takes on
22 average, I think, somewhere in the neighborhood of 20
23 minutes to overturn the vast majority of those cases from
24 the actual field workers.
25 Nobody even knows this Board exists. I'm going
26 1 to put a spotlight on this to find out why are they
2 overturning so many of these caseworkers' decisions and what
3 are the qualifications of the people on this Board, what is
4 their workload, and are they able to competently -- I'm not
5 saying they're not competent people -- but are they able to
6 competently look at each of those cases and make a
7 thoughtful decision?
8 REPRESENTATIVE BULLOCK: And I think what's very
9 important as we go through those processes, whatever those
10 decisions are, particularly for keeping children in their
11 homes, which I think is what we would like to do most --
12 AUDITOR GENERAL DePASQUALE: Absolutely.
13 REPRESENTATIVE BULLOCK: -- we would like to find
14 a way to keep children with their family members in their
15 homes and with kinfolk, that we do that, providing families
16 with adequate support so that they can properly care for
17 their children and be a family unit.
18 AUDITOR GENERAL DePASQUALE: Representative,
19 that's a great point. But one of the things we're going to
20 look at is when the Board does overturn a decision of a
21 caseworker, are we just sending that kid back into the home
22 assuming that everything is fine or is there some support
23 flow in there? Because even if the decision to overturn it
24 is correct -- and again, we have to be open-minded about
25 that going into this. But there would have been at least a
27 1 reason why the caseworker pulled the child out because that
2 doesn't just happen by some 24-year-old young adult walking
3 in saying, hey, I'm pulling the kid out. There's a whole
4 process that goes with that.
5 If that child is removed from the home and the
6 Appeals Court puts that child back in, we've got to make
7 sure at least something is following that child back into
8 the home.
9 REPRESENTATIVE BULLOCK: Absolutely.
10 Thank you.
11 AUDITOR GENERAL DePASQUALE: Thank you.
12 REPRESENTATIVE BULLOCK: Thank you, Mr. Chairman.
13 MAJORITY CHAIRMAN SAYLOR: General, I wanted to
14 just add on to something earlier. You talked about the
15 pharmacy managers.
16 AUDITOR GENERAL DePASQUALE: Yes.
17 MAJORITY CHAIRMAN SAYLOR: I just wanted to let
18 you know I totally agree with you. I think many of our
19 pharmacists across the State are very concerned about that.
20 If you have legislation that you would like to propose to
21 try and get at auditing those groups of pharmacy managers,
22 please forward that to the Appropriations Committee. We'd
23 be glad to take a look at that as we move forward.
24 AUDITOR GENERAL DePASQUALE: I see a lot of my
25 team writing the notes down now. We will be more than happy
28 1 not only to come up with ideas but come over and meet with
2 staff and members.
3 MAJORITY CHAIRMAN SAYLOR: I don't know if you
4 want to meet with the Philly fan.
5 AUDITOR GENERAL DePASQUALE: If they get Harper,
6 I may not. But, yes, absolutely. It's something that we
7 will absolutely do with them.
8 MAJORITY CHAIRMAN SAYLOR: Sure. Great.
9 Moving on to Representative Fritz.
10 REPRESENTATIVE FRITZ: Thank you, Mr. Chairman.
11 Good afternoon, Auditor General.
12 AUDITOR GENERAL DePASQUALE: Good to see you,
13 Representative.
14 REPRESENTATIVE FRITZ: Your office recently
15 conducted audits of two of the Commonwealth's River Basin
16 Commissions. Can you kindly and briefly explain your top
17 one or two take-aways from those audits?
18 AUDITOR GENERAL DePASQUALE: I would say more of
19 the Susquehanna River Basin Commission than the other basin
20 commission. But I am glad that this General Assembly
21 basically came to me and asked me for those audits because
22 that Basin Commission was running amok, spending thousands
23 of dollars on shrimp and salmon and holiday parties.
24 Look, I'm pro people having a holiday party. But
25 why -- the business owner s of those basin commissions were
29 1 buying lobster for those Board meetings and their holiday
2 parties and giving out gift cards. I mean, I thought heads
3 should have been rolling. I mean, it's a disgrace.
4 REPRESENTATIVE FRITZ: Okay. Well, thank you for
5 that theme of excess. And along those very lines, was there
6 notice that both basin commissions have been accumulating
7 cash at a rapid pace yet they continue to demand more and
8 relatedly was there an examination of the fact that both
9 commissions sit on tens of millions of dollars in unreserved
10 funds?
11 AUDITOR GENERAL DePASQUALE: We did. And I will
12 just say, similar to school districts, every entity that is
13 a government entity having some level of cash reserves is
14 appropriate in case the down times happen.
15 I thought both commissions were excessive. But I
16 particularly focused on the SRBC, that I thought their
17 administrative team was sorely lacking.
18 REPRESENTATIVE FRITZ: And, Mr. Auditor General,
19 why should Pennsylvania taxpayers continue to fund agencies
20 that have such substantial reserves?
21 AUDITOR GENERAL DePASQUALE: Their job is to make
22 sure that we have clean water in those areas, not buy
23 lobster for a bunch of staffers. And they have lost sight
24 of their mission. They have lost sight of why they were
25 created. And they need to get back on their mission and
30 1 focusing on the people of Pennsylvania and particularly the
2 people in that region and not having the business owners of
3 those regions, you know, buying them lobster and shrimp.
4 REPRESENTATIVE FRITZ: Understood.
5 Mr. Auditor General, was attention paid to the
6 fact that a basin commission such as the Delaware River
7 Basin accepts large amounts of money from outside
8 non-government agencies that clearly has special interest?
9 Furthermore, some of these same entities that provide
10 funding to the Delaware River Basin Commission are
11 simultaneously funding campaigns to sue that same agency.
12 Would you agree that government agencies should
13 be untethered by such agendas?
14 AUDITOR GENERAL DePASQUALE: The best way for me
15 to answer that is, if people were funding the Department of
16 the Auditor General that also had an impact on entities that
17 I would or would not audit, that would be highly
18 inappropriate.
19 REPRESENTATIVE FRITZ: Okay. And along those
20 same lines, what would you recommend that we do to prevent
21 such conflict and help instill and safeguard fairness and
22 objectivity by any such regulatory agency?
23 AUDITOR GENERAL DePASQUALE: I think first of all
24 they should have to abide by whatever ethics rules and code
25 of conduct that apply to the Governor's Office when it comes
31 1 to gifts and that type of thing. That would be No. 1. And
2 if they aren't or if they already are under those rules and
3 the employees violated it, they should be fired. So I start
4 off with that.
5 Two, before they're allowed to raise any fees,
6 there should be a question of why they didn't tap into the
7 reserve more. And I think the Legislature has the right to
8 hold them accountable for each of those entities.
9 And I think on the third part, if there are
10 entities that are funding them that also have a conflict of
11 interest, that should be stopped immediately.
12 REPRESENTATIVE FRITZ: Do you feel as though
13 Pennsylvania's withdrawal from such entities would be
14 warranted?
15 AUDITOR GENERAL DePASQUALE: No. I think that
16 reforming them as opposed to ending them would be a better
17 approach.
18 REPRESENTATIVE FRITZ: Thank you for your time.
19 No further questions.
20 AUDITOR GENERAL DePASQUALE: Thank you.
21 REPRESENTATIVE FRITZ: Thank you, Mr. Chairman.
22 MAJORITY CHAIRMAN SAYLOR: Representative Gainey,
23 please.
24 REPRESENTATIVE GAINEY: Thank you.
25 Good afternoon, Auditor General. How are you,
32 1 sir?
2 AUDITOR GENERAL DePASQUALE: I'm doing great,
3 Representative. How are you doing?
4 REPRESENTATIVE GAINEY: Always good to see you.
5 AUDITOR GENERAL DePASQUALE: Thank you.
6 REPRESENTATIVE GAINEY: On a report that you put
7 out about if we legalize cannabis, it would bring us $600
8 million, my first question to you is, if we decriminalize
9 small amounts of marijuana, what is the savings that we will
10 see from the decriminalization of cannabis?
11 AUDITOR GENERAL DePASQUALE: First of all, let me
12 say because we are auditors, I need to be technically
13 accurate.
14 REPRESENTATIVE GAINEY: That's fine.
15 AUDITOR GENERAL DePASQUALE: It would be 581
16 million.
17 REPRESENTATIVE GAINEY: 581 million.
18 AUDITOR GENERAL DePASQUALE: So I need to be --
19 because they'll say, why didn't you -- you know, I don't
20 want to have those conversations. Well, sometimes I do but
21 it's because I screw up. This one, it's 581 million. And
22 we base it on what our current tax rates are and anticipated
23 usage.
24 Philadelphia's decriminalization, just
25 Philadelphia alone, like a savings of $4 million. So if you
33 1 extrapolate that out populationwise across Pennsylvania,
2 we're looking at, I would say, at least ten to fifteen
3 million dollars in savings just from decriminalizing.
4 REPRESENTATIVE GAINEY: As we talk about it, we
5 look -- I know part of it talked about the population in
6 Colorado compared to the population in Pennsylvania that
7 helped you come up with that number. Can you discuss that a
8 little bit, please?
9 AUDITOR GENERAL DePASQUALE: Yes. So we looked
10 at our current tax rates, what current studies show of
11 already existing adult usage, and then we took what Colorado
12 was pulling in in revenue -- and we're two and a half times
13 their size -- and those three items together is how we came
14 up with the 581 million.
15 REPRESENTATIVE GAINEY: And regardless of some of
16 the savings that we would see through decriminalization or
17 legalization, what other savings will we see in regards to
18 incarceration costs going down? whether that's at the state
19 and county level.
20 AUDITOR GENERAL DePASQUALE: Every county that
21 has to deal with this we obviously see savings. And let me
22 start off with, obviously I'm the numbers person and that's
23 what drives our mission.
24 REPRESENTATIVE GAINEY: Yes.
25 AUDITOR GENERAL DePASQUALE: I also think there's
34 1 just another way to look at this, too. And that is I
2 believe -- I know not everyone does -- but I believe
3 regulation and taxation is a better way to manage the issue.
4 I believe that if we do this right, we can
5 actually reduce teen access because if you now have
6 legitimate businesses getting licensed by the State selling
7 a product that we know is safer -- I'm not -- like, we all
8 know cigarettes can be dangerous. People shouldn't smoke.
9 We know alcohol abuse. There's a lot of things that are
10 legal that, you know, are not 100 percent safe.
11 And I would put marijuana in the exact same
12 thing. There are health benefits but there's also some
13 negatives on it, too. I've never said this is a 100 percent
14 positive zero-negative issue.
15 On balance to me it absolutely makes sense to go
16 down this path. But regulation taxation is actually a
17 better way to manage a complicated issue in my opinion.
18 REPRESENTATIVE GAINEY: And I want to thank you
19 because I agree. I mean, there's no perfect piece of
20 legislation, but it is about what moves humanity forward.
21 And I often say, I can't remember a time in American history
22 where people didn't get high.
23 But if we want to safeguard against our community
24 and the humanitarian of Pennsylvania, then we have to look
25 at what deregulation has done. I haven't seen where it
35 1 saved lives. I've seen where it's brought more death. So
2 changing the business model on any other industry would have
3 already been done. And I think that we have to give serious
4 consideration to how we change it here.
5 The second question that I have is in regards to
6 you talked about the shootings, the young children
7 shootings. Can you talk about in regards to the next
8 generation, meaning our youth, and the amount of shootings
9 that they're dealing with today? What is the increase of
10 mental health in the next ten years of young people that
11 have been impacted by the death of someone that they love
12 through the gun shootings?
13 AUDITOR GENERAL DePASQUALE: First, I'll visit --
14 and I recommend this. Visit any trauma unit in the State
15 and they will tell you how many kids they have to deal with,
16 whether they lost a parent, a brother, sister, a loved one.
17 We've all been teenagers at some point. And we
18 all know that there are ups and downs in teen life. And
19 some of us have had to deal with incredible tragedies. You
20 know, sometimes unfortunately that's part of life.
21 Any kid that sees a shooting, you know, we can
22 say, be tough about it. And there's things that, yeah, some
23 of us at some point in our life had to pick yourself up off
24 the mat and keep charging. But there is a huge cost for
25 young people dealing with this violence in their
36 1 neighborhoods, well beyond dollars.
2 Some of the experts, you know, call it -- they
3 say we have got to do a better job in our schools of
4 trauma-informed education, that the kids, after dealing with
5 some of these shootings, etc., then come in and we, you
6 know, sometimes expect them to do well in Algebra the next
7 day. Some kids can. I mean there are some human beings
8 that just have that ability.
9 And we sometimes put those individuals up on a
10 pedestal and say everyone needs to be like them. The
11 individuals that can just sort of move that aside and move
12 on, they are the minority.
13 REPRESENTATIVE GAINEY: I'm a numbers guy. And
14 I'm glad that you said that. As a numbers guy, is that
15 something that we as a Legislature need to pay attention to
16 in regards to increasing our appropriations to mental health
17 knowing that this population is growing in regards to young
18 children dealing with posttraumatic stress?
19 AUDITOR GENERAL DePASQUALE: I would say the
20 short answer is yes. But also it's beyond just money. It's
21 better coordination between our school districts and our
22 mental health facilities in each of the counties. Better
23 coordination there, yes. I think funding is part of it but
24 we also need better coordination.
25 A lot of school counselors and even students in
37 1 these schools know the challenges some of these kids face
2 and the connection between them, and the mental health
3 access in the county sometimes is lacking. That has to be
4 improved.
5 REPRESENTATIVE GAINEY: As always, Auditor
6 General, thank you.
7 AUDITOR GENERAL DePASQUALE: Thank you,
8 Representative.
9 MAJORITY CHAIRMAN SAYLOR: Representative
10 Rothman.
11 REPRESENTATIVE ROTHMAN: General, good afternoon.
12 AUDITOR GENERAL DePASQUALE: Good afternoon.
13 REPRESENTATIVE ROTHMAN: Thank you for being
14 here.
15 AUDITOR GENERAL DePASQUALE: Absolutely.
16 REPRESENTATIVE ROTHMAN: A followup to
17 Representative Gainey's question about legalization of
18 recreational marijuana. You had a $581 million fund. About
19 half that would keep Harper in Washington. But what rate
20 are you presuming that and what's the total volume of the
21 industry?
22 AUDITOR GENERAL DePASQUALE: We assume the same
23 rate as cigarettes right now. That was the tax rate we used
24 in the additional sin tax that are put on cigarettes and
25 there was a survey done that I don't have in front of me but
38 1 we can get you the specifics that already about 9 percent of
2 Pennsylvania adults, adult meaning 18 or older, already
3 consume marijuana.
4 REPRESENTATIVE ROTHMAN: But the cigarette tax is
5 based on a per pack or per cigarette in a pack. How do you
6 intend to tax?
7 AUDITOR GENERAL DePASQUALE: We took a best
8 estimate of how it would be sold.
9 REPRESENTATIVE ROTHMAN: But is it a percentage?
10 I mean, is it a percentage of the total? I mean, if you're
11 using 6 percent, we're talking about $10 billion. What's
12 the --
13 AUDITOR GENERAL DePASQUALE: No. Obviously that
14 would be up to the General Assembly to decide the tax rate.
15 We just took an estimate based on that 9 percent and tried
16 to use the sin tax as it already exists. And then also use
17 what Colorado pulls in already, which is about 250 million.
18 And again we multiplied that by 2.5.
19 REPRESENTATIVE ROTHMAN: Okay. Thank you.
20 Moving on. In April 2018, the Commonwealth,
21 acting through the Department of General Services, entered
22 into a $201 million certificate of participation financing
23 agreement with the Municipal Real Estate Funding LLC.
24 During last year's budget hearings, members of
25 the Appropriations Committee asked a lot of questions about
39 1 the Governor's proposal.
2 The lease and the statutory authority to enter
3 into the lease was never clearly explained by the
4 Administration.
5 Earlier this morning I asked some questions of
6 the Treasurer about the interest rate being paid, about the
7 fees being charged, and about the formula used in selecting
8 the Municipal Real Estate Funding LLC and the large fees
9 that they generated. It's about 5 percent interest over the
10 27 years.
11 Would you consider auditing this transaction on
12 behalf of the General Assembly?
13 AUDITOR GENERAL DePASQUALE: That would be a good
14 item to discuss with the General Assembly. Certainly we'd
15 be interested in looking at it.
16 REPRESENTATIVE ROTHMAN: Thank you.
17 Thank you, Mr. Chairman.
18 MAJORITY CHAIRMAN SAYLOR: Representative
19 McCarter.
20 REPRESENTATIVE McCARTER: Thank you, Mr.
21 Chairman.
22 Again, welcome, Auditor General. Again, I want
23 to thank you for helping get Andrew McCutchen also on the
24 Phillies. That was great.
25 AUDITOR GENERAL DePASQUALE: We are doing our
40 1 part.
2 REPRESENTATIVE McCARTER: He's a great part. And
3 we look forward to Bryce as well.
4 If I could, you recently announced that you were
5 going to be looking and preparing a special report dealing
6 with climate change. I was hoping today a little bit to
7 explore that with you. If you could give us kind of an
8 indication of what the scope and focus of that report will
9 be.
10 AUDITOR GENERAL DePASQUALE: The State has a
11 Climate Change Advisory Panel that already exists. That was
12 created in about 2007-2008. And so we're basically going to
13 be reviewing the work that they do in coordination with some
14 of the other legislative and executive decisions that have
15 been made over the last decade, first of all to see what the
16 economic impact of the State is and is the State doing what
17 it should be doing addressing it or if the State should be
18 doing more and looking at specifically again the Climate
19 Change Advisory Panel.
20 There may be limits to what the State can do.
21 But we want to at least see if the State is maximizing its
22 efforts.
23 REPRESENTATIVE McCARTER: Okay. So if I can take
24 from that then that you would hope to -- because of the
25 extreme weather events and so forth that are happening and
41 1 you'll able to make some analysis of what the costs are
2 directly to the State. As we look at a report in the
3 Inquirer today, it suggested that, in fact, our climate
4 within the next 55 years will end up being very similar to
5 that and probably Memphis, Tennessee, 6 and a half degrees
6 higher. That's the type of thing you'll be looking at?
7 AUDITOR GENERAL DePASQUALE: I want to be clear.
8 We are not scientists. We do want to look at the data that
9 exists. We want to be scrupulous about being fair and
10 open-minded about it. But, yes, part of what we anticipate
11 to be the cost to the State of storm levels rising in the
12 future will be something that we'll be examining.
13 REPRESENTATIVE McCARTER: Okay. Thank you very
14 much. I appreciate that.
15 AUDITOR GENERAL DePASQUALE: Sure.
16 REPRESENTATIVE McCARTER: Thank you, Mr.
17 Chairman.
18 MAJORITY CHAIRMAN SAYLOR: Representative Gabler.
19 REPRESENTATIVE GABLER: Thank you, Mr. Chairman.
20 And, General, good afternoon. It's great to see
21 you here.
22 AUDITOR GENERAL DePASQUALE: Thank you.
23 REPRESENTATIVE GABLER: I wanted to ask a
24 question about a program that received a bit of scrutiny in
25 the General Assembly last year. I wanted to highlight it a
42 1 little bit.
2 Up in my neck of the woods there was a
3 transaction that was conducted by PENNVEST. It was a $50
4 million, 1 percent loan, that was granted to a private
5 out-of-state investment firm. And great concern has been
6 raised regarding the legitimacy of this transaction and
7 compliance with PENNVEST's enabling statute, and the size
8 and scope of a $50 million single PENNVEST transaction is
9 certainly mind-boggling and troubling.
10 And I certainly know that there's a lot of
11 in-state entities that have expressed some angst over this,
12 considering the fact that here's an out-of-state firm that
13 got $50 million back by the taxpayers of Pennsylvania at a 1
14 percent rate and there's a lot of instate firms that said,
15 well, jeez, I wish I could have competed for that.
16 So in response to that, the General Assembly,
17 specifically the House of Representatives, last year passed
18 House Resolution 948 by unanimous vote of 192 to zero asking
19 your office to have a look at this and all of the nonpoint
20 source projects that PENNVEST has authorized, to review them
21 for legitimacy to make sure that we're doing things the
22 right way and considering the importance of water and sewer
23 infrastructures to communities across the Commonwealth.
24 Is this a priority of your office? Can you give
25 us a little bit of insight into what you intend to do with
43 1 this?
2 AUDITOR GENERAL DePASQUALE: Yes, it is. We
3 haven't voted in or out. A lot of this depends on what the
4 budget -- what our budget ability is moving forward and the
5 ability to -- because that would be a special performance
6 audit. So that's something I'm happy to talk to you and
7 other members of the General Assembly about. That is a high
8 priority. If we feel we can get the necessary budget
9 supplement to try to help with that, I'm open-minded to
10 looking at that.
11 REPRESENTATIVE GABLER: And I appreciate that.
12 I think that there are certainly a lot of
13 conversations that we've had here today about a lot of
14 different directions that your office has been able to go on
15 its own. I think that something just as core as the
16 financing the Commonwealth puts towards water and sewer
17 infrastructure to finance a private entity out-of-state
18 transaction, $50 million in one shot, when many communities
19 are trying to beg and borrow to get to, you know, maybe $1
20 million help with something that they're doing.
21 I think it's important that we prioritize this.
22 So I'd be more than happy to talk to you about the budget
23 and otherwise. But regardless of all that, I would just
24 suggest to you that I think this is something that really
25 needs to rise to the level of scrutiny because it's just
44 1 something that -- transactions like this gone unchecked I
2 think really would be a troubling sign for the future of
3 your infrastructure.
4 AUDITOR GENERAL DePASQUALE: And I appreciate
5 your point. There's no question when you look at our
6 infrastructure needs across Pennsylvania that one does stick
7 outside the mainstream of what most state assistance is.
8 REPRESENTATIVE GABLER: Absolutely. I appreciate
9 that. Thank you.
10 That's all my questions, Mr. Chairman. I
11 appreciate it.
12 MAJORITY CHAIRMAN SAYLOR: Representative Kinsey.
13 REPRESENTATIVE KINSEY: Thank you, Mr. Chairman.
14 Good afternoon.
15 AUDITOR GENERAL DePASQUALE: Good to see you,
16 Representative.
17 REPRESENTATIVE KINSEY: Mr. General, you recently
18 released a press release regarding the Philadelphia Parking
19 Authority. I believe you said it was the second audit that
20 took place. You had outlined numerous management-related
21 problems as well as I believe $78 million of revenue that
22 the Philadelphia School District may have missed out on.
23 The fact that you just released, I believe maybe
24 yesterday, this report, are there any recommendations that
25 you can share with us today?
45 1 AUDITOR GENERAL DePASQUALE: A couple. I will
2 tell you that the report was issued a little while ago.
3 REPRESENTATIVE KINSEY: Okay.
4 AUDITOR GENERAL DePASQUALE: The news release was
5 put out yesterday. Because in the world of you can't make
6 this stuff up, it's now being reported that part of -- this
7 was reported in the media, not that I knew firsthand about
8 this, that part of the indictment of various officials in
9 Philadelphia included conversations about trying to not get
10 the Philadelphia Parking Authority audited.
11 So that's where that -- why the additional news
12 came out. Obviously, we audited it. Tough if people were
13 mad that we did it.
14 REPRESENTATIVE KINSEY: Right.
15 AUDITOR GENERAL DePASQUALE: And we did it in
16 conjunction with the Attorney General's Office.
17 So a couple things on the Philadelphia Parking
18 Authority. First of all, two things are absolutely
19 unbelievable, outrageous, because I can't come up with other
20 words for it at least on television where kids may be
21 watching.
22 REPRESENTATIVE KINSEY: Sure.
23 AUDITOR GENERAL DePASQUALE: They -- I believe
24 the Board and certainly staff knew that a culture of
25 allowing sexual harassment persisted on that in that
46 1 operation for a decade and nothing was done. And until
2 scrutiny was put on that entity, that Executive Director was
3 never held accountable, which some of the women who went
4 through there, it is absolutely outrageous. And I think
5 there's a special place in hell for the people that enabled
6 that to happen.
7 Two, when that Authority was taken over by the
8 State and given the new structure, taken away from the city,
9 and that's -- I'm not saying that any entity was perfect.
10 I'm not. But part of that commitment was that the revenue,
11 additional revenue, would be flowing to the school children
12 of Philadelphia.
13 Again, whether you think Philly should get more
14 or less school funding, remove that aside for a second. The
15 amount of years the Philadelphia Parking Authority met their
16 obligation is zero. Zero. Now former Representative Petri
17 is the new Executive Director. I've known Scott for a long
18 time. I believe he will not tolerate that form of sexual
19 harassment. I believe that with every fiber of my being.
20 Obviously, I have to remain objective.
21 REPRESENTATIVE KINSEY: Sure.
22 AUDITOR GENERAL DePASQUALE: If he were to allow
23 it, I have to do what I have to do. But I know him as a
24 person. That's not something that he's going to tolerate.
25 He has started to institute some of the reforms that we
47 1 recommended. Last year after our audit was the first year
2 they came close to, didn't meet, but they at least came
3 close to what their obligation was to the School District.
4 But finding out yesterday, like many of us did,
5 that there was part of -- that there was an actual effort
6 between a member of City Council -- at least this is the
7 allegation according to what the Federal indictment is --
8 and the Board Chair did not have the entity audited, I mean,
9 I guess, you know, you just never cease to hear it all.
10 REPRESENTATIVE KINSEY: So let me ask this
11 follow-up question. I believe in the report you thanked the
12 Attorney General.
13 AUDITOR GENERAL DePASQUALE: Yes.
14 REPRESENTATIVE KINSEY: And the Inspector
15 General.
16 AUDITOR GENERAL DePASQUALE: Right.
17 REPRESENTATIVE KINSEY: So my question is then,
18 does your department currently have the authority to audit
19 state departments and local municipalities and companies
20 such as PPA or do you have to be invited by, you know, the
21 Attorney General's Office?
22 AUDITOR GENERAL DePASQUALE: It's a great
23 question. The short answer is -- and without trying to be
24 too much of a tongue tie here -- I do not have the authority
25 to audit municipal authorities.
48 1 Now, there are some instances where I can look at
2 certain things, like following State money, etc. This has
3 been one of my calls over the last six years as Auditor
4 General because I believe that a lot of these municipal
5 authorities all over Pennsylvania are blowing user money all
6 over the state, bad bond deals, hiring law firms without
7 scrutiny. And I think at least a threat that I could come
8 in and audit them would put a lot of that in check.
9 So some of these entities actually allow for the
10 Attorney General to do the audit but they're not equipped to
11 do that. So then when they -- in a sense we work it out
12 that I'm going to go in and do that, but it's under their
13 authority. I believe that that should change.
14 REPRESENTATIVE KINSEY: Well, I appreciate your
15 comments. Actually I just had a conversation with my good
16 friend, Representative Frank Ryan. So there is legislation
17 that we're looking at. In fact, I also have legislation
18 that's out there. We're going to try to work together.
19 I think it's important that folks understand the
20 authority that your department currently has and does not
21 have. And really if we're looking at safeguarding the
22 taxpayers of this Commonwealth and their hard-earned
23 dollars, I think it makes perfectly good sense to us as a
24 body to legislate and allow your department to do that.
25 So I just want to say thank you for that.
49 1 AUDITOR GENERAL DePASQUALE: Thank you,
2 Representative. Just as a note to both Representatives and
3 also the body, Senator Ward actually has introduced a bill
4 in the past on this issue so you may want to reach out to
5 Senator Ward as well.
6 REPRESENTATIVE KINSEY: Thank you very much.
7 Thank you, Mr. Chairman.
8 MAJORITY CHAIRMAN SAYLOR: Representative
9 Lawrence.
10 AUDITOR GENERAL DePASQUALE: Senator Ward from
11 Westmoreland. Sorry.
12 MAJORITY CHAIRMAN SAYLOR: That's okay.
13 REPRESENTATIVE LAWRENCE: Thank you, Mr.
14 Chairman.
15 Gene, it's always good to see you.
16 AUDITOR GENERAL DePASQUALE: Good to see you.
17 REPRESENTATIVE LAWRENCE: I'm glad you're here
18 today. I wanted to follow up and maybe just to underline
19 and highlight in bold-face print the comments that
20 Representative Gabler shared earlier with regard to the
21 timber deal. I mean, just to be clear, we're talking about
22 a New Hampshire-based private timber company approved for a
23 $50 million loan in the state of Pennsylvania to purchase
24 timberland in Northwestern Pennsylvania at a 1 percent
25 interest rate with generous repayment terms. This was not a
50 1 publicly advertised or competitively bid deal. And $50
2 million is coming from a fund that is legally required to
3 work with water, municipal water, and sewer systems.
4 Now, earlier you had mentioned that your agency
5 completed 5,000 audits last year. Is that number about
6 correct?
7 AUDITOR GENERAL DePASQUALE: Yes.
8 REPRESENTATIVE LAWRENCE: The House moved a
9 resolution unanimously asking your office to consider this.
10 I realize this would be 1 out of 5,000 but it doesn't seem
11 like a major ask. I guess what I would ask is, it seems --
12 and I just want to make sure I got your answer correctly.
13 It seemed to me that you suggested you might not look at
14 this unless there was a special appropriation to take on
15 this audit. Is that correct or did I mishear that?
16 AUDITOR GENERAL DePASQUALE: I would say that it
17 depends upon how our budget goes would be my level of
18 openness on the ability to do it. And first of all, the
19 5,000 audits is a good point to reference. 70 percent of
20 those are mandated. And this would be a much more
21 complicated audit.
22 So it's not like auditing a municipal pension
23 fund or a VFRA that we can get in and out in a month. This
24 one would be a much more complicated operation.
25 REPRESENTATIVE LAWRENCE: So again, I guess what
51 1 I would say is if a $50 million, 1 percent loan, to a
2 private equity firm out of New Hampshire doesn't merit the
3 attention of your department, I wonder what does.
4 AUDITOR GENERAL DePASQUALE: You can look at
5 every other audit we did last year. That's what merited it.
6 And specifically this General Assembly mandated we look at
7 past legislation and funded the audit of the Susquehanna
8 River Basin Commission.
9 If you feel that strongly about it and you don't
10 want to use my authority to do it, you can do that as well.
11 REPRESENTATIVE LAWRENCE: How many of the -- and
12 I'm not trying to be confrontational. But again, it's a $50
13 million audit -- or an audit, excuse me, of a $50 million
14 question. Would you say that that's a large amount of
15 money? a small amount of money? kind of the average size
16 your agency looks at?
17 AUDITOR GENERAL DePASQUALE: Well, we look at
18 everything from a small municipality, the Department of
19 Human Services, so it ranges from, I would say, 5 million to
20 3 to 4 billion. We're auditing PennDOT right now. That's
21 obviously a large agency.
22 REPRESENTATIVE LAWRENCE: Sure. I mean, this $50
23 million for PENNVEST was the largest loan they'd ever
24 provided by a substantial amount. It's not even close. In
25 addition, there's at least rumblings that there may be
52 1 similar deals in the future of this nature and kind of going
2 through the legality of whether this is actually legal or
3 not, why this deal wasn't offered to Pennsylvania-based
4 operations. And I'm not arguing the merits of the
5 underlying -- I'm a supporter of land preservation. But to
6 me it's very troubling that there was a substantial amount
7 of money committed with no bids, no public debate, not
8 competitively bid, local people here in Pennsylvania did not
9 have the opportunity to get in on it with a 1 percent
10 interest rate with very generous repayment terms.
11 Again, I would just like to reinforce the
12 comments from my friend Representative Gabler and highlight
13 again that this did pass the House unanimously as a
14 resolution for your agency to review it. And I certainly
15 would appreciate any due consideration.
16 AUDITOR GENERAL DePASQUALE: I will certainly
17 take that under advisement.
18 REPRESENTATIVE LAWRENCE: Thank you.
19 AUDITOR GENERAL DePASQUALE: You're welcome.
20 REPRESENTATIVE LAWRENCE: Thank you, Mr.
21 Chairman.
22 MAJORITY CHAIRMAN SAYLOR: Representative Flynn.
23 REPRESENTATIVE FLYNN: Thank you, Mr. Chairman.
24 I wanted to go back to the PBMs, General. In
25 regard to your special report on the rural Pharmacy Benefit
53 1 Managers, many of my constituents are loyal to independent
2 pharmacies in my district. And I've talked to pharmacy
3 owners and constituents who are very appalled by the actions
4 of the Pharmacy Benefit Managers. What legislative action
5 do you recommend to start holding these giant corporations
6 more accountable to the taxpayers of Pennsylvania?
7 AUDITOR GENERAL DePASQUALE: Our report puts
8 through several steps. I think the first one would be more
9 accountability to the Pharmacy Benefit Managers on the
10 taxpayer dollars that they're getting. And again, you're
11 talking about, you know, $3 billion minimum on this.
12 So I think the first and easiest step would be
13 giving me or the Department of Human Services the ability to
14 audit these entities.
15 REPRESENTATIVE FLYNN: Okay. And I understand
16 the PBMs are subcontracted to handle the benefits of Medical
17 Assistance beneficiaries for Pennsylvanians. And as you
18 pointed out in the report, because of you -- because of
19 this, you have no authority to do an audit of the increased
20 expenses that these corporations have cost taxpayers.
21 All the fees that the Pharmacy Benefit Managers
22 are charging the State should be -- they need to be
23 disclosed. So what action should be taken to allow these
24 expenses to become disclosed in the interest of taxpayer
25 money?
54 1 AUDITOR GENERAL DePASQUALE: I think considering
2 the specific public health that is involved with them, I
3 think all of those, all that information should be publicly
4 disclosed. Again, if we have the ability to audit it, we
5 can get at that information.
6 And I know that they have other business
7 interests that, you know, can certainly be walled off from
8 any audit. Another thing that's critical is, we've got to
9 make sure that there's an actual wall between the Pharmacy
10 Benefit Managers and the retail chain that they are
11 affiliated with.
12 There are some Pharmacy Benefit Managers that are
13 also part of the same corporate entity as some of the larger
14 retail chains. Not all, but some. And there is a deep
15 concern by many of the independent pharmacies that that wall
16 of separation isn't as strong as it should be.
17 And I think both on the accountability side of it
18 and on the auditing side of it but also on the wall between
19 those two entities, we've got to make sure that's real.
20 REPRESENTATIVE FLYNN: And I've seen articles
21 from other states in regard to prescription drug
22 reimbursement. The graphics show that PBMs are paying
23 independent pharmacies significantly less than they're
24 paying these chain drugstores. What do you think we could
25 do to protect the interest here?
55 1 AUDITOR GENERAL DePASQUALE: I do think that
2 we've got to make sure -- and I'm not sure of the right
3 legislative prescription for this, no pun intended on that,
4 sorry. But we should work through that on the best way to
5 get it done legislatively. But there's got to be a fair
6 fight.
7 By the way, if an independent pharmacy isn't
8 evolving with the times, better marketing, not updating
9 their technology, look, I don't think it's the government's
10 job to sort of keep them prompted up. Having said that,
11 when taxpayer dollars are potentially used to skew the
12 business model at the retail level, which many at the
13 independent side believe is happening -- and I think there's
14 at least strong evidence to be concerned that it's
15 happening -- then I do think it's our job to at least make
16 sure it's a fair fight.
17 REPRESENTATIVE FLYNN: I've had pharmacy owners
18 show me actual bills with hidden costs that they were
19 charged after they filled the prescription where they ended
20 up owing thousands of dollars on a prescription that cost
21 them $100.
22 AUDITOR GENERAL DePASQUALE: Many of these
23 independents now are literally getting to the point where
24 certain drugs that they sell, they lose money on each sale,
25 while the Pharmacy Benefit Manager is still making money on
56 1 it.
2 Again, our No. 1 job should be to make sure that
3 the consumers get the care they need. But there's just
4 something entirely wrong with that model.
5 REPRESENTATIVE FLYNN: Yeah. Seems like a fixed
6 model.
7 AUDITOR GENERAL DePASQUALE: And over the last,
8 I'd say, ten years, I think the role of Pharmacy Benefit
9 Manager has increased so much that no one saw it coming.
10 Again, we see the pharmaceutical industry, again with all
11 their strengths and weaknesses. But everyone is aware of
12 what they do.
13 And certainly at the retail level, we know you go
14 in and you want to purchase your drugs. I think a lot of
15 people like going to the independents because they get to
16 know their pharmacist. They get to have a relationship with
17 them. And a lot of people need that advice on how best to
18 take their drugs.
19 REPRESENTATIVE FLYNN: Thank you.
20 AUDITOR GENERAL DePASQUALE: Thank you.
21 REPRESENTATIVE FLYNN: Thank you, Mr. Chairman.
22 MAJORITY CHAIRMAN SAYLOR: Representative Dunbar.
23 REPRESENTATIVE DUNBAR: Thank you, Mr. Chairman.
24 Welcome, General. Good to see you.
25 AUDITOR GENERAL DePASQUALE: Good to see you,
57 1 Representative.
2 REPRESENTATIVE DUNBAR: And I thank you for your
3 points about Bryce Harper not having a chance at showing up
4 at the Pirates and as well as Representative McCarter's
5 comments about Andrew McCutchen now patrolling the outfield
6 for the Phillies. I want to point out to everybody that the
7 Pirates did win 82 games last year and had a winning record,
8 claims the Phillies cannot make.
9 And I believe that has something to do with
10 cost-effective decision-making, which is a good segue for me
11 to talk about bond issuance and some decisions we've made
12 there and the cost effectiveness of those. And these are
13 questions I also asked Treasurer Torsella earlier. You are
14 one of the three issuing officials that come up for general
15 obligation debt, correct? And before we issue any sale of
16 any Commonwealth bonds, you sign, you review?
17 AUDITOR GENERAL DePASQUALE: Yes.
18 REPRESENTATIVE DUNBAR: And the same before any
19 sale has occurred, you have to sign off on the final bond
20 resolution. So there is some concerns about the first bond
21 issuance of 2018 where the general obligation fund had
22 capitalized interest, capitalized bond interest. Do you
23 agree that that's not a very cost-effective method?
24 AUDITOR GENERAL DePASQUALE: Yes. A lot of these
25 are, to be blunt, very complicated transactions. Sometimes
58 1 you're -- and I've been doing this now for six years.
2 Sometimes you look at it and say this is entirely spot on.
3 Sometimes we look and say we need to improve this or that.
4 So we make each individual -- and there's times where we
5 push back and say we need to do something better here.
6 Sometimes you are literally making the least bad decision,
7 too, because sometimes you're trying to refinance some debt
8 and you just have the right opportunity in the market to
9 make that work.
10 So some of these are incredibly challenging. And
11 I do know that we all try to do the best job we can on each
12 one of them. I think we've mostly gotten that right over my
13 tenure. There's one or two that I've been highly critical
14 of and there was even one that I refused to sign, you know,
15 earlier on in my tenure because I didn't believe it made the
16 right sense. And you always need two of the three
17 signatures.
18 REPRESENTATIVE DUNBAR: And that's what I'm
19 trying to -- since we've had this discussion with Treasurer
20 Torsella, he pretty much stated that -- I don't want to put
21 words in his mouth -- he didn't think capitalized bond
22 interest was a very cost-effective method.
23 This was the first time in my tenure here that
24 I've seen any bond issuers that had capitalized bonds. I
25 don't know what precipitated it or how we got to that. Is
59 1 that something we're continuing to do in the future? Having
2 spoken to now two of the issuing agents, it would be nice to
3 know we can avoid that in the future.
4 AUDITOR GENERAL DePASQUALE: I don't want to give
5 some line in the sand that we'll never see it again. But it
6 is my strong hope that we never see it again.
7 REPRESENTATIVE DUNBAR: I appreciate that. And
8 I'll try to hold you to that as well.
9 AUDITOR GENERAL DePASQUALE: Absolutely.
10 REPRESENTATIVE DUNBAR: Thank you, Mr. Chairman.
11 MAJORITY CHAIRMAN SAYLOR: I just want to take
12 this opportunity to interrupt your testimony to introduce
13 Bernard Hopkins, who has joined us today.
14 AUDITOR GENERAL DePASQUALE: Oh, I didn't see
15 him.
16 Good to see you, Champ.
17 (Applause)
18 MAJORITY CHAIRMAN SAYLOR: We'll move on to
19 Representative Krueger.
20 REPRESENTATIVE KRUEGER: Thank you, Mr. Chairman.
21 Thank you, General, for joining us here today.
22 AUDITOR GENERAL DePASQUALE: Sure.
23 REPRESENTATIVE KRUEGER: I've appreciated the
24 conversations about some of the special reports that you've
25 done. I, too, like many of my colleagues, have heard from
60 1 independent pharmacists in my district about the challenges
2 with Pharmacy Benefit Managers. And I look forward to your
3 next report coming out on that issue. I also appreciated
4 the firearm safety report.
5 I want to talk about an issue that you did a
6 special report on a couple of years ago in 2016.
7 AUDITOR GENERAL DePASQUALE: Okay.
8 REPRESENTATIVE KRUEGER: This time last year in
9 February you were asking for budget funding to eliminate
10 Pennsylvania's backlog of about 1,200 rape kits. And at the
11 time you noted that the General Assembly had passed
12 legislation after your report that mandated reporting and
13 testing of the State's rape kit backlog. But we failed to
14 provide any resources to any agencies to actually test those
15 kits. So it's a year later. Have we made any progress?
16 AUDITOR GENERAL DePASQUALE: So a couple things.
17 Of all of the things I've done in my tenure, if you said I
18 could have only accomplished one, it would be this. When we
19 first did that report, it was just under 4,000, about 3,800
20 untested rape kits. And only about 40 percent of the police
21 departments were complying.
22 We are now over 90 percent compliance. Because
23 of more compliance from the police departments, I believe
24 the truer number was, because more started adding their
25 numbers in, about 5,000. Again, that's a ballpark estimate.
61 1 We are now under 1,000 in untested kits and continuing to
2 fall.
3 I have to say that having any untested kits is
4 inexcusable. But I do know that many of the departments and
5 the labs themselves are working very hard now I think in
6 large part because of our report and the efforts from this
7 General Assembly and the Governor's Office on following that
8 report on focusing on this issue. I have met with people
9 that have seen some level of justice because of this.
10 There's more work to be done.
11 REPRESENTATIVE KRUEGER: So there's a lot of
12 conversations happening these days around sexual assault,
13 sexual harassment. And we know that one of the reasons that
14 victims don't come forward is they don't have the confidence
15 that their complaint will be taken seriously, that it will
16 be followed through with.
17 What do we need to do to get that number down to
18 zero untested rape kits in Pennsylvania?
19 AUDITOR GENERAL DePASQUALE: A couple of things.
20 First of all, for people who don't know -- and some of you
21 may but some of you may not; that doesn't make anybody
22 wrong -- these rape kits, obviously they're sexual assault
23 kits, it's a minimum of a four-hour evasive process for any
24 alleged victim. So the idea that -- and again, it's some
25 men but mostly women are going about this willy-nilly to get
62 1 back at somebody is the definition of outrageous.
2 I'm not going to say nobody has ever had a false
3 claim. I'm not saying that. But the idea that thousands of
4 women are going through this process just for kicks is
5 outrageous. It's a minimum of four hours. That means that
6 after the alleged assault took place, they cannot shower,
7 they cannot do anything. They have to get to the hospital
8 or wherever the clinic is and go through that four-hour
9 process. And when I say invasive, just know what I mean by
10 invasive.
11 The idea that women went through that and the
12 kits weren't tested should make everyone's blood boil. And
13 that didn't happen in thousands of instances.
14 Now, to get it down to zero may be impossible
15 because the victim has to also consent. And there are
16 times, even after going through this, that they don't want
17 to do that. But the only thing that -- and I don't mean
18 only as in only, this is big, but it's what we can do, is if
19 there can be a commitment from our State that every single
20 kit, there will be the funding to test that kit, assuming
21 the victim wants it, and if we do that, then I think there
22 can be more confidence in coming forward.
23 And if you want to know how much it would cost,
24 it's between 1,000 and 1,500 per kit, which means for about,
25 you know -- you're talking just about a million dollars a
63 1 year in a budget of $35 billion to make sure that we never
2 have a lack of funding for untested rape kits.
3 REPRESENTATIVE KRUEGER: Thank you, Mr. General.
4 And we know that oftentimes testing a rape kit can help
5 prevent a future crime because oftentimes these are folks
6 who don't just rape someone once. They're repeat offenders.
7 Thank you.
8 AUDITOR GENERAL DePASQUALE: If the Chairman will
9 allow me an additional second on that, I want to follow up
10 on that.
11 MAJORITY CHAIRMAN SAYLOR: Yes.
12 AUDITOR GENERAL DePASQUALE: Thank you, Mr.
13 Chairman.
14 Roughly -- this is according to the experts now
15 -- 95 percent of rapists are serial rapists. The idea that
16 this happened once in college and it never happens again --
17 there is also an isolated incident. Most of the people, in
18 fact the vast majority of people, are horrible human beings
19 that don't just do this. I don't mean don't as in this is
20 -- okay. They do -- they are the definition of bad people
21 that terrorize people nonstop. And especially getting away
22 with it once gives them a license to keep doing it.
23 MAJORITY CHAIRMAN SAYLOR: General, this is
24 really not a policy hearing here, so we really probably
25 shouldn't be talking about this here. It should be another
64 1 issue.
2 But what I will tell you -- and it was before
3 this Committee -- last year the State Police testified on
4 this issue. And it was very clear from their testimony, if
5 you would believe what they had to say, is that it was a
6 problem that they couldn't even contract it out by court
7 rules. Again, I'm taking State Police word.
8 AUDITOR GENERAL DePASQUALE: I know.
9 MAJORITY CHAIRMAN SAYLOR: It wasn't a matter of
10 money. It was a matter of building a new facility, which
11 they're in the process of building. Hopefully it will be
12 completed this year sometime is my understanding. And so
13 just for the record, I don't want to blame the State Police
14 because again there's been a huge increase in people coming
15 forward, which is great.
16 AUDITOR GENERAL DePASQUALE: Right.
17 MAJORITY CHAIRMAN SAYLOR: But it also, I think,
18 caught the Commonwealth and the State Police Lab by
19 surprise. And by court rules, according to the State
20 Police, they're not allowed to subcontract that out due to
21 regulations and how you handle, I guess, those kits or any
22 kind of evidence, the chain of evidence.
23 AUDITOR GENERAL DePASQUALE: Two things. There
24 is a chain of evidence issue. Maybe there's three things.
25 There is a chain of evidence. I'm not sure about the
65 1 subcontracting. I don't want to say because I'm not aware
2 of all the mechanics on that. But I do know that once their
3 lab is expanded, that will greatly help their efforts.
4 There's no question about it.
5 MAJORITY CHAIRMAN SAYLOR: Absolutely.
6 With that we'll move to Representative Struzzi.
7 REPRESENTATIVE STRUZZI: Thank you, Mr. Chairman.
8 Good afternoon, Mr. Auditor General.
9 AUDITOR GENERAL DePASQUALE: Good afternoon.
10 REPRESENTATIVE STRUZZI: I want to step back a
11 second. I do want to applaud your efforts with Children and
12 Youth Services. I did have the opportunity last week to
13 visit with the Indiana County Children and Youth Services
14 Director and some of her Board members. And they truly
15 appreciate your efforts.
16 AUDITOR GENERAL DePASQUALE: Thank you.
17 REPRESENTATIVE STRUZZI: I do think it's
18 important to appreciate that some organizations are doing
19 very well with the funding and the resources that they have.
20 But you did expose some good things there and I think it
21 behooves us now to make some effort to try and correct those
22 serious concerns. So thank you for that.
23 AUDITOR GENERAL DePASQUALE: Thank you.
24 REPRESENTATIVE STRUZZI: My question -- I'm new,
25 as you know. My question is related to the justification
66 1 for your investigations. You know, not every claim that
2 comes forward warrants an investigation. How you do justify
3 the use of taxpayer dollars? Do you go down a path to a
4 certain point and then stop or, you know, does there have to
5 be some reasonable evidence for you to continue with an
6 investigation?
7 AUDITOR GENERAL DePASQUALE: Yes. And not to be
8 flip about it, but from the time I get up or at least
9 outside until I go home at night, you can imagine just going
10 to the grocery store, you know, you get ideas for audits.
11 Sometimes it's amazing what you get at a high school
12 baseball game.
13 Again, about 70 percent of our audits are
14 mandatory. But even in that, there's some discretion on
15 timing, depending on what evidence we get. So we have to
16 audit all the school districts, but if something comes in
17 that's hot, we may change our schedule to go back in sooner.
18 We weigh those as a team. Sometimes it's
19 information from the General Assembly. Sometimes there's
20 something that popped up just through a newspaper report.
21 Sometimes it's following up on a previous audit we did and
22 we weigh those as a team.
23 One of the big things is, do we have the manpower
24 to do it? And what is the pathway even if the information
25 we get -- let's just assume it's accurate -- what's the --
67 1 is there a real problem with that and is there a pathway to
2 fix it and also what's our authority?
3 REPRESENTATIVE STRUZZI: Thank you.
4 And then a second question that I have. You're
5 in front of the cameras a lot exposing corruption, whether
6 it's corruption, whether it's things that need corrected,
7 which is appreciated. But also I'm sure some of your
8 investigations result in good findings.
9 AUDITOR GENERAL DePASQUALE: Right.
10 REPRESENTATIVE STRUZZI: Not all State agencies
11 are, you know, going down the wrong path.
12 AUDITOR GENERAL DePASQUALE: Absolutely.
13 REPRESENTATIVE STRUZZI: Not all organizations
14 have, you know, misuse of funds and things like that.
15 And when I watch the news -- you know, I have
16 four kids at home. They watch the news. And they see the
17 world as, you know, portrayed by a lot of the press releases
18 and press conferences that you have. Are you also telling
19 the good side as well? And how do you -- what's the
20 rationale behind the publicity oftentimes?
21 AUDITOR GENERAL DePASQUALE: We do releases on
22 all of our audits.
23 REPRESENTATIVE STRUZZI: Okay.
24 AUDITOR GENERAL DePASQUALE: I would love to have
25 the day where it would get more attention where it says
68 1 DePasquale says X, Y, Z school district is doing fine. We
2 do do those releases. They don't get admittedly much
3 attention. So it's certainly a fair point.
4 REPRESENTATIVE STRUZZI: Okay.
5 AUDITOR GENERAL DePASQUALE: About 90 percent of
6 our audits are minimal to no findings, which means that the
7 vast majority of our public servants across Pennsylvania are
8 actually doing a good or as good as job as they can.
9 I know what you mean. My kids are getting older
10 now. But there is a side of you that is afraid to watch
11 television sometimes because it seems like only bad stuff
12 gets on. We do try. We have not been effective in breaking
13 through on some of those good stories, although there was
14 one example where I do know where we were able to cut
15 through.
16 My first year in office we did an audit of the
17 Reading School District. And it was just bad from soup to
18 nuts. They hired a new superintendent, developed a great
19 partnership with the teachers, the business community, etc.
20 We did a press conference in Reading last year that it was
21 the best turnaround of any School District in Pennsylvania.
22 The pride in those teachers, the Administration,
23 and the people involved in that at the ground floor -- and,
24 yes, we did get some press attention on that. But I get why
25 it doesn't. DePasquale outraged over X. I get why. We did
69 1 do that. And I will tell you that we will try to find more
2 of those examples.
3 REPRESENTATIVE STRUZZI: Thank you.
4 AUDITOR GENERAL DePASQUALE: Thank you.
5 MAJORITY CHAIRMAN SAYLOR: Representative
6 Fiedler.
7 REPRESENTATIVE FIEDLER: Thank you for being
8 here.
9 AUDITOR GENERAL DePASQUALE: Good to see you,
10 Representative.
11 REPRESENTATIVE FIEDLER: You, too.
12 I understand you're conducting a comprehensive
13 look at Pennsylvania's criminal justice system.
14 AUDITOR GENERAL DePASQUALE: Yes.
15 REPRESENTATIVE FIEDLER: And you have said that
16 the amount of money we spend on the corrections industry is
17 a major concern. We have nearly 50,000 people in prison
18 across our State, the highest incarceration in the
19 northeast.
20 AUDITOR GENERAL DePASQUALE: Yes.
21 REPRESENTATIVE FIEDLER: I know that you do have
22 a special report on this coming out. Is there anything you
23 can tell us that you've already learned, any preliminary
24 findings, or things that we can expect in ways that -- you
25 know, recommendations you might make as far as diversionary
70 1 courts, treatment programs, anything like that that would
2 save lives and save money?
3 AUDITOR GENERAL DePASQUALE: I don't want to do
4 too much of a spoiler alert because we have more work yet to
5 do. But one of the things that's going to come out is a lot
6 of diversionary courts at the county level have a lot of
7 merit and have been proven successful. That's one thing I
8 can tell you point blank here.
9 I also want to make it clear, because this
10 question comes up, any recommendation that we're going to do
11 is going to be on non-violent people. If you commit
12 violence against a woman, a child, or any human being, you
13 know, murder, rape, sexual assault, that's not who we are
14 talking about. Certainly there's a whole system to deal
15 with that. We're going to be looking at non-violent
16 offenders and specifically how we can better manage that
17 system because most of those are drug addiction to begin
18 with.
19 REPRESENTATIVE FIEDLER: Thank you.
20 AUDITOR GENERAL DePASQUALE: Sure.
21 MAJORITY CHAIRMAN SAYLOR: Representative
22 Delozier.
23 REPRESENTATIVE DELOZIER: Thank you, Mr.
24 Chairman.
25 Good to see you.
71 1 AUDITOR GENERAL DePASQUALE: Good to see you,
2 Representative.
3 REPRESENTATIVE DELOZIER: Thank you for your time
4 here today. And actually it was a good segue with the prior
5 speaker on the criminal justice reform. So that's an issue
6 that I've worked a lot on in the recent sessions. And it's
7 something that I think we desperately need to have
8 information on.
9 My question is a little bit different than what
10 was asked. And that is the fact that we have -- so many
11 times in State Government we have so many different entities
12 doing the same thing.
13 AUDITOR GENERAL DePASQUALE: Right.
14 REPRESENTATIVE DELOZIER: So my question to you
15 is specifically as to the fact we have -- right now the
16 House and the Senate, we formed the Criminal Justice Reform
17 Caucus. We have two Judiciary Committees that work on
18 looking at ways to save dollars as well. And then we have
19 obviously the Department of Corrections and Secretary Wetzel
20 that's looking around for any ideas.
21 All information is welcome. Can you give me more
22 specifics from your direction? I don't want the overlap. I
23 don't want, you know, us all searching for the same type of
24 information all using taxpayer dollars to do it and yet
25 coming up with the information repetitively.
72 1 AUDITOR GENERAL DePASQUALE: First of all, we
2 have done previous work and different audits on this very
3 topic. We did an audit looking at all the state's drug
4 rehabilitation programs, saw significant overlap, made a lot
5 of recommendations. Some of those are being fulfilled.
6 We are going to soon be coming out with our
7 workforce development audit. That started because we were
8 very concerned that a lot of different agencies were doing
9 the same thing and not coordinating. Again, I understand
10 why different agencies would have a role, but at least have
11 the coordination, certainly on criminal justice.
12 Again, I don't want to tip the hand because we
13 still have a lot of work yet to do. But it is a concern
14 that different agencies aren't having the proper
15 coordination. Again, I get Corrections is going to be
16 different than, you know, the Department of Drug and
17 Alcohol. They just have different roles. But at least
18 making sure there's better coordination is critical to
19 getting criminal justice reform right.
20 REPRESENTATIVE DELOZIER: Okay. So you're coming
21 at it from the perspective of the different agencies and
22 what their roles are in performing?
23 AUDITOR GENERAL DePASQUALE: That will be part of
24 it. It's not just about the money. And I think part of how
25 you get to better savings is having better coordination
73 1 among the agencies so that you lead to less problems, thus
2 lead to the savings.
3 REPRESENTATIVE DELOZIER: Okay. So it's not only
4 a performance audit but it's also financial?
5 AUDITOR GENERAL DePASQUALE: Correct.
6 REPRESENTATIVE DELOZIER: So it's a little of
7 each?
8 AUDITOR GENERAL DePASQUALE: Correct.
9 REPRESENTATIVE DELOZIER: Okay. Thank you for
10 that.
11 AUDITOR GENERAL DePASQUALE: Sure.
12 REPRESENTATIVE DELOZIER: And many, many, many
13 moons ago, having worked at the Auditor General's Office, I
14 remember having the Performance Audit Bureau as well as the
15 Special Audit Bureau. I'm just trying to better understand
16 how it happens because you do a lot of special audits. And
17 they are different entities and obviously some of them fall
18 into natural school audits or that type of thing.
19 AUDITOR GENERAL DePASQUALE: Right.
20 REPRESENTATIVE DELOZIER: So does the staff in
21 those particular bureaus of school audits when there's
22 something dealing with that and you're doing a special audit
23 that doesn't necessarily have to do with the schoolbooks,
24 which is typically how you go in there, it has something
25 else you're dealing with. You know, you talked about the
74 1 Pharmacy Benefit Managers. You talked about firearm safety
2 as well as taxing marijuana. So where would taxing
3 marijuana go, like what bureau? Do you use the established
4 bureaus or do you use special audits all of the time for all
5 of these? I'm just trying to figure out how that works.
6 AUDITOR GENERAL DePASQUALE: Like, on that one in
7 particular, we have people that are -- I guess the best way
8 to say it is they're part of the special audits bureau but
9 they have writing skills that we tap into for those types of
10 reports.
11 REPRESENTATIVE DELOZIER: Okay. My understanding
12 -- so they don't necessarily have the background of taxation
13 or do they?
14 AUDITOR GENERAL DePASQUALE: On that one --
15 REPRESENTATIVE DELOZIER: That one in particular.
16 AUDITOR GENERAL DePASQUALE: They have a lot of
17 research skills. Again, you take, for example, when we're
18 looking at health care issues, we don't have any doctors.
19 But we look at the research of what's happening in other
20 states.
21 REPRESENTATIVE DELOZIER: Okay.
22 AUDITOR GENERAL DePASQUALE: And the financial
23 implications from those.
24 REPRESENTATIVE DELOZIER: Okay. And the -- my --
25 I was just trying to understand, like I said, the staffing.
75 1 You're not asking for any more staffing or anything like
2 that. So I'm just trying to figure out how you negotiate
3 moving those folks around as to what their expertise is.
4 AUDITOR GENERAL DePASQUALE: I guess you could
5 say I'd like to think of myself as a coach in this to try to
6 use the players that you have.
7 REPRESENTATIVE DELOZIER: Okay. Who you have.
8 AUDITOR GENERAL DePASQUALE: You utilize the best
9 talent you have. And some people have different skills.
10 REPRESENTATIVE DELOZIER: Okay. And my last
11 question is the fact that when we're talking about -- and
12 actually you sort of answered it when you talked about the
13 grocery store as a joke. But the ability for -- what drives
14 the ability for you -- I know you have the ones that you're
15 mandated for, like the performance audits and dealing with
16 welfare offices and all the different agencies. You have
17 the school audits and that type of thing. So when you have
18 something else that comes along, is it driven by -- you
19 mentioned 32 that are driven by the Legislature. What other
20 entities come to you and ask for an audit that you consider?
21 AUDITOR GENERAL DePASQUALE: The one that I know
22 specifically -- and we haven't really gotten a lot of
23 requests from the Executive Branch. But there was one that
24 came specifically that there was a concern about oversight
25 of the nursing home industry.
76 1 REPRESENTATIVE DELOZIER: Okay.
2 AUDITOR GENERAL DePASQUALE: And that was one
3 that came from the Governor's Office. They said they were
4 concerned about how they were handling the issue themselves.
5 They wanted somebody independent to --
6 REPRESENTATIVE DELOZIER: To go back into --
7 AUDITOR GENERAL DePASQUALE: To go back and look
8 at it.
9 REPRESENTATIVE DELOZIER: Okay.
10 AUDITOR GENERAL DePASQUALE: And so that was one.
11 Again, we sat down and we worked that out with the
12 Administration. One of the things that I always insist on
13 is if we're going to do it, people have to live with the
14 result, whatever it is, whether it's the General Assembly,
15 the Governor's Office, or whatever it may be. Once the
16 audit starts, there can be zero effort from the entity we're
17 auditing to try to squelch that audit.
18 REPRESENTATIVE DELOZIER: Okay. And I appreciate
19 the information. I look forward to working and getting the
20 results from the criminal justice side of things. We have a
21 lot of work to do with that. And we have a lot of agenda
22 items to do so I'll say that.
23 And on a side note, keep your hands off Harper.
24 Thank you. Bye-bye.
25 AUDITOR GENERAL DePASQUALE: And thank you,
77 1 Representative, for your leadership on criminal justice
2 reform. It is appreciated.
3 MAJORITY CHAIRMAN SAYLOR: Representative Kim.
4 REPRESENTATIVE KIM: Thank you.
5 General DePasquale, thank you so much for being
6 here.
7 AUDITOR GENERAL DePASQUALE: Good to see you,
8 Representative.
9 REPRESENTATIVE KIM: Good to see you.
10 So my question has to do with the audit with the
11 school district transportation costs. I am so, so glad that
12 you're doing that or you did that. It may not seem like a
13 big issue, but it's a big issue in my district. I'm trying
14 to change some of the bus laws but there's a fiscal impact.
15 AUDITOR GENERAL DePASQUALE: Yes.
16 REPRESENTATIVE KIM: And just real quickly in the
17 Public School Code of 1949, school districts do not have to
18 bus students if they live 1.5 miles or less.
19 AUDITOR GENERAL DePASQUALE: Right.
20 REPRESENTATIVE KIM: So we essentially have
21 five-, six-year-olds walking to school in urban districts
22 where parents don't have cars.
23 AUDITOR GENERAL DePASQUALE: Right.
24 REPRESENTATIVE KIM: So you have a parent walking
25 one child to school and then they walk another child to
78 1 school and then they hop on a bus to go to work. That's a
2 lot, especially if there's polar vortex temperatures.
3 AUDITOR GENERAL DePASQUALE: Right.
4 REPRESENTATIVE KIM: So, you know, my bill would,
5 you know, reduce that to .5 miles, you know, something more
6 reasonable.
7 AUDITOR GENERAL DePASQUALE: Right.
8 REPRESENTATIVE KIM: But there's a fiscal impact.
9 AUDITOR GENERAL DePASQUALE: Yes.
10 REPRESENTATIVE KIM: So what did you find in your
11 report? What are your recommendations? And if we can
12 reduce the cost and push the money toward, you know, better
13 transportation for kids, I'd appreciate that.
14 AUDITOR GENERAL DePASQUALE: Where I found in my
15 tenure as Auditor General about $50 million wasted in school
16 transportation costs, 46 of that 50 million was one common
17 denominator, one. There are 17 school districts in
18 Pennsylvania that do not competitively bid their school
19 transportation dollars. They account for 46 of the $50
20 million wasted.
21 And 4 million of that is the Scranton School
22 District alone. Denaples Transportation is the -- that's
23 the only school district they have. And we found they were
24 $4 million over just in one school district. Now, I can
25 vent about that for a long time.
79 1 And it's a disgrace what's been done to the
2 taxpayers and the kids in Scranton. Literally the School
3 Board has decided to keep that school bus contract, which is
4 the worst in the State, not rebid it, and cut Art and Music
5 in the schools.
6 To me, that's a crime.
7 REPRESENTATIVE KIM: Right.
8 AUDITOR GENERAL DePASQUALE: So I do think that
9 every school district should be required to bid their school
10 bus contract.
11 REPRESENTATIVE KIM: Right.
12 AUDITOR GENERAL DePASQUALE: For example, we've
13 had school districts that started doing it as a result of me
14 hammering them, even though they weren't required. They
15 said, oh, we'll never save any money. Then they get back
16 with us, oh, we actually, lo and behold, saved money because
17 you're driving competition.
18 REPRESENTATIVE KIM: Right.
19 AUDITOR GENERAL DePASQUALE: We are doing now an
20 audit also of the Pittsburgh School District Transportation
21 System. They have 20 different contracts just in their
22 school district. So we're going to be looking at it to see
23 if he can find savings there. And then we're also going to
24 be doing a similar type of audit in Philadelphia as well.
25 I'd be happy to talk with you further. But if
80 1 you want to say what's the simplest and easiest thing to do,
2 require every school district to competitively bid it. I
3 guarantee that will lead to savings. And you can use some
4 of those savings for savings and use some of it to help with
5 some of the other issues that you want to address.
6 I do understand why you wouldn't want some of
7 those young kids walking that far to school.
8 REPRESENTATIVE KIM: Thank you. And thank you so
9 much for putting attention on this.
10 AUDITOR GENERAL DePASQUALE: Sure.
11 REPRESENTATIVE KIM: Thank you, Mr. Chairman.
12 MAJORITY CHAIRMAN SAYLOR: General, just one
13 quick question on the Scranton contract.
14 AUDITOR GENERAL DePASQUALE: Yes.
15 MAJORITY CHAIRMAN SAYLOR: When you find
16 something like that that's so outrageous, do you turn that
17 over to an Attorney General for investigation?
18 AUDITOR GENERAL DePASQUALE: On that one in
19 particular, I will try to speak precisely and carefully. I
20 had a discussion with the Attorney General and it appears
21 that on two separate occasions they have been visiting the
22 Administration Building to get various pieces of
23 information.
24 MAJORITY CHAIRMAN SAYLOR: Okay.
25 AUDITOR GENERAL DePASQUALE: And that's as much
81 1 as I can add on that.
2 MAJORITY CHAIRMAN SAYLOR: Very good.
3 Representative Heffley.
4 REPRESENTATIVE HEFFLEY: Thank you, Mr. Chairman.
5 Thank you, Auditor General DePasquale, for being
6 here today.
7 AUDITOR GENERAL DePASQUALE: Thank you.
8 REPRESENTATIVE HEFFLEY: And I want to just
9 commend you on your work that you did. I know we attended a
10 hearing that you had in the Lehigh Valley regarding the
11 issues with the PBMs.
12 AUDITOR GENERAL DePASQUALE: Yes.
13 REPRESENTATIVE HEFFLEY: There's been a lot of
14 talk about that last session. The House did pass House Bill
15 2212, which would have given that transparency to the
16 Department of Health to oversee that. We'll be working
17 towards that goal again this session.
18 I think it's really important the role that the
19 Auditor General's Office plays in auditing. A lot of people
20 aren't aware of what PBMs are.
21 AUDITOR GENERAL DePASQUALE: Right.
22 REPRESENTATIVE HEFFLEY: I know more about it
23 than I probably wanted to.
24 AUDITOR GENERAL DePASQUALE: Join the club on
25 that one.
82 1 REPRESENTATIVE HEFFLEY: And how that all
2 triggers out but you're talking about billions of dollars.
3 And it's really important. I guess, you know, a lot of the
4 suggestions that you had made, have any of those been
5 implemented yet through the regulatory agencies here at the
6 State? And if so or if not, why would those regulatory
7 agencies, if they had the statutory authority to do so, have
8 not implemented it and do we need additional legislation to
9 address those issues?
10 AUDITOR GENERAL DePASQUALE: I am not aware,
11 although I don't want to say it's 100 definite. But I am
12 not aware of any regulatory changes that have developed
13 because of the report.
14 I do know that the relevant committees in the
15 House and Senate on both sides of the aisle have reached out
16 to us. I know they're going to be having hearings on this
17 topic. And I know part of that is going to be what
18 additional legislation may be necessary. So I certainly
19 know on the auditing side of it, again whether it's DHS,
20 Health, myself, or some combination, and certainly on making
21 sure that wall between the two entities, those are, to me,
22 two easy ones to talk about from the legislative side.
23 But I'm not aware of any regulatory changes yet.
24 Why that has happened, hopefully the reason is because --
25 REPRESENTATIVE HEFFLEY: I would definitely
83 1 encourage, if they can do something to make these
2 improvements through regulation, it should be done right
3 away.
4 AUDITOR GENERAL DePASQUALE: Absolutely.
5 REPRESENTATIVE HEFFLEY: We're talking about
6 billions of taxpayer dollars right now.
7 AUDITOR GENERAL DePASQUALE: Absolutely.
8 REPRESENTATIVE HEFFLEY: I commend you on that.
9 I would just -- one of the things that concerns me overall
10 in government is sometimes -- you know, the good work that
11 you've done with the school districts and auditing the
12 busing situation as you just explained, make sure that we
13 stay focused on auditing those finances and those
14 performances.
15 AUDITOR GENERAL DePASQUALE: Right.
16 REPRESENTATIVE HEFFLEY: And sometimes there's
17 other things that come up that maybe are more in the realm
18 of policy, not necessarily audit, and that they use those
19 very limited resources we have in the State and that your
20 office has to go after the -- like the PBMS are not a --
21 it's not, you know, a really high profile thing but it's a
22 huge issue financial for the Commonwealth.
23 I would encourage your office to continue to
24 focus on those types of efforts .
25 AUDITOR GENERAL DePASQUALE: Yes.
84 1 REPRESENTATIVE HEFFLEY: Thank you for your time
2 today.
3 AUDITOR GENERAL DePASQUALE: Thank you.
4 REPRESENTATIVE HEFFLEY: Thank you, Mr. Chairman.
5 AUDITOR GENERAL DePASQUALE: Thank you,
6 Representative.
7 MAJORITY CHAIRMAN SAYLOR: Representative
8 Schweyer.
9 REPRESENTATIVE SCHWEYER: Thank you, Mr.
10 Chairman.
11 Auditor General, how are you, sir?
12 AUDITOR GENERAL DePASQUALE: Great. How's it
13 going?
14 REPRESENTATIVE SCHWEYER: Very well, thank you.
15 I wanted to switch topics just a little bit to
16 going back to the question of education auditing, but not
17 the transportation one, although representing someone who
18 has a school -- or representing a school district that does
19 not have busing, I do appreciate your interest on that
20 topic. I'm looking forward to learning more about
21 Representative Kim's efforts there.
22 But I want to talk a little bit about charter
23 school reimbursement. You know that my school district, one
24 of the largest in the State, third, fourth, depending on
25 enrollment at any given point in time, we have a $310
85 1 million budget as of last year, $55 million of which went to
2 two charter school reimbursements.
3 And so I want to stay out of the policies of
4 charter schools. I want to stay away from the politics of
5 it. We all know that they are at best tricky here in
6 Harrisburg. What I'd like to ask you is, A, what are you
7 doing currently? What have you done in the last year? And
8 what are you planning on looking at currently in terms of
9 the flow of cash, specific emphasis on Special Education,
10 the Special Education piece?
11 AUDITOR GENERAL DePASQUALE: A couple of things.
12 First of all, you know, similar to school
13 districts, we've audited charter schools and cyber charters
14 as well and we -- particularly on the brick and mortar, you
15 see some good, some not so good, it hasn't been on the
16 cyber, it's been a little bit more on the negative side.
17 But leave that aside for just a second on the policy.
18 One of my biggest concerns on the charter school
19 side is they get to set up foundations that are then
20 shielded from scrutiny from my department and from taxpayers
21 in general. For instance, if you have a superintendent of
22 any school district, you get to know their salary, what
23 their health care budget is, how they contract. Many
24 charter schools set that up through a foundation which
25 shields it from public scrutiny.
86 1 I think any charter school foundation needs to be
2 added to the State's Right-To-Know Law so that I would have
3 the ability to audit that function as well.
4 Certainly on the Special Education funding -- and
5 I will tell you that I am not convinced -- with the
6 exception of one school that I've been particularly
7 concerned with, but in general, I'm not here to tell you who
8 is right or wrong.
9 But we clearly have a problem in Pennsylvania
10 where kids are in a school district and then go to the
11 charter school. And we see a dramatic increase when they
12 get to the charter school in being identified as Special
13 needs. Now, I am not here to tell you which entity is
14 correct in the assessment.
15 One of the things I've called for is there has to
16 be some neutral party to determine which one is accurate
17 because if the kid needs the help, they should absolutely
18 get it. But if it's doing it as a backdoor way for some
19 charter operator to make more money, which we believe in a
20 couple instances is clear, when every single kid in some
21 charter schools -- again some -- I want to be clear -- some,
22 not all, some, every single kid in some charter schools is
23 identified as Special needs, all of them. I find that the
24 definition of almost impossible.
25 REPRESENTATIVE SCHWEYER: I appreciate that. I
87 1 know Allentown is not alone in urban school districts. And
2 it's interesting looking at the charter school penetration
3 of different districts. Some of our -- in particular urban
4 districts have virtually very little charter school
5 penetration. But when you look at ones in the Lehigh
6 Valley, all three of our major urban districts, Allentown,
7 Bethlehem, and Easton, all have pretty significant charter
8 school financial issues or financial issues of the school
9 district as a direct result of the number of kids. So I do
10 appreciate you looking at that.
11 I hope that means you're going to continue. I
12 know you do the charter schools as part of your regular
13 school audits. We've talked about that before. But I hope
14 as we look at sort of those broader issues, we can hear more
15 from your department because it's something that we need to
16 take the politics out of and just look at how it's
17 financially impacting folks, how it's financially impacting
18 taxpayers, property taxpayers, and those sorts of things.
19 So I appreciate your candor on the matter. I
20 appreciate your time on that.
21 That's all I have.
22 AUDITOR GENERAL DePASQUALE: Those efforts will
23 continue.
24 REPRESENTATIVE SCHWEYER: Thank you.
25 AUDITOR GENERAL DePASQUALE: Thank you,
88 1 Representative.
2 REPRESENTATIVE SCHWEYER: Thank you, Mr.
3 Chairman.
4 MAJORITY CHAIRMAN SAYLOR: I will just note --
5 and I appreciate Representative Schweyer's comments on the
6 charter schools and the need for some reform there. I think
7 the biggest problem we've had here in the General Assembly
8 has been going on for eight years.
9 The interesting thing is that the Pennsylvania
10 School Board Association, as well as the Pennsylvania --
11 I'll just say the worst of the charter schools have combined
12 together to kill charter school reform, which is a shame.
13 We need to really have charter school reform. We know there
14 are good charters.
15 AUDITOR GENERAL DePASQUALE: Absolutely.
16 MAJORITY CHAIRMAN SAYLOR: And I know there is
17 one good one with former Representative Mann who heads up in
18 Allentown. That is a very good charter school. I visited
19 it. So it's one of those things where we need to close down
20 the bad charters.
21 AUDITOR GENERAL DePASQUALE: Right.
22 MAJORITY CHAIRMAN SAYLOR: I think Representative
23 Schweyer is exactly right. We need to determine what the
24 real reimbursement for those charter schools should be.
25 But hopefully at some point we'll be able to
89 1 convince the Pennsylvania School Board Association to get on
2 board with the Legislature and do charter school reform.
3 AUDITOR GENERAL DePASQUALE: I remember when I
4 was in the House and we would have our meetings locally with
5 the School Board Association. I remember your vigorous
6 points you made then and I'm sure they continue to this day.
7 But you're right. Look, there are some good ones. All I
8 want to say is if my department or myself can be helpful in
9 that effort, feel free to call on us.
10 MAJORITY CHAIRMAN SAYLOR: Thank you.
11 Representative Topper.
12 REPRESENTATIVE TOPPER: Thank you, Mr. Chairman.
13 Thank you, General.
14 AUDITOR GENERAL DePASQUALE: Sure.
15 REPRESENTATIVE TOPPER: We're getting close to
16 the end. You know, as I've been listening, I have a
17 concern. We've kind of danced around that concern a couple
18 of times. I guess I'm going to be the one to bring up the
19 uncomfortable subject and direct it to you in this manner.
20 There are times when I see these reports and I
21 listen to the press conferences and see the releases and I
22 think, man, that's exactly what the Office of Auditor
23 General should be doing. And it's working. And then there
24 are times when I think, man, Gene is way out of his lane
25 here.
90 1 And I went and did some looking back at the
2 history of, you know, this office was created by the General
3 Assembly in the early 1800s. And I'll just quote what I
4 have here.
5 "The principal role of the Auditor General is to
6 determine whether State funds are being used in accordance
7 with the purposes and guidelines that govern each use of the
8 Commonwealth's dollars, not looking for new revenue or
9 making policy decisions."
10 And I guess I'm concerned. Maybe it's the
11 political climate that we're in today that brings it up.
12 Maybe it's just the idea of where we are at with politics in
13 Pennsylvania. But I'm concerned that this office has on
14 numerous occasions recently really veered into the policy
15 areas and gotten away from what we really need the office to
16 do.
17 And the reason I bring that up is because, as
18 Representative Lawrence, Gabler, and others have noted,
19 there are areas where we feel there needs to be
20 investigation. And you, yourself, have stated today that
21 your resources can be stretched thin at times, especially
22 your personnel resources and staff.
23 And so I guess my question to you is, perhaps the
24 definition of the office is a bit vague and maybe do we need
25 to go back and say, we really need to drill down on this,
91 1 this is the responsibility of this office so we don't stray.
2 What are your thoughts?
3 And I know this is a conversation that maybe we
4 can start now and continue to have later.
5 AUDITOR GENERAL DePASQUALE: I think, first of
6 all, it's an appropriate question. And a lot of these are
7 judgment calls. You know, I don't get to make policy, but I
8 do recommend it from time to time.
9 Part of it is when I ran in 2012 and 2016 -- and
10 I will be the first to tell you that my debate for Auditor
11 General in my reelection debate, the television ratings did
12 not equal Trump and Hillary. So I'll be the first to
13 concede that point. We did not have 100 million people
14 tuning in.
15 But I did say in both of those -- and I say that
16 somewhat tongue in cheek -- that part of my job was not just
17 to point out problems but to also make recommendations on
18 how to fix those problems. And so I view that as part of
19 the mandate of -- if it was just to check the money, I'm not
20 sure, I think we would just have a State accountant and not
21 have the question --
22 REPRESENTATIVE TOPPER: Well, no. I think that
23 is actually what we would want in this elected position. I
24 think the position was created --
25 AUDITOR GENERAL DePASQUALE: I think some people
92 1 may want it. But let me tell you, I've won two elections on
2 promising something different.
3 REPRESENTATIVE TOPPER: Well, I think you won two
4 elections -- of course, listen. I won't get into too much
5 about that. But I also think people saw you as someone who
6 is trustworthy when it comes to managing or investigating
7 finances.
8 And look, this State has had an issue, whether it
9 be in the row offices or in the Legislature. Whenever
10 there's been a mistrust in State Government, not that
11 they're looking for more policy, but they're looking for
12 honest people that can drill down into the numbers. And I
13 think that's exactly what they saw.
14 AUDITOR GENERAL DePASQUALE: I'm going to push
15 back on that. And by the way, we may just disagree on this.
16 So I appreciate that. That would not have allowed me to
17 look at the untested rape kits. If I was just looking at
18 the money spent, I could not have gone at that. That audit
19 would not have been done.
20 REPRESENTATIVE TOPPER: Right. But we've also
21 had bills dealing with those kits here in the General
22 Assembly. I know I voted on several. We've had the State
23 Police in. Again, not saying that any of the issues you're
24 looking at are not important. I believe that they are.
25 Whether, you know, it be for gun safety or environment,
93 1 whatever it is, I think those are important.
2 AUDITOR GENERAL DePASQUALE: Right.
3 REPRESENTATIVE TOPPER: I just want to make sure
4 that we are not setting a precedent that our row offices are
5 also used as press conference tools, that we are really
6 getting into the heart of the matter of what each office was
7 set up to do. And that's the conversation that I want to
8 make sure that we continue.
9 AUDITOR GENERAL DePASQUALE: Great. Thank you.
10 REPRESENTATIVE TOPPER: Thank you, Mr. Chairman.
11 MAJORITY CHAIRMAN SAYLOR: Representative White.
12 REPRESENTATIVE WHITE: Thank you, Mr. Chairman.
13 How are you doing?
14 AUDITOR GENERAL DePASQUALE: Good to see you.
15 REPRESENTATIVE WHITE: Holding up all right?
16 AUDITOR GENERAL DePASQUALE: Yes.
17 REPRESENTATIVE WHITE: Brace yourself.
18 Look, I'm from Philadelphia. I've lived there
19 since I was born. I'm really grateful for that opportunity.
20 But sadly in Philadelphia we've seen crime, corruption,
21 fraud, abuse take place and just run rampant pretty much.
22 City Hall has been run by Democrats for basically
23 six decades and that's the fact. Last year the City
24 Controller expressed concern about 924 million in accounting
25 errors, among other issues, such as not reconciling accounts
94 1 for too many years, along with the oversight, the lack of
2 oversight and transparency. I think it's clear that there's
3 mismanagement. You've audited other entities in
4 Philadelphia, as you previously mentioned.
5 I, along with my colleagues, Democrat,
6 Republican, are very grateful for that. You just traveled
7 all the way to visit us in Philadelphia, which we love to
8 see you there, but you're talking about voting machines.
9 And I just want to know when you're going to audit the City
10 of Philadelphia, the municipality itself.
11 AUDITOR GENERAL DePASQUALE: Give me the legal
12 authority to do it. I'm not legally allowed to do it.
13 REPRESENTATIVE WHITE: Sir, you are permitted to
14 legally track down the money that the State --
15 AUDITOR GENERAL DePASQUALE: On the State money.
16 REPRESENTATIVE WHITE: That's correct.
17 AUDITOR GENERAL DePASQUALE: But I can't audit
18 the City government.
19 REPRESENTATIVE WHITE: You can audit them for the
20 State dollars they receive and I encourage you to do that.
21 AUDITOR GENERAL DePASQUALE: And we did audit the
22 school district and we had a lot of findings there.
23 REPRESENTATIVE WHITE: I understand that. And
24 you understand my question, right?
25 AUDITOR GENERAL DePASQUALE: But I do not have
95 1 the authority to just audit the City government. I can
2 audit State funds that flow through and --
3 REPRESENTATIVE WHITE: And I encourage you to do
4 that.
5 AUDITOR GENERAL DePASQUALE: And we have audited
6 the Department of Human Services there. And we are auditing
7 the election process right there now.
8 REPRESENTATIVE WHITE: Okay. Well, I just want
9 to reiterate how important it is that we address this major,
10 major concern in Philadelphia.
11 AUDITOR GENERAL DePASQUALE: If there is a
12 specific area that you want us to look at, please let us
13 know. I'm more than happy to follow up with that.
14 REPRESENTATIVE WHITE: I'd be happy to.
15 MAJORITY CHAIRMAN SAYLOR: Representative Cephas.
16 REPRESENTATIVE CEPHAS: Thank you, Mr. Chairman.
17 Good afternoon.
18 AUDITOR GENERAL DePASQUALE: Good afternoon.
19 REPRESENTATIVE CEPHAS: I want to follow up with
20 some questions that Representative Delozier and
21 Representative Fiedler had raised in reference to your
22 upcoming report around criminal justice reform.
23 AUDITOR GENERAL DePASQUALE: Okay.
24 REPRESENTATIVE CEPHAS: We've made a lot of
25 concerted effort and there's been a lot of conversation to,
96 1 you know, fix our system when it comes to prison
2 populations, when it comes to ex-offenders returning back to
3 society around their records. The one area I'd like to see
4 if your report addresses is the issue around workforce
5 development within our correctional facilities.
6 Some of the challenges that I've heard being
7 raised -- and this is, you know, purely anecdotal, so
8 there's no research or statistics relating to what I'm
9 getting ready to say. But some of the entities, as
10 returning citizens come out, they have concerns with how we
11 are tooling them as they are getting ready to return back to
12 society by way of workforce development and that the
13 certifications that they're receiving inside don't
14 necessarily align with high-occupation industries or some of
15 our unions.
16 Is your report planning to look into that issue?
17 I know just this past year we now have the Pennsylvania --
18 the Department of Corrections now sitting at the workforce
19 development table. But I just kind of want to get a sense,
20 does your report look into that as well?
21 AUDITOR GENERAL DePASQUALE: They were one of the
22 entities that we were -- so when our report comes out, they
23 were one of the entities that we are certainly looking at.
24 There are admittedly some legal barriers that people that
25 are going back into society have on certain job functions,
97 1 which I think the majority wanted and looking to address.
2 But that is one of the areas. They are one of
3 the entities that we're looking at in that report.
4 REPRESENTATIVE CEPHAS: And does your report plan
5 to make recommendations on particular barriers into certain
6 industries that don't necessarily relate to the reason why
7 they entered into our justice system?
8 So, for example, when it comes to the cosmetology
9 license or the barbering license and, you know, certain
10 crimes related, this allows them to get that certification.
11 And then it's almost like, well, why are we training them
12 for that?
13 AUDITOR GENERAL DePASQUALE: There is -- the
14 barber licenses is one in particular; that is, the prison
15 system is pretty good at training barbers but yet they are
16 prohibited from getting the license when they come out,
17 which just makes you wonder, like, what's the reason for
18 that? If we're going to be training the people in the
19 prisons to do this -- and I know part of it. You know, each
20 prison in a sense is sort of this mini city where there's a
21 lot of it where the prisoners do a lot of the functions,
22 which most people aren't aware of. But why are we going to
23 let them do that there and then not let them take that skill
24 out?
25 I get various crimes where you don't be want them
98 1 near children, etc., but, you know, on a barber license, I
2 do think that we should at least have a discussion in
3 society on that one. And there's others but that one in
4 particular.
5 REPRESENTATIVE CEPHAS: Okay. Thank you so much.
6 AUDITOR GENERAL DePASQUALE: Thank you.
7 REPRESENTATIVE CEPHAS: Thank you, Mr. Chairman.
8 MAJORITY CHAIRMAN SAYLOR: Representative
9 Bradford.
10 MINORITY CHAIRMAN BRADFORD: Real quick, Eugene.
11 I just want to thank you for the amazing job you
12 do I think not only on the dollars and cents, but frankly
13 using the bully pulpit of your office and shining a light
14 where it needs to be shined. I think you've done an amazing
15 job. And I think everyone across the board appreciates the
16 job you do.
17 I don't know if we should ever politicize the
18 position but really give it the autonomy and independence it
19 needs to look at every level of government in every county
20 in Southeastern Pennsylvania. I believe we have more than
21 one county. We have five. So I think we should probably be
22 fair in looking at all those if we're going down that road.
23 AUDITOR GENERAL DePASQUALE: Thank you,
24 Representative.
25 MINORITY CHAIRMAN BRADFORD: Thank you.
99 1 MAJORITY CHAIRMAN SAYLOR: I did want to
2 recognize Representative Nelson who joined us also during
3 the hearing. I forgot to mention him earlier.
4 Gene, I want to thank you as Auditor General for
5 the job you're doing.
6 AUDITOR GENERAL DePASQUALE: Thank you.
7 MAJORITY CHAIRMAN SAYLOR: I do think we'll
8 follow up with Representative White's request about the
9 State dollars that are flowing in Philadelphia. She's not
10 the first person to raise questions about how spending in
11 Philadelphia is going. As you discovered in most of your
12 audits in Philadelphia, it doesn't look good.
13 AUDITOR GENERAL DePASQUALE: Right.
14 MAJORITY CHAIRMAN SAYLOR: So I think it
15 justifies a lot of other agencies or other State dollars
16 that are flowing there. I agree with Representative White
17 that when you find smoke, there's probably some fire. And
18 since you found it in everything else that you've done in
19 Philadelphia, I believe it justifies other audits.
20 Admittedly that doesn't mean that you shouldn't
21 audit other counties. I'm just saying that I think her
22 request is a reasonable request.
23 AUDITOR GENERAL DePASQUALE: There's no question
24 it's a reasonable request. And I'm happy to have that
25 discussion.
100 1 MAJORITY CHAIRMAN SAYLOR: So with that, other
2 than the fight between the Phillies and the Pirates and
3 who's going to sign who, congratulations and thank you.
4 AUDITOR GENERAL DePASQUALE: Thank you.
5 (Whereupon, the hearing concluded.)
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101 1 I hereby certify that the proceedings and
2 evidence are contained fully and accurately in the notes
3 taken by me on the within proceedings and that this is a
4 correct transcript of the same.
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8 Jean M. Davis 9 Notary Public
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