COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES APPROPRIATIONS COMMITTEE BUDGET HEARING DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT

MAIN CAPITOL BUILDING MAJORITY CAUCUS ROOM TUESDAY, FEBRUARY 28, 2006, 3:04 P.M. VOLUME V OF V

BEFORE: HONORABLE BRETT FEESE, CHAIRMAN HONORABLE DWIGHT EVANS HONORABLE GIBSON C. ARMSTRONG HONORABLE MATTHEW E. BAKER HONORABLE STEPHEN E. BARRAR HONORABLE STEVEN W. CAPPELLI HONORABLE CRAIG A. DALLY HONORABLE GENE DiGIROLAMO HONORABLE TERESA E. FORCIER HONORABLE JOHN A. MAHER HONORABLE EUGENE F. McGILL HONORABLE STEVEN R. NICKOL HONORABLE SCOTT A. PETRI HONORABLE DOUGLAS G. REICHLEY HONORABLE SAMUEL E. ROHRER HONORABLE CURT SCHRODER HONORABLE JERRY A. STERN HONORABLE PETER J. ZUG HONORABLE KATIE TRUE HONORABLE PETER ZUG HONORABLE

2

1 BEFORE (Cont'd.): HONORABLE HAROLD JAMES 2 HONORABLE KATHY M. MANDERINO HONORABLE ANTHONY J. MELIO 3 HONORABLE HONORABLE JOSH SHAPIRO 4 HONORABLE MIKE STURLA HONORABLE THOMAS A. TANGRETTI 5 HONORABLE DON WALKO HONORABLE GREG S. VITALI 6 HONORABLE

7

8 ALSO PRESENT: MIRIAM FOX 9 ED NOLAN

10

11 HEATHER L. ARTZ, RMR, CRR REPORTER - NOTARY PUBLIC 12

13

14

15

16

17

18

19

20

21

22

23

24

25

3

1 I N D E X

2

3 TESTIFIER PAGE

4 Secretary Dennis Yablonsky 4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

4

1 REPRESENTATIVE FLEAGLE: The House

2 Appropriations Committee will come to order. Before

3 us at this time is the Secretary of Department of

4 Community and Economic Development. Welcome,

5 Mr. Secretary. If you would, before you give your

6 testimony, if you would have the stenographer swear

7 you in.

8

9 DENNIS YABLONSKY, called as a witness, being

10 duly sworn, was examined and testified, as follows:

11 SECRETARY YABLONSKY: Thank you. Thank you,

12 Mr. Chairman.

13 REPRESENTATIVE FLEAGLE: Again, welcome. You

14 may proceed with your testimony.

15 SECRETARY YABLONSKY: Thank you,

16 Mr. Chairman. It's good to be with you all today,

17 particularly on Fat Tuesday. I believe you have a

18 copy of my written testimony. I'd like to start by

19 describing a summary of that, and then take your

20 questions.

21 Let me start by outlining what's been

22 accomplished on the economic and community development

23 front in the past year, and then I'd like to present

24 briefly our goals and priorities for the coming year

25 for the Department.

5

1 Over the past year there's been significant

2 progress in a number of areas that directly impacts

3 the economic competitiveness and revitalization of

4 Pennsylvania.

5 The state's employment is at an all-time

6 high, other macroindicators are on the rise, and

7 continued company expansion and attraction plans

8 indicate future growth.

9 The current economic indicators for the state

10 are continuing to show signs of recovery, particularly

11 in the area of job growth. Employments for residents

12 of the Commonwealth, as I mentioned, have reached an

13 all-time high of 5.73 million people, and there's over

14 120,000 net new jobs created in the past three years.

15 According to the Corporation for Enterprise

16 Development, our rankings relative to other states is

17 already improved -- has also improved. Employment

18 growth, for example, shows that we've gone from 41st

19 to 15th this past year. In the very same report we

20 were ranked as number 6 in the nation in the creation

21 of start-up businesses, up from 32nd.

22 Our investments in businesses and site prep

23 and infrastructure and community revitalization are

24 starting to have an impact.

25 Also of importance to highlight is the

6

1 progress that's been made in improving the environment

2 for Pennsylvania's businesses by reducing taxes and

3 workers' compensation costs. The Governor's budget

4 proposal would reduce business taxes by an additional

5 $221 million. When you add that to the business taxes

6 that have been enacted by you all in the last three

7 years, business tax cuts in the last three years would

8 total $987 million.

9 Also, the Governor recently announced that

10 Pennsylvania will decrease workers' comp cost, saving

11 the state's employers approximately a hundred million

12 dollars on their 2006 premiums.

13 We've been working hard on the stimulus

14 package. It's been launched. We've committed to over

15 1300 projects. We've allocated approximately $1.3

16 billion of the $2.3 billion in money that's available.

17 These projects are committed to bringing approximately

18 125,000 jobs eventually to the Commonwealth. And we

19 work with the private sector who committed an

20 additional $2 billion in private sector match on those

21 projects.

22 Our budget for this year is proposed at $426

23 million. We propose an increased investments in a

24 number of programs, including the infrastructures and

25 facilities improvement program. The Governor's also

7

1 highlighted two major -- two new major initiatives,

2 the first is the Jonas Salk Legacy Fund. DCED is

3 partnering with the Department of Health to implement

4 a new bioscience initiative called the Jonas Salk

5 Legacy Fund. It's intended to provide $500 million in

6 accelerated capital over the next two years for

7 investments in bioscience research in this state.

8 This money will be used to help attract world class

9 faculty and to provide financing for facility and lab

10 infrastructure.

11 Funding for this program would come from the

12 securitization of a portion of Pennsylvania's tobacco

13 settlement funds. This approach will allow us to

14 dramatically accelerate these new investments in

15 bioscience infrastructure without adversely affecting

16 the Commonwealth's general fund.

17 Specifically, no taxpayer dollars will be

18 used and there will be no risk to the Commonwealth in

19 connection with this initiative. This fund will also

20 require a dollar-for-dollar match, which means that a

21 total of $1 billion in new accelerated capital would

22 be available.

23 The second new initiative the Governor

24 proposed is called World Trade PA. This is designed

25 to help Pennsylvania businesses successfully compete

8

1 in the global economy.

2 We're proposing $15 million of additional

3 support be available to advance these initiatives.

4 And this money would be available for direct support

5 to businesses, to our international partners, and for

6 the outreach and operational expenses of running the

7 program.

8 In closing, we feel that the budget proposal,

9 coupled with the progress that's already been made,

10 will help us to continue to build a strong foundation

11 for growth with Pennsylvania's businesses and

12 communities and put the Commonwealth in a position to

13 be more competitive in the future.

14 I'm looking forward to continuing to working

15 with all the members of the General Assembly and to

16 continue to improve our job population and community

17 revitalization performance in the coming years. Thank

18 your for the opportunity. I'd be happy to take your

19 questions that this time.

20 REPRESENTATIVE FLEAGLE: Thank you,

21 Mr. Secretary. I have an initial question here. And

22 this comes from several constituents that I have that

23 are very entrepreneurial. And my area, although it's

24 a rural area, was widely known as an area where farm

25 boys became mechanics and built industries. And we're

9

1 really innovative in business. And it's getting to be

2 known now for an innovation in, believe it or not,

3 international trade, and particularly younger people

4 who are not afraid to take those chances and who grow

5 up in that atmosphere of we have to compete

6 internationally.

7 I did get a rather alarming report from one

8 of them. And I wouldn't go into detail about the

9 specific office of the -- or which trade office it

10 was, because I don't think that's fair to the person

11 that's in that office. We can discuss that certainly,

12 but are you -- when you're looking at the World Trade

13 in Pennsylvania initiative, how are things going to

14 change from the way they are now?

15 SECRETARY YABLONSKY: Well, the World Trade

16 initiative is designed to do a couple of things.

17 First of all, there has been a strong emphasis on

18 trade, and by that I mean helping Pennsylvania

19 companies find markets to export their products to

20 overseas. We have representation now in 17 countries,

21 I believe. We've made some changes in that

22 representation over the last couple of years. We will

23 probably make some additional changes as a result of

24 this initiative, assuming it's proposed.

25 The second part where we haven't emphasized

10

1 as strongly until Governor Rendell came on board was

2 the reverse side, which is the so-called Foreign

3 Direct Investment, where we find overseas companies

4 that want to invest in Pennsylvania. We're putting a

5 much greater emphasis on that, not at the expense of

6 trade. We're trying to build both of them up to an

7 equal level. So this initiative would involve some

8 changes. It would involve some new programs.

9 It would involve more money in existing

10 programs. And it would involve a lot more outreach to

11 small and mid size businesses in Pennsylvania to

12 educate them on the value of trade, and then to help

13 them get started.

14 REPRESENTATIVE FLEAGLE: Well, and these

15 constituents are just great folks that are creating

16 jobs and just cost us practically nothing to do as far

17 as economic development. But I certainly would like

18 to -- naturally everybody wants them to have their

19 district be known as an international trade innovator.

20 SECRETARY YABLONSKY: Of course.

21 REPRESENTATIVE FLEAGLE: One of their

22 suggestions was, and you can respond to this, was that

23 they thought that that trade group would be better

24 administered through the Small Business Development

25 Centers. And I think they said that because they --

11

1 those are folks they had worked with, those were folks

2 that were responsive, and felt that the foreign trade

3 office of DCED -- and maybe it's because of the very

4 nature of international trade was too bureaucratic --

5 had a lot of levels to it, and did not get the results

6 that they wanted.

7 My question to you is, would you certainly,

8 in light of the World Trade Pennsylvania initiative,

9 be willing to work with my constituents who are

10 customers of this Commonwealth -- and we want to

11 promote them -- but would that Department be willing

12 to work with those folks in my district and other

13 districts to develop performance standards for that

14 international trade department that we have?

15 SECRETARY YABLONSKY: Absolutely. We've

16 already developed a number of performance standards

17 and are doing well against those standards in the last

18 couple of years, but we're always open for suggestions

19 on how we can do better.

20 REPRESENTATIVE FLEAGLE: And the charge was

21 they operate too autonomously, with little or no

22 connection to the outcome of their clients. And I

23 realize in business you can't always be successful,

24 that's just the way it is. But I would hope to work

25 with you and your department and my constituents,

12

1 several of them, to make that center more responsive

2 to them and to -- to improve both sides.

3 SECRETARY YABLONSKY: I'm happy to look at

4 specifics. I think the group is doing very well. I

5 don't know the particulars that you're referring to.

6 But I'd be happy to sit down with your constituents

7 and see what was the issues and what we can do about

8 it. By the way, we work with the SBDC regularly on

9 international trade. They're one of our regional

10 network -- regional export network partners. And they

11 will be actively involved in this world trade program.

12 REPRESENTATIVE FLEAGLE: Well, if the World

13 Trade Pennsylvania Initiative does survive the budget

14 cycle, perhaps that can be a catalyst for the

15 different operation.

16 SECRETARY YABLONSKY: Well, we'll make a note

17 to follow up specifically with your office on this.

18 REPRESENTATIVE FLEAGLE: And I'll recognize

19 the democrat chairman, Dwight Evans.

20 REPRESENTATIVE EVANS: Thank you,

21 Mr. Chairman. Good afternoon, Mr. Secretary.

22 SECRETARY YABLONSKY: Good afternoon.

23 REPRESENTATIVE EVANS: Secretary, I'd like to

24 kind of take a moment, the Chairman just expressed on

25 World Trade PA is something the Ridge Administration,

13

1 they talked a lot about exports and importance of

2 international. So I applaud you and the Governor for,

3 again, trying to enhance this particular initiative.

4 So can you go into a little bit more detail

5 of where you see this going in terms of talk about it

6 in the context of accountability and the evaluation

7 and how will you measure the results that you're

8 looking for with this particular investment?

9 SECRETARY YABLONSKY: Certainly. First of

10 all, we'll be looking at what I will call macro

11 levels, by that I mean the overall growth in exports

12 for the states and the overall growth in foreign

13 direct investment, some of which will have a direct

14 impact on, some of which we will have an indirect

15 impact on. We also already measure and will continue

16 to measure direct effected results. By that I mean we

17 know exactly which companies, which Pennsylvania

18 companies we help export, whether it's through trade

19 missions or other support. And we ask them to come

20 back and verify specifically each year how much

21 increase in trade resulted from the support you got

22 from the state. And then we track those numbers,

23 which are up quite nicely.

24 Similarly, on the investment side, we work --

25 the international -- Office of International Business

14

1 Development works very close with the Governor's

2 Action Team so that when we get a real prospect we're

3 working together, and then when we're able to effect a

4 closure of an agreement we, like the Gamace agreement,

5 for example, the Spanish wind generation company, we

6 then track that.

7 So we will continue to track these

8 investments. And any improvements we can make on how

9 we measure performance and demand accountability would

10 be welcome.

11 REPRESENTATIVE EVANS: You know, something

12 that's very close to my heart, yesterday we had the

13 University of Pennsylvania here. We were talking

14 about the veterinarian school. We had the Secretary

15 of Agriculture here. We were talking about the number

16 one priority of agriculture. Something that I've

17 talked a lot about is the aspect in rural and urban is

18 the supermarket initiative. And I appreciate you and

19 your department working with me on that, that

20 supermarket initiative.

21 Can you talk a little bit about the

22 initiative, put it in the context of now how you think

23 that has also been helping Pennsylvania?

24 SECRETARY YABLONSKY: It's a wonderful

25 initiative and it's been a great partnership,

15

1 certainly, with your office and with our partner in

2 Philadelphia.

3 The need -- there is, of course, the need for

4 supermarkets in urban areas where people do not have

5 access to affordable, fresh, wholesome food. And this

6 is a particular problem in our urban areas. This

7 initiative is designed to stimulate private sector

8 interest in investment in those kinds of supermarkets.

9 And I believe there have been at least seven projects

10 approved in Philadelphia, Gettysburg, Eddystone, and

11 Pittsburgh, to my recollection. And I believe there's

12 over a dozen additional projects in the pipeline.

13 So this has been a great example of

14 administrative, General Assembly, and private sector

15 cooperation. And I hope the program will continue.

16 REPRESENTATIVE EVANS: The other thing is,

17 which I'm very impressed with what you've put in your

18 documentation about jobs, the number of jobs that have

19 been created from the economic stimulus program. And

20 I think in this day and age when you have tight

21 dollars and people constantly raise very legitimate

22 questions about accountability and evaluation. Do you

23 want to speak a little bit to -- you know, as I look

24 through business in your site, I notice how you've

25 laid out the jobs, jobs created. And I'm impressed.

16

1 This is the first time I've seen a department lay out

2 where it's measurable and people -- because that's

3 ultimately what this committee should be about. We

4 should be measuring exactly the dollars that we've

5 got.

6 So do you want to speak a little bit about

7 the whole economic development stimulus program, its

8 direction related to your mission, in your mission

9 statement? And then, secondly, I want to piggyback,

10 we also had the Secretary of Transportation here. And

11 one of the things he talked about was the Pennsylvania

12 infrastructure program. Can you show some examples of

13 how you sort of cross-pollenization, with working

14 together around initiatives to achieve your objective

15 of growing Pennsylvania in jobs?

16 SECRETARY YABLONSKY: Certainly. We work

17 with PennDOT and many of the other departments

18 regularly on economic development projects, because

19 they frequently involve transportation infrastructure,

20 sometimes they involve environmental issue. There's

21 land and green parks, so we get involved with DCNR,

22 just to name a few. We do this a couple of different

23 ways. We have an economic development committee of

24 the cabinet which the Governor formed under executive

25 order that I chair. There are five cabinet

17

1 secretaries that meet regularly to deal with policy

2 issues. And then both the Governor's Action Team and

3 the Community Action Team meet at the deputy and

4 director level regularly to work on projects.

5 And there have been a number of them where

6 transportation has played a key role in making

7 things -- in making things come together in a

8 wholesome way.

9 And as you mentioned, we're measuring

10 everything that we do. I mean, I come from the

11 business world. It's a world where you measure things

12 and you account. And I think the same principles

13 apply here. The Department had already been measuring

14 things before I arrived. We've pick -- we've picked

15 the pace up on those activities, and we try to make

16 sure that every -- every time we commit the money

17 there's a corresponding commitment to economic impact,

18 be it jobs or capital development or whatever it might

19 be. And then we go back and monitor it later on to

20 make sure that the commitments have been achieved.

21 REPRESENTATIVE EVANS: In your statement, you

22 talked a little bit about, in addition to the

23 investment decision you made, you also talked about

24 tax policy, you also talked about workers' comp.

25 SECRETARY YABLONSKY: Yes.

18

1 REPRESENTATIVE EVANS: Do you want to talk

2 about those two particular connections of policy

3 relating to the investment decisions that you have

4 been making.

5 SECRETARY YABLONSKY: Sure. I mean, business

6 taxes and the cost of workers' comp cost and other

7 costs like that are a factor in companies' decision

8 making on whether they stay here or whether they

9 relocate here from out of state.

10 I will tell you that it is almost never the

11 number one factor, in my experience here. And all of

12 the research reinforces that to be the case. But that

13 being said, it is -- it is a factor and it's a part of

14 what the Governor and the administration and you all

15 are trying to do. And there are certain aspects of

16 business taxes that if we were to modify would make us

17 even more competitive.

18 The capital stock and franchise tax, for

19 example, needs to be phased out. And eventual

20 phase-out of the NOL cap would be helpful. Anything

21 we can do on the CNI, for example -- the CNI is

22 particularly an optics problem where, I mean,

23 out-of-state site experts look at 9.99 percent and

24 they go, it's the second highest in the country. Even

25 though, as I think Secretary Fajt has testified, not

19

1 everybody pays that rate. It's an optics problem for

2 us when we're dealing with competition.

3 So once again, while it's not the most

4 important issue in decision making, it is one of the

5 factors. And I think we need to continue to try to

6 make progress. And I believe this budget will do

7 that.

8 REPRESENTATIVE EVANS: One of the last

9 questions, in your mission statement you talk about

10 empowering the business community. And in your

11 mission statement, and from what I've just heard you

12 say, what you're attempting to do under the Rendell

13 administration, it looks like to me, is obviously

14 expand your opportunity in the nationally, the world

15 trade, in addition to tax policy, workers' comp, and

16 investment. You're basically trying to, what it looks

17 like to me, have some of a seamless approach to

18 putting Pennsylvania in a very competitive position.

19 The Governor said in his speech on the day they

20 announced that if Pennsylvania was a country it would

21 be the 17th largest country.

22 And obviously we're in a very much

23 competitive world. We've been in that possession for

24 three to four years. As you look at things over the

25 time, what are some of the other things you think we

20

1 can do as we look towards the future about making

2 Pennsylvania more competitive state and in terms of

3 growth and opportunity?

4 SECRETARY YABLONSKY: Well, some of it is

5 continuing to implement the direction that we're

6 heading in. For example, we need to finish out the

7 job of creating an inventory of sites that are ready

8 to go for businesses.

9 We need to continue to finish the job of

10 revitalizing our core community so that there are

11 attractive places for young people to live. We need

12 to continue to work on making sure that venture

13 capital and other risk-oriented sources of capital are

14 available for businesses that want to start and grow

15 here.

16 And we need to continue to work with our

17 universities and colleges to not only continue to help

18 them drive forward as economic engines in and of their

19 own right, but that we gain all of the leverage from

20 the research and the innovation activities that they

21 occur. Those are the kinds of things that I think are

22 important strategically for us to continue, not to

23 lose sight of, continue to execute the plan.

24 REPRESENTATIVE EVANS: Thank you,

25 Mr. Secretary. Thank you, Mr. Chairman.

21

1 REPRESENTATIVE FLEAGLE: The Chair thanks the

2 gentleman and recognizes Representative Reichley.

3 REPRESENTATIVE REICHLEY: Thank you,

4 Mr. Chairman. Thank you, Mr. Secretary.

5 SECRETARY YABLONSKY: Good afternoon.

6 REPRESENTATIVE REICHLEY: I'd like to really

7 focus on two things. First off, with regard to

8 funding for the Ben Franklin Technology development, I

9 see that it's been reduced here down to it looks like

10 50 million.

11 SECRETARY YABLONSKY: It's proposed level

12 funded next year.

13 REPRESENTATIVE REICHLEY: Right, from two

14 years ago. But I understand historically the 28

15 million of that has been dedicated to the Ben Franklin

16 Center. I'm wondering if you can state here today

17 that you're prepared to do that as well within this

18 budget.

19 SECRETARY YABLONSKY: We are prepared to make

20 that recommendation to the Ben Franklin Authority

21 board that it would be funded at -- I think it's 27.6

22 or 27.8, but level with what it's funded at this year.

23 REPRESENTATIVE REICHLEY: Okay. Because

24 that's -- there's one at Lehigh University in that

25 area and we're very happy with the work that's been

22

1 doing, a number of start-up technology companies in

2 the Lehigh Valley, and certainly want to make sure

3 that they continue to receive funding stream that

4 enables them to do their work within the Valley.

5 SECRETARY YABLONSKY: I understand they do a

6 good job.

7 REPRESENTATIVE REICHLEY: Now, the second

8 area I really want to ask you about was on this World

9 Trade PA thing. A few years back, and this goes back,

10 I think, to the Reagan and Bush era, they used to be

11 criticized for sort of doing the same thing and

12 promoting American businesses overseas, it was called

13 corporate welfare.

14 And I'm just wondering how the Rendell

15 administration views the necessity of engaging, is it,

16 $15 million for the world trade project when you're

17 cutting money to establish projects like the

18 infrastructure technical assistance projects, adding

19 manufacturing and I am sure all politics is local and

20 some of these policies frankly are from the Lehigh

21 Valley area, but I'm curious as to how the

22 justification's been made to cut money to establish

23 productive projects that have helped existing

24 Pennsylvania businesses in light --in an exchange for

25 adding $15 million to this program.

23

1 SECRETARY YABLONSKY: We see the global trade

2 program as a real opportunity for the state. And

3 specifically we've done some research that identifies

4 that on a relative basis, Pennsylvania's small and

5 mid-size companies are not exporting as much as they

6 probably could be and should be. And aren't --

7 certainly aren't as much as some of our competitor

8 states.

9 We've made progress in the last two years in

10 particular, but there's a wonderful opportunity out

11 there. I mean, if you've read the book The World Is

12 Flat -- you probably have -- you understand some of

13 the concepts. It's a global economy now. And

14 frankly, you can't just compete in your own backyard

15 anymore on almost any business. And we believe that

16 Pennsylvania businesses, to become competitive, need

17 to get educated about this and need a little bit of

18 encouragement to go do it. Once they get started it's

19 on -- they're on their on.

20 I mean, I think they need their products, and

21 their approach will work based upon how good they do.

22 But we see this as an opportunity. And budget choices

23 are relative choices. I mean, I hate to cut anything

24 in my budget, but we have to make decisions on where

25 you think you'll get the biggest impact for the

24

1 dollars that you invest. And in this particular case,

2 we believe this $15 million will more than pay for

3 itself in impact in helping Pennsylvania companies

4 grow and, subsequently, create more jobs.

5 REPRESENTATIVE REICHLEY: What do you foresee

6 you can do with the $15 million and who exactly are

7 you going to go out to in the Pennsylvania business

8 climate to approach to help them?

9 SECRETARY YABLONSKY: The money will be spent

10 in four buckets, if you will. First bucket will be

11 direct support to companies. We have a grant program

12 to help them evaluate whether they're ready to do

13 exporting and get information on particular markets.

14 They may be curious about intellectual property

15 issues, for example, in a particular market, need a

16 little help to do that; or they may be so small that

17 they can't afford to do an initial trip overseas, so

18 we may help them with that.

19 We have an existing export loan program.

20 It's a low interest loan program that provides working

21 capital to small and mid-size businesses who want to

22 expand internationally. They may need to hire an

23 agent overseas, they may need to hire some sales

24 people, they may need to translate technical

25 documentation or marketing documents into other

25

1 languages. We provide working capital loans through

2 that program. We'd like to expand it.

3 A second piece of this will be additional

4 money for our partners. We are planning on providing

5 regional money to partners who want to kick off a

6 major export program for support of their companies.

7 We have overseas reps we will probably expand in

8 markets where we're underserved, like India and China.

9 We have representation in both of those countries. We

10 feel we need to expand there. We're looking at some

11 other markets, like eastern Europe.

12 Third, we are planning on creating a

13 comprehensive web -- set of Web tools that will make

14 it easy for small businesses to get on the site, be

15 able to evaluate their export readiness, find out

16 where they have holes, who they can talk to, a whole

17 series of things where we can outreach through the web

18 much further than we could with humans.

19 And then finally there will be seminars,

20 promotion, education, things like that. We have

21 specific breakdowns which we can provide you, but

22 that's basically where the money would go.

23 REPRESENTATIVE REICHLEY: Now, with regard to

24 those four buckets, to what degree would any of these

25 programs be duplicative of things that are already

26

1 offered at the federal level or from trade

2 associations for that matter?

3 SECRETARY YABLONSKY: I'm not aware of any

4 redundancy. There may be some things where we're

5 doing more than the federal programs, but I'm not

6 aware of any redundancy.

7 REPRESENTATIVE REICHLEY: So I have Doug's

8 kumquat farm, you know, and you're going to say that I

9 am going to come to you to translate documents so I

10 can sell kumquats in Pakistan?

11 SECRETARY YABLONSKY: You're going to come to

12 us and you're going to say I think there's an

13 opportunity in Spain, and then we're going to sit down

14 with you and we're going to help you figure out what

15 the market opportunity is in Spain, what the tariffs

16 and trade issues are, what the tax issues are, who you

17 might talk to over there to get started, whether an

18 overseas rep or your own people maybe makes the most

19 sense, and with our -- did -- with our European

20 counterpart identify potential partners for you talk

21 to. We may even organize a trade mission to take you

22 and a bunch of your colleagues over to Spain for a

23 week to talk to people. So a whole range of

24 activities that will help people get going in

25 exporting activities.

27

1 REPRESENTATIVE REICHLEY: And are you going

2 to be charging people for these services?

3 SECRETARY YABLONSKY: We are not planning to

4 charge for these services.

5 REPRESENTATIVE REICHLEY: To what degree does

6 the predecessor witness, the Department of

7 Agriculture, do things like that for the largest

8 industry in Pennsylvania, the agriculture sector? To

9 what level is that already done by other departments?

10 SECRETARY YABLONSKY: In the ag area we work

11 very carefully with Secretary Wolff and his people.

12 When trade missions are exclusively ag, his people

13 typically go on them. They work with DCED

14 representatives overseas, so if they go to -- once

15 again, if they go to France, they'll work with our

16 French Representative over there. So it's a

17 collaborative effort. But when it comes to ag,

18 they're the specialists and we generally let them

19 handle it.

20 REPRESENTATIVE REICHLEY: Well, I guess I'm

21 just curious. Not long after I got elected I remember

22 I went to a Farm Show dinner and they gave out a whole

23 series of awards to manufacturers who were selling

24 their products in South America, Europe, and all that

25 kind of stuff. And they were doing that without this

28

1 program in place. I'm just curious as to not just in

2 the agriculture sector, but in the other businesses,

3 you know, what you're going to be doing that isn't

4 already out there.

5 SECRETARY YABLONSKY: Well, it's, once again,

6 we're targeting small, mid-size businesses, the

7 businesses that either aren't aware of the

8 opportunities, maybe they're -- there's a fear of the

9 unknown, or frankly they just don't know how to get

10 started. And we think we can help a number of those

11 people. Some of them will decide it's not for them.

12 And that's part of the process.

13 REPRESENTATIVE REICHLEY: And as I mentioned

14 about all politics being local, let me bring you back

15 to one other point. In terms of grants, from DCED, as

16 you are probably aware, there has been some complaints

17 about the length of time it takes for some grant

18 recipients to receive the actual money for the grant.

19 Can you tell us today what the average length of time

20 is between when a recipient receives their letter of

21 notification and throughout the whole process of

22 getting a contract until they actually get a check in

23 hand?

24 SECRETARY YABLONSKY: It's hard to answer

25 that question in an absolute sense. And I'm not

29

1 avoiding the question. But the reason is we have 108

2 different programs. A great number of those are grant

3 programs. Each of them are a little bit different.

4 It depends on which one you're talking about. And

5 most importantly, it depends on how complete the

6 application is from the applicant. All of our

7 programs go through an on-line single application

8 system.

9 When there are delays in getting people paid,

10 it is usually the result of us having to go back and

11 get the application complete, or they've given us an

12 incorrect employer number. And I'm not blaming

13 people. It's just part of the process. But when we

14 have to do all of those cycles to get the application

15 complete before we can approve it, that usually is

16 what slows it down. The actual amount of time we

17 process, it is predictable. The actual amount of time

18 it takes the treasurer to pay is predictable. The

19 variables typically are how sophisticated and how

20 experienced are the applicant in getting all the

21 information in. If you have particular issues, I'd be

22 happy to take a look at it.

23 REPRESENTATIVE REICHLEY: And I appreciate

24 that. I think in general, though, it's running

25 roughly in the range of about a year or so, a lot of

30

1 people in our area it's taking them, from the time

2 they get a letter till they actually get money.

3 SECRETARY YABLONSKY: There's only one

4 program that I think fits that bill, and it's not

5 business grant money.

6 REPRESENTATIVE REICHLEY: All right. Well, I

7 appreciate that. Thank you very much.

8 REPRESENTATIVE FLEAGLE: The Chair thanks the

9 gentleman and recognizes Representative Shapiro.

10 REPRESENTATIVE SHAPIRO: Thank you,

11 Mr. Chairman. Mr. Secretary, good to see you.

12 SECRETARY YABLONSKY: Nice see you, too,

13 Representative.

14 REPRESENTATIVE SHAPIRO: Thank you for your

15 testimony today. I wanted to commend you and your

16 team for the Community Action Team program that you

17 put in place, I guess about a year ago, and give you

18 an opportunity to talk a little bit about it. I can

19 tell you that in my community in Eastern Montgomery

20 County, Abbington Township, we are at the beginning

21 stages of a massive effort to try and improve the 611

22 corridor, which as you know runs through Cheltenham

23 and Abbington and through the Moorlands and beyond.

24 And I can tell you that Secretary Klothen and

25 in your Community Action Team have been working quite

31

1 well in my community on that.

2 Perhaps you could elaborate a little bit

3 about how it's working statewide. After all, this is

4 a new program. I think it's important for the

5 committee to understand how the dollars are being

6 spent and the results that we've been getting.

7 SECRETARY YABLONSKY: Thank you. The

8 Community Action Team, just to refresh everybody's

9 memory, is a parallel organization that we implemented

10 about a year ago to the Governor's Action Team. The

11 Governor's Action Team is focused on being a single

12 point of contact for businesses who want access to

13 state programs and technical assistance. There was

14 never a corresponding single point of access for local

15 government, local community action agencies, local

16 economic development agencies for downtown

17 revitalization program, site preparation, and et

18 cetera. And that's why we formed the Community Action

19 Team. It is a single point of contact where you have

20 one representative assigned to your project, and we

21 work with PennDOT, DEP, DCNR, all the other

22 departments to bring all of the state's resources,

23 both finance and technical assistance, together.

24 Most of the Community Action Team activity

25 has been on what I would call impact significant

32

1 downtown revitalization projects, where a municipality

2 has decided it's going to do some -- it's going to do

3 a Main Street program. It's going to work on

4 surrounding residential area. They need new parking,

5 maybe there's an old theater that needs to be cleaned

6 up, store facades need work, all the activity to get

7 your main commercial and residential corridors

8 cleaned, safe, exciting and on the go again. And when

9 you're talking those kinds of projects, it's usually

10 tens of millions of dollars, a portion of which comes

11 from the state.

12 We've actively engaged in the first year 36

13 different communities through the Community Action

14 Team. But not all those projects are complete. But

15 we have a number of them, a handful that actually are

16 underway and we're seeing results in a number of

17 others that are in the planning stage. But it's 36

18 different communities that are actively engaged right

19 now.

20 REPRESENTATIVE SHAPIRO: I can tell you in

21 the 611 corridor project we're using Chairman Evans as

22 our model. And he did it without the Community Action

23 Team. So it's become a lot easier for us.

24 Let me also ask you a little bit about the

25 brain drain; that is, young people leaving the

33

1 Commonwealth. This is an issue that I care a lot

2 about. A lot of people talk to me about this issue.

3 And there has been a lot of mixed data in terms of the

4 number of young people, mixed data that I've seen in

5 terms of the young people who are coming here for

6 college and then likely leaving.

7 We have, I think, the second most amount of

8 college students after the Commonwealth of

9 Massachusetts, yet we're exporting a lot of those

10 students after they graduate.

11 What are the numbers? And where do we stand

12 in terms of the brain drain and what is the -- what is

13 DCED doing to address that really important issue?

14 SECRETARY YABLONSKY: Well, a couple of

15 things. The macro numbers aren't great yet. We're

16 still -- we're number one in America in exporting 25

17 to 34 year olds. And that's not just college, that's

18 of all ages.

19 I haven't seen an update on that number in

20 the last year. We'll hopefully be getting something

21 soon. On the flip side, we are the number one

22 importer of out-of-state freshman in colleges. We

23 have more out-of-state freshman than any other state

24 in the Union. And the good news is we're a net

25 importer on that front.

34

1 Yes, we do lose a lot of them, but we do keep

2 a large percentage of them. That being said, we need

3 to be doing a lot better. And what are the issues?

4 Number one, jobs. I mean people, young people want to

5 go to a place where they can work for a company but

6 also know that there might be three or four other

7 companies that if it doesn't work out with company A

8 they can work for. And second of all, they're

9 particularly interested in quality of place. They're

10 interested in living, working, eating, and recreating

11 all in more of an integrated kind of an environment.

12 And that's exactly what we're trying to do with the

13 Community Action Team and the community revitalization

14 initiatives is to do more to try to create the places

15 where these young people would like to live, while

16 we're also working on creating the jobs.

17 It's also important -- I hear from the

18 companies all the time. They want to hire people and

19 they want to know that there's places for them to

20 live. And so the quality of place issues are an

21 important part of the Governor's agenda. And here

22 we're trying to address it in a number of different

23 areas, not just from DCED but a number of departments.

24 REPRESENTATIVE SHAPIRO: I suppose Growing

25 Greener is an important part of that, as we try to

35

1 create sustainable communities certainly in and around

2 workplace. Just final question, in terms of start-up

3 sectors, I know Representative Reichley was referring

4 to life sciences earlier. That's an important

5 start-up sector, certainly, down in Montgomery County

6 and in the southeast.

7 What is the fastest growing start-up sector

8 or two or three? And that's the question.

9 SECRETARY YABLONSKY: Well, maybe I'll answer

10 it a little obliquely. We spent a lot of time in the

11 last year working on a study with the IBM Corporation

12 to identify where our competitive strengths were, and

13 specifically the clusters and subsectors where we had

14 strength relative to our composition and where there

15 was growth potential. And we benchmark, oh, a couple

16 of dozen North American regions and probably handful,

17 maybe 10 or 12, international regions to identify.

18 And there were four high level clusters that where we

19 maxed up with comparative strength in growth.

20 First was life sciences; second one was

21 advanced technology, particularly alternate energy and

22 electronics. The third was advanced manufacturing.

23 And the forth was -- was in business services. And we

24 are proactively trying to make sure that we continue

25 to support the growth of those businesses.

36

1 REPRESENTATIVE SHAPIRO: That's great. Thank

2 you. Just as someone who read the World Is Flat and

3 who's embraced it, I think the World Trade PA

4 initiative is just outstanding and really forward

5 thinking. And I commend you for it.

6 SECRETARY YABLONSKY: Thank you very much.

7 REPRESENTATIVE SHAPIRO: Thank you. Thank

8 you, Mr. Chairman.

9 REPRESENTATIVE FLEAGLE: The Chair thanks the

10 gentleman and recognizes Representative Maher.

11 REPRESENTATIVE MAHER: Thank you,

12 Mr. Chairman. Mr. Secretary, good to see you.

13 SECRETARY YABLONSKY: Nice to see you,

14 Representative Maher.

15 REPRESENTATIVE MAHER: It has been a pleasure

16 to work with you on the Tobacco Settlement Investment

17 Board as soon as your appointment as Secretary. And I

18 should share with the other members of this assembly

19 that from that experience I have grown to have an even

20 higher regard for your integrity and your ability to

21 juggle an enormous number of balls at one time.

22 SECRETARY YABLONSKY: Thank you, sir.

23 REPRESENTATIVE MAHER: And I'm going to start

24 off pretty easy, but then I'm going get into some hard

25 questions. The easy questions, there's a line item

37

1 for the Pittsburgh oversight, the ICA board.

2 SECRETARY YABLONSKY: Yes.

3 REPRESENTATIVE MAHER: That has declined from

4 the current years' 960,000 to a request of 630,000. I

5 just want to establish that given some of what was

6 going on with that in the last year or so, which was

7 certainly a peak time, that you're satisfied that that

8 provides a sufficiency of funds to -- for this board

9 to accomplish its purpose.

10 SECRETARY YABLONSKY: I'm not aware -- I

11 believe that number was generated jointly between the

12 budget office and the ICA itself. No one has

13 indicated to me that the number is a problem, so I'm

14 assuming that -- and certainly from my own just back

15 to the envelope.

16 REPRESENTATIVE MAHER: Just silence is

17 acceptance.

18 SECRETARY YABLONSKY: Yes, and I certainly

19 believe that's enough money for them to do what they

20 need to do.

21 REPRESENTATIVE MAHER: And does that embrace

22 whatever might be expended for Act 47 coordinators as

23 well, or is that somewhere else in your --

24 SECRETARY YABLONSKY: That is separate. The

25 money that we spend on the Act 47 coordinators is in a

38

1 separate Act 47 line in the DCED budget.

2 REPRESENTATIVE MAHER: I must confess I don't

3 have my regular glasses with me, so I may have missed

4 it.

5 SECRETARY YABLONSKY: I can point you to it

6 in a moment. Transfer to municipalities financial

7 recovery revolving fee.

8 REPRESENTATIVE MAHER: No wonder I missed it.

9 And the similar question, you're satisfied that that's

10 enough?

11 SECRETARY YABLONSKY: Yes.

12 REPRESENTATIVE MAHER: Another line item, a

13 small line item but one I know you appreciate, I have

14 an ongoing interest in, is the film office. This year

15 the film office in Pittsburgh is receiving just about

16 half of what they received the prior year. And you

17 and I had a misunderstanding on a conversation about

18 this apparently a year ago. I just wanted to ask you,

19 what are your plans for the line item as it's

20 situated, because I would certainly want to encourage

21 restoring the Pittsburgh film office to the level it

22 had been.

23 SECRETARY YABLONSKY: Well, the amount of

24 money that we've proposed in the budget for the '06-07

25 year is flat with the budget in '05-06. So we would

39

1 be expecting to give them I believe it's $120,000, the

2 same about they got in the previous year. I believe

3 the increase you're referring to there was maybe two

4 years ago, there was additional money allocated in the

5 budget that subsequently resulted in the Pittsburgh

6 film office receiving more money. That level of

7 support is not in the budget that we've proposed.

8 REPRESENTATIVE MAHER: And you don't seem to

9 be interested in restoring it to that level.

10 SECRETARY YABLONSKY: Well, I mean, like I

11 said earlier, there are a number of line items in the

12 budget I would love to see increased. It's the budget

13 is an exercise in limited resources and choices, and

14 we didn't feel we could afford to increase that

15 particular line item in this year.

16 REPRESENTATIVE MAHER: It looks like a little

17 bit like in Pittsburgh that DCED is putting its money

18 down on two different squares on the same industry,

19 that there's some other activities going on hither and

20 yon that are -- are those attracting funds from DCED?

21 SECRETARY YABLONSKY: I'm not sure what

22 you're referring to, Representative.

23 REPRESENTATIVE MAHER: I was lead to believe

24 that there's some film industry representative or

25 something such working the state office building now

40

1 on the state bureau.

2 SECRETARY YABLONSKY: We have an individual

3 who works for the tourism and film office who happens

4 to live in Pittsburgh. And I don't know what

5 percentage of her time is spent on film versus other

6 activities.

7 REPRESENTATIVE MAHER: So you don't

8 perceive -- I guess what I'm getting --

9 SECRETARY YABLONSKY: I didn't take away.

10 REPRESENTATIVE MAHER: -- at, what DCED would

11 not be financing one local organization and to compete

12 against another local organization.

13 SECRETARY YABLONSKY: Absolutely not. This

14 is a distributed network in Pittsburgh and

15 Philadelphia and elsewhere. We are not trying to

16 replicate what they're doing.

17 REPRESENTATIVE MAHER: Very good. Now we

18 move on to the harder questions. The Infrastructure

19 Facilities Improvement program, you're seeking 15

20 million, I believe, this year?

21 SECRETARY YABLONSKY: That's correct.

22 REPRESENTATIVE MAHER: The budget information

23 you presented which had -- was a bit ago when this was

24 all prepared, but as I understood that, you hadn't

25 disbursed any of that funding so far into this year.

41

1 Is that right?

2 SECRETARY YABLONSKY: Well, I can give you an

3 update, Representative. We have committed to $3.6

4 million worth of projects as of today. We have a

5 pipeline of identified good projects for another $8

6 million. That takes you to 11.6, and there is a lot

7 more coming.

8 As this program becomes more -- people are

9 more aware of it, and as we get further into the

10 cycle, the demand is growing. Clearly the $5 million

11 level is not enough. Frankly, I think we'll use the

12 15 up as well, but that's the level that we felt,

13 number one, we could afford, but also a level we felt

14 was important. These projects are all pretty good

15 projects.

16 REPRESENTATIVE MAHER: And as you went

17 through this with this original 5 million level of

18 funding, what -- what characteristics would you have

19 sort of merged as being the sorts of projects that you

20 were supporting here?

21 SECRETARY YABLONSKY: Well, first of all, by

22 statute, the projects have to be either retail

23 projects, hospital projects, convention center

24 projects, or manufacturing projects. And the money

25 has to go for infrastructure, public infrastructure,

42

1 related to that. So there's a limitation in the

2 statute.

3 Second of all, the way the statute's written,

4 the money is gen -- the money is awarded based on an

5 evidence produced that there will be incremental state

6 taxes. As a result of the project, there would be

7 incremental personal income tax or incremental sales

8 tax or hotel occupancy tax. And we go -- DCED does an

9 initial review. Revenue then confirms. Budget does a

10 third review. So we have a three-way triangulation to

11 try to make sure that we're comfortable and

12 conservative on the numbers. So these projects all by

13 definition have clear economic impact.

14 REPRESENTATIVE MAHER: So it's sort of like a

15 TIF without it being a TIF.

16 SECRETARY YABLONSKY: Absolutely.

17 REPRESENTATIVE MAHER: And sometimes these

18 sorts of funds and projects have a tendency on a red

19 state, blue state or red district, blue district to

20 have a certain color pattern to them. Would you

21 expect that we would find that sort of color pattern?

22 SECRETARY YABLONSKY: If you did I'd be

23 surprised, because frankly --

24 REPRESENTATIVE MAHER: Glad to hear that.

25 SECRETARY YABLONSKY: -- when we review

43

1 projects I never even think about whether it's an R or

2 a D district. I think is the project meritorious and

3 does it have impact and are they ready to go.

4 REPRESENTATIVE MAHER: Good. Now to the

5 biggest subject, you mentioned earlier that we worked

6 together on the Tobacco Settlement Investment Board.

7 This Jonas Salk Legacy Fund, which you've mystically

8 phrased as acceleration, I think, of revenue.

9 SECRETARY YABLONSKY: That is correct.

10 REPRESENTATIVE MAHER: Which for people who

11 might not understood what an acceleration of revenue

12 is, this means basically taking the revenues that

13 we're expecting for the next generation and borrowing

14 against it and having a pot of money today that our

15 heirs' interest will pay off.

16 SECRETARY YABLONSKY: Not exactly. I may

17 explain it briefly.

18 REPRESENTATIVE MAHER: Please, please.

19 SECRETARY YABLONSKY: We have an existing

20 program called CURE that you all authorized that uses

21 19 percent of the state's tobacco settlement revenue

22 every year to fund research. It's managed by the

23 Department of Health.

24 REPRESENTATIVE MAHER: Yes.

25 SECRETARY YABLONSKY: It's approximately $70

44

1 million a year that goes into that program. It's a

2 good program. It's having an impact. We have talked

3 to virtually all of the large institutions that are

4 involved in that program, and every single one of them

5 have said we have big projects that could use more

6 money, an obvious statement from the research

7 institutions.

8 What we are proposing is to take 50 percent

9 of that $70 million, $35 million a year, and to use it

10 to securitize that bond. That bond would generate

11 $500 million, approximately, that would be invested in

12 two years versus approximately 14 to 15 years if you

13 did it at the $35 million a year level.

14 Why are we doing this? The competition for

15 bioscience research is very intense. Most of that

16 money comes from National Institute of Health. It's

17 very competitive. That federal money is going down.

18 What do the institutions in Pennsylvania need to do to

19 get more of that? By the way, they get about 1.4

20 billion a year right now. They're doing very well,

21 but they'd like to do better. One, they need faculty

22 researchers to be able to attract the money; and two,

23 to get the faculty researchers they have to have the

24 laboratory, the equipment, all the instrumentation and

25 the facilities.

45

1 It's relatively straightforward for the

2 universities to fund salaries and soft costs from NIH

3 money. But they're unable frequently to fund the

4 upfront company capital that's required to build the

5 facility, to fit out the labs, to buy the equipment.

6 It's the hardest money for the universities to come

7 by.

8 What we're doing is saying we're going to

9 allow you to come in and apply for $500 million worth

10 of funding in two years rather than over 14 and a

11 half.

12 Now getting to your point about --

13 REPRESENTATIVE MAHER: So this would be for

14 capital projects?

15 SECRETARY YABLONSKY: This would be for

16 capital projects only.

17 REPRESENTATIVE MAHER: For research by

18 nonprofits? By educational entities?

19 SECRETARY YABLONSKY: By any academic

20 research institution in the state that's a

21 not-for-profit. For-profit research institutions

22 would not qualify under our proposal.

23 Now, from the financial aspect of this, there

24 is no appropriation required. We're not asking for

25 any money from the general fund. And this is not

46

1 going to be Commonwealth debt. This will be secured

2 ties by Wall Street. They will basically build into

3 the cost of the securitization the risk of the tobacco

4 revenue going down. What we're -- what we're

5 guaranteeing as a state is that they will get 9 and a

6 half percent. That's half the 19. They will get 9

7 and a half percent of whatever tobacco revenue the

8 state gets.

9 If that revenue goes down, the bond holders

10 are the ones taking the risk, not the state. We're

11 not backdropping it. We're not guaranteeing it.

12 There is no future obligation on the part of --

13 REPRESENTATIVE MAHER: And vice versa.

14 SECRETARY YABLONSKY: I'm sorry?

15 REPRESENTATIVE MAHER: Vice versa.

16 SECRETARY YABLONSKY: Meaning?

17 REPRESENTATIVE MAHER: We're doing a gamble

18 that in the event this fund's actually going to

19 increase, and we've seen some increases --

20 SECRETARY YABLONSKY: Well, if the fund

21 increases doesn't change this. They still get 9 and a

22 half percent.

23 REPRESENTATIVE MAHER: So it's a gamble

24 between us and Wall Street. They're hoping they're

25 we're wrong. We're hoping --

47

1 SECRETARY YABLONSKY: I don't know that I'd

2 call it a gamble. I'd call it an interesting and

3 creative financing mechanism to accelerate $500

4 million into the next two years where institutions can

5 really make use of it.

6 REPRESENTATIVE MAHER: There's been other

7 states that have done these sorts of secure decision

8 in the tobacco proceeds.

9 SECRETARY YABLONSKY: Yes.

10 REPRESENTATIVE MAHER: Are you impressed with

11 the results of those?

12 SECRETARY YABLONSKY: Well, most of the other

13 states that have done this or something like this have

14 used the money to balance their budget.

15 REPRESENTATIVE MAHER: But I'm talking about

16 the financial instrument. Because it seems to me that

17 in retrospect it looks like the state's securitized

18 tobacco streams got hammered by Wall Street. It

19 turned out maybe the guys in Wall Street were a little

20 smarter than the guys in the halls of the capitol

21 buildings across the state.

22 SECRETARY YABLONSKY: Well, I certainly would

23 never presume to guess what Wall Street would do. So

24 that's why we've talked to them, multiple of them,

25 before we made this proposal to make sure we had it

48

1 right.

2 REPRESENTATIVE MAHER: Multiple of who?

3 SECRETARY YABLONSKY: People on Wall Street.

4 REPRESENTATIVE MAHER: No, I meant the other

5 states, have you talked with the other states?

6 SECRETARY YABLONSKY: No, but we've followed

7 what they've done. And as I mentioned earlier, the

8 proposal that we've made is in sync with the original

9 intention of tobacco revenue settlement.

10 REPRESENTATIVE MAHER: I understand your

11 brain trust now includes some Wall Street alum, or at

12 least one anyway.

13 SECRETARY YABLONSKY: Right.

14 REPRESENTATIVE MAHER: So I'm sure she'll be

15 very busy. Just really a final observation. I'm not

16 sure that the deficit that we have in bioscience is a

17 deficit of capital investment that requires this sort

18 of thing. We certainly have illustrations where -- we

19 certainly have illustrations where universities have

20 successfully gone forward with significant

21 infrastructure investments, partnering with the state

22 without necessitating our mortgaging a generation's

23 worth of the receipts for the state. And sure, not

24 tax dollars, that's true. But it's the public

25 treasury. And we're mortgaging the public treasury

49

1 for a generation to get a one or two year oh-happy-day

2 experience.

3 And I -- it may be the right direction, but

4 I'm -- I'm not persuaded at this point. I guess I'd

5 like to see the inventory of what the perceived need

6 is before we start proposing the perceived solution.

7 And maybe do you have sort of a roster --

8 SECRETARY YABLONSKY: Sure.

9 REPRESENTATIVE MAHER: -- of what projects

10 you would expect this half a billion dollars to go to?

11 SECRETARY YABLONSKY: Sure. As you know, I

12 have a little bit of experience in this area.

13 REPRESENTATIVE MAHER: Absolutely.

14 SECRETARY YABLONSKY: And I've been working

15 with the universities for years. And I will tell you

16 for one-on-one in group sessions that to a person they

17 all talk about the demand and the difficulty of

18 finding this kind of capital money to finish the

19 financing for these facilities. Do they get it done

20 on their own at times? Absolutely.

21 We think we could get some facilities built

22 that wouldn't have gotten built otherwise. We think

23 we will be able to help them attract faculty that they

24 wouldn't have been able to attract otherwise. And we

25 think we'll be able to accelerate projects that would

50

1 have taken a lot longer. And we -- the 12 --

2 REPRESENTATIVE MAHER: But do you have some

3 sort of a list of what you're looking at?

4 SECRETARY YABLONSKY: Yeah. I mean, I

5 wouldn't want to disclose it without talking to the

6 institutions, but we've talked to at least 12

7 institutions, every single one of them identified at

8 least one project.

9 REPRESENTATIVE MAHER: Well, I think members

10 of the Appropriations Committee would be most

11 interested in what the sketch is of where that half a

12 billion dollars would be headed.

13 SECRETARY YABLONSKY: We'd be happy to work

14 with you on that.

15 REPRESENTATIVE MAHER: Appreciate it. And

16 just to put a perspective with this -- as you're

17 talking shorthand about a generation of payments, how

18 many years' worth of payments would you be pledging to

19 yield this half a billion dollars up front?

20 SECRETARY YABLONSKY: If I recall it's 20,

21 yes, 20.

22 REPRESENTATIVE MAHER: So in terms of the

23 stream of dollars, and I recognize you have present

24 value and so forth, but the stream of dollars, is $700

25 million of payments at a -- assuming no change in the

51

1 rate at which the dollars are flowing into the state.

2 SECRETARY YABLONSKY: Well, there's principal

3 and then interest on the debt service. The present

4 value of the incremental debt service was something in

5 the order of $75 million, so we looked at it -- we

6 looked at it pretty favorably. So once again, we'll

7 be happy to give you all of those calculations.

8 REPRESENTATIVE MAHER: I appreciate it.

9 SECRETARY YABLONSKY: And you're knowledgable

10 in this area as well.

11 REPRESENTATIVE MAHER: And I appreciate it.

12 Thank you very much, Mr. Secretary.

13 SECRETARY YABLONSKY: Thank you,

14 Mr. Representative.

15 REPRESENTATIVE FLEAGLE: The Chair thanks the

16 gentleman and recognizes Representative Frankel.

17 REPRESENTATIVE FRANKEL: Thank you,

18 Mr. Chairman. Secretary Yablonsky, welcome. First of

19 all, let me say that I, too, have had just great

20 experience working with you and your staff --

21 SECRETARY YABLONSKY: Thank you.

22 REPRESENTATIVE FRANKEL: -- and your

23 accessibility from small projects to major projects

24 that we're trying to get done in Pittsburgh. And

25 we've seen the benefits. I mean, take a look at some

52

1 of the successes that our city has seen in the last

2 year, such as bringing in the American Eagle

3 headquarters to right into the center of the city, 500

4 new employees on the south side, work where it's an

5 area that had been a former steel plant, environmental

6 disaster is now flourishing. And we're going to have

7 a lot of young, vital people working there. We've got

8 Google coming in. We brought Intel into the facility

9 at Carnegie Melon University that your department

10 helped facilitate. So there are lots of great things

11 happening here that I don't think would have happened

12 otherwise without the state's involvement.

13 Let me -- I'd like to follow up a little bit

14 on Representative Maher's line. As you know, I've

15 been an advocate for a long time of doing something in

16 a big way to deal with biomedical research in the

17 state. Clearly, I think there is a problem when

18 you're confronted with the $3 billion asset sitting in

19 California targeted at our researchers and other

20 states doing same.

21 I know specifically, I won't name them here,

22 prominent researchers in Pittsburgh who have been

23 recruited to California. Luckily, I don't know one

24 that's left yet, but I think they see promise here

25 because we have an enormous advantage in many respects

53

1 in the State of Pennsylvania. It's one of the great

2 bright spots what's happening in the life sciences and

3 our research institutions.

4 So I'm generally supportive of Jonas Salk

5 research fund that's been proposed. But I have some

6 concerns as well. And I think in my discussions with

7 the institutions who are likely to benefit, the

8 concern is how -- how the decisions are going to be

9 made ultimately. One of the things that is, I think,

10 a very good aspect of the CURE fund is that the way

11 those resources have been distributed over the years

12 is based on a formula of how successful the research

13 institutions are in terms of receiving NIH funding. I

14 mean, it's basically an objective standard.

15 And I think some of the concerns that I've

16 heard from research institutions, not just in

17 Pittsburgh and other parts of the state, is that, you

18 know, are we going to be focused with this fund and

19 basically a reward on the merit bases the institutions

20 that are currently really successful? Are we going to

21 start trying to, you know, x university or college

22 wants to get into the business, right, are we going

23 to, you know, give them money, you know, to kind of a

24 start up. And I question, you know, whether that's --

25 that would be a sound decision making. So I guess the

54

1 questions I have that are still undefined, what's

2 really the governance mechanism going to be for

3 distributing these dollars?

4 SECRETARY YABLONSKY: The proposal is that we

5 create an independent body, independent of the

6 administration, independent of the General Assembly,

7 that would have clearly representation from the

8 administration and the General Assembly, but would

9 also have private sector representation, number one.

10 And we're doing that for a second collateral reason is

11 setting it up that way would allow us to raise federal

12 and other private money directly into this entity,

13 which we can't do now with the CURE program.

14 Second of all, we would expect to have

15 scientific advisory boards, commercialization advisory

16 boards, similar professional expertise that advises

17 this group like the CURE program does right now. So

18 that the decisions are based upon valid science and

19 meritorious proposals.

20 One of the things that I like about this is

21 that it's proactive. The formula funding you referred

22 to is great. But it's re-active to NIH funding. You

23 get a dollar of NIH funding, you get x number of cents

24 in matching funds. Whereas this would be proactive

25 and would put some of these institutions in a position

55

1 to get more NIH funding as a result of it.

2 So I'm not criticizing the formula funding.

3 I just like the proactivity of this approach. And as

4 you know, we're not proposing to eliminate the formula

5 funding. We're proposing to keep at least half of it

6 in place. So that's how we would propose to govern

7 this. And then that's part of the reason why we like

8 this particular approach.

9 REPRESENTATIVE FRANKEL: I think as long as

10 we have some kind of assurance, we're not just going

11 to create some kind of economic development tool that

12 we can start spreading these things again.

13 SECRETARY YABLONSKY: I'm sorry. I didn't

14 mean to interrupt you.

15 REPRESENTATIVE FRANKEL: No. Go right ahead.

16 SECRETARY YABLONSKY: I just wanted to add

17 we're intentionally trying to build on the already

18 existing strengths in the Commonwealth, which means

19 the existing institutions and what they do.

20 REPRESENTATIVE FRANKEL: And I would say I

21 would be remiss if I didn't say that -- I know it's

22 not part of this year's budget -- but at the end of

23 the day, I would love to see us augment the resources

24 with a new revenue stream that is sitting out there,

25 and I think Pennsylvania would embrace, and that is

56

1 taking away the state tax exception for tobacco

2 products other than cigarettes that currently goes

3 scott free.

4 Pennsylvanians would understand, I think, in

5 a minute the value of taxing chewing tobacco, pipe

6 tobacco cigars, to leverage additional resources to do

7 research to cure diseases. And I think we really

8 ought to be taking a look at that, if not this year

9 certainly next year. It's something that I think, I

10 mean, republicans and democrats can embrace. I mean,

11 we don't -- none of us would like new taxes, but this

12 is a tax that relates directly to creating better

13 health outcomes for Pennsylvanians. And I think we

14 ought to be proactive in pushing something like this

15 and related to augmenting research in this state. So

16 just a comment for the future. Certainly I'd like to

17 pursue that with you in the future. Thank you.

18 SECRETARY YABLONSKY: Thank you,

19 Representative.

20 REPRESENTATIVE FLEAGLE: The Chair thanks the

21 Representative and recognizes Representative Dally.

22 REPRESENTATIVE DALLY: Thank you,

23 Mr. Chairman. Good afternoon, Mr. Secretary.

24 SECRETARY YABLONSKY: Good afternoon,

25 Representative.

57

1 REPRESENTATIVE DALLY: I'd like to start off

2 by thanking you for assisting in the Lehigh Valley,

3 especially the Keystone Cement Project. You stepped

4 up and came through with some good programs for that

5 manufacturer. And I truly appreciate that, as they

6 do.

7 SECRETARY YABLONSKY: You're welcome.

8 REPRESENTATIVE DALLY: The questions I have,

9 I came across a newspaper article concerning a Beaver

10 County development agency. It was published in the

11 Pittsburgh Tribune Review on Sunday, February 26th.

12 And the article talks about $10.6 million which I'm

13 assuming came from your agency and it was paid to a

14 group called Beaver Initiative for Growth which is

15 controlled solely by two individuals. Representative

16 Michael Veon and Senator Gerald LaValle.

17 And it's registered ironically as a 501(c)(6)

18 under the federal tax code as opposed to a 501(c)(3).

19 So what that does is allow this organization to remain

20 tax exempt and engage in politics and form political

21 action committees, which in and of itself doesn't

22 concern me. What concerns me is that they're using

23 state dollars in the amount of $10.6 million for a

24 process which Mr. Veon conceded does not create or

25 retain jobs. Instead, the agency helps create a

58

1 climate for job creation and then lists its

2 involvement in 50 community projects as proof.

3 So, I mean, reading this article, it really

4 doesn't pass the smell test. And I just wondered, if

5 you had any opinions on this Beaver County development

6 agency or what involvement your department had in

7 funding this organization that's controlled by

8 basically two people to the tune of $10.6 million?

9 SECRETARY YABLONSKY: I did read the article

10 as well. I am familiar with the organization. Our

11 Governor's Action Team has worked with BIG on a number

12 of projects in that area, similar to the project you

13 mentioned in your area. They've been a good partner

14 to identify projects and help us work local issues

15 with companies. So my experience with them from that

16 perspective has been positive.

17 The rest of the things that they do I

18 couldn't tell you. I frankly don't know all the

19 details of that particular organization. I believe

20 that a portion of the funding has come from DCED. I

21 don't -- I haven't yet looked to confirm that all of

22 that funding, but certainly a portion of that funding

23 came from DCED. And I suspect it came from

24 legislative line items. One again, I will confirm

25 that, but I don't know that for a fact yet.

59

1 REPRESENTATIVE DALLY: If you could provide

2 that information to the board -- or to the chairman of

3 the committee, I'd appreciate that. Because the

4 article goes on to say about how there are dual

5 employment situations for people that are employed as

6 state employees as well as being employed by this

7 Beaver Initiative for Growth, which also concerns me.

8 And I just think that we need to look at

9 issues like this, especially given the fact that if

10 you took this money and put it back in your budget you

11 could restore almost fully the business retention and

12 expansion line item, the manufacturing and business

13 assistance which you know is sorely needed, and

14 perhaps the Homeowners' Emergency Mortgage Assistance

15 program.

16 So those are just three items that I think

17 maybe $10.3 million may have been better spent

18 throughout the Commonwealth instead of targeted to

19 what appears to be a folly of a few individuals.

20 SECRETARY YABLONSKY: Well, we will certainly

21 do our job, which is to make sure -- I've already

22 verified they're a valid recipient. But we also will

23 verify that the money was used for the purpose in

24 which it was intended for through an audit process.

25 REPRESENTATIVE DALLY: Is that common for

60

1 state funds to go to an organization organized under

2 501(c)(6)?

3 SECRETARY YABLONSKY: I don't know the

4 specific question about (c)(3) versus (c)(6). I would

5 suspect that it is, but I can't verify it for a fact.

6 REPRESENTATIVE DALLY: Well, I know one of

7 the differences is the fact that they can engage in

8 politics and form political action committees as

9 opposed to a 501(c)(3) which is exempt from that.

10 SECRETARY YABLONSKY: Charitable, right.

11 REPRESENTATIVE DALLY: All right. I'd

12 appreciate some follow up from your agency on that.

13 SECRETARY YABLONSKY: We will definitely

14 follow up with you on that.

15 REPRESENTATIVE DALLY: Thank you.

16 REPRESENTATIVE FLEAGLE: The Chair thanks the

17 Representative and recognizes Representative Mundy.

18 REPRESENTATIVE MUNDY: Thank you,

19 Mr. Chairman. Good afternoon, Secretary Yablonsky.

20 SECRETARY YABLONSKY: Good afternoon,

21 Representative.

22 REPRESENTATIVE MUNDY: I want to go back to

23 tax policy for just a minute. And I want to

24 congratulate you and Governor Rendell. I have been

25 here for 15 years now, through -- this is my fourth

61

1 administration. And during the years, the '90s, the

2 booming economy of the '90s, it appeared to me as a

3 student of economic development and job growth that

4 our entire strategy for job growth in Pennsylvania was

5 tax cuts, business tax cuts. And to that end we cut

6 business taxes about $3.7 billion, which obviously

7 left us in some severe difficulty when the Rendell

8 administration took over.

9 And yet, with $3.7 billion in tax cuts,

10 business tax cuts, there was still the perception that

11 business taxes in Pennsylvania were high and we were

12 still 46 in job growth.

13 And I guess what I'm seeing that's different

14 in the Rendell administration and under your

15 leadership at the DCED is that we, in addition to

16 making strategic business tax cuts, cutting those

17 business taxes that are the least favorite and least

18 progressive, we are now beginning to engage in

19 strategic investment in not only in specific projects,

20 but in industries that are going to grow our economy

21 over time, like medical and biotech.

22 So that now we are 15th in job growth. And I

23 think that is remarkable. I think it needs to be

24 highlighted. And interestingly enough, in today's

25 newspaper, one of our major papers in Pennsylvania,

62

1 there's a big article about how the tax foundation in

2 Washington, D.C., has identified Pennsylvania as 16th

3 among the 50 for overall tax environment for business.

4 You know, I can tell you that when Governor

5 Rendell came into office initially, he sat down with

6 our economic development professionals and our county

7 commissioners and all of us legislatures in Luzerne

8 County and not one word was mentioned about taxes,

9 business taxes.

10 Every single bit of the discussion was about

11 what strategic investments can this administration

12 make in the job growth and economic development of

13 Luzerne County.

14 And to that -- to the extent that you have

15 been such a wonderful partner in making those

16 strategic investments that have moved our economy

17 forward and brought us from 46th to 15th in job

18 growth, I just think that's remarkable.

19 And, again, strategic investments, last year

20 in the Governor's budget and in legislation we passed

21 the Governor's economic development stimulus program,

22 $2.3 million, which really isn't a lot. Can you tell

23 must how that money was spent and what kinds of

24 projects were invested in?

25 SECRETARY YABLONSKY: The $2.3 billion

63

1 stimulus package is broken up into 19 separate pots of

2 money, but basically in three strategic areas. The

3 first one, in the area where I spent most of our time

4 earlier, was on infrastructure, the Business in Our

5 Sites program, the Penn Works program, the Capital

6 Redevelopment program, programs that are designed to

7 help build infrastructure and that have construction

8 and engineering job impact immediately, but prepare

9 localities to have sites that they could go and

10 attract business. And we've already begun to see the

11 impact of that. We've had businesses that have made

12 commitments and started creating jobs as a result.

13 And of the 1.12 -- 1.3 billion we've committed so far,

14 a good chunk of that, I think 8- or $900 million, has

15 gone into the infrastructure side.

16 The second piece was money for community

17 revitalization, the Main Street program, the Elm

18 Street program, housing redevelopment assistance, all

19 the things that the Community Action Team uses to

20 clean up and revitalize downtown communities. And

21 we've done a number -- there's been over a hundred

22 Main Street projects in the last -- in the last couple

23 years.

24 And the third area is gap filling for capital

25 needs with businesses. A part of that goes to

64

1 attracting additional businesses like manufacturing.

2 We have the Core Industries program and the Second

3 Stage Loan program for working capital and equipment

4 financing for manufacturing. We have the $150 million

5 set aside for agriculture and tourism which has been a

6 great success. I think we funded 135 different

7 projects out of that already.

8 So the traditional side gap, filling low

9 interest loan and some grant money capital for those

10 industries, and then on the new economy side, the

11 Keystone Innovation Zone program which is our

12 partnership with the universities, and the

13 accompanying venture capital programs which are

14 getting early stage risk capital into the hands of the

15 companies with growth potential. So we've made good

16 progress in the last 18 months, and we expect to be

17 able to commit the rest of that money in the next one

18 to two years.

19 REPRESENTATIVE MUNDY: And well, I just -- I

20 think it's obviously working, because we're now 15th.

21 We were 46th. So something's working. And I do

22 support the Governor's continuation of the business

23 tax cuts, the capital stock and franchise tax phaseout

24 and I do support the notion that Delaware loophole

25 should be closed, because it's not fair to the

65

1 businesses that are paying taxes in Pennsylvania and

2 gives a break to those who aren't.

3 But I am very concerned about this notion

4 among the business community, because in this same

5 article that I referenced earlier, it talks about how

6 the business people in Pennsylvania dispute that it's

7 a good business tax climate.

8 Now, you know, you get the impression that it

9 tells taxes are zero, the business community's going

10 to be yelling about more and more business tax cuts at

11 the same time that they want these strategic

12 investments made in job growth and economic

13 development, because it helps them as well as everyone

14 else. What can we do to dispel this myth that

15 Pennsylvania is a high tax state? Is it -- is it just

16 the corporate net that's too high that nobody pays?

17 As you talked about an optical illusion, I agree with

18 you.

19 What else can we do to convince -- it just

20 seems to me that the more the business community yells

21 about these unfair business tax burdens, it's a

22 self-fulfilling prophecy to some extent and they keep

23 other businesses from coming here, when it is a myth.

24 What can we do to dispel the myth?

25 SECRETARY YABLONSKY: Well, I think there are

66

1 a couple of things we can do. Number one, we need to

2 continue to publicize some of these research studies

3 that show that on average we're -- we're 16th or 20th,

4 whatever it is. We're not 45th in our overall tax

5 environment. Keeping in mind, too, it's very

6 different between small businesses and large business,

7 the small business community is taxed at the personal

8 income tax rate, 3.07 percent, second lowest in

9 America. Great tax environment for them. On the flip

10 side, they have the capital stock and franchise tax in

11 the NOL provisions which affect them. So we'd like to

12 address some of those needs.

13 On the big company side, which are typically

14 C corps, they're taxed at CNI rate which is 9.99

15 percent, assuming they pay it. That's where this

16 Delaware loophole thing comes in. As I mentioned

17 earlier, it's an optical problem for us because at the

18 national level we're viewed as a high big business tax

19 state because of the 9.9 percent.

20 And I do think that the recommendations that

21 were in the Governor's business tax commission should

22 be taken up seriously, but it's been mentioned by --

23 I'm sure by Secretary Fajt and Secretary Masch there

24 needs to be a way to pay for them.

25 I mean, you can't do all these things at once

67

1 and fund all the other programs that we all need to

2 fund, so you have to make choices. And I think the

3 Governor's made the right choices of phasing these

4 things into the tune of almost a billion dollars in

5 four years.

6 REPRESENTATIVE MUNDY: It just seems to me

7 that we have such a great story to tell here in

8 Pennsylvania, very forward thinking in the policies

9 put forward by this administration. And I am

10 personally thrilled that we're now 15th in job growth.

11 I think that's remarkable. Given the loss of

12 manufacturing nationwide. And manufacturing was a big

13 industry here.

14 SECRETARY YABLONSKY: I'd like to add one

15 other thing if I may.

16 REPRESENTATIVE MUNDY: Please.

17 SECRETARY YABLONSKY: We have a program.

18 It's kind of a quiet program and important one called

19 the Business Retention and Expansion program. Where

20 we call, physically call on 9 to 10,000 Pennsylvania

21 businesses ever year, of all shapes and sizes and

22 sectors. We spend a few hours with them profiling

23 them, getting a survey filled out. And then many of

24 them end up being prospects for expansion projects, or

25 maybe they're in trouble and we try to take proactive

68

1 action.

2 But one of the things that's really

3 interesting to me is that every year, that study,

4 about 3 percent of the companies say business taxes is

5 a major issue for them, 3 percent.

6 REPRESENTATIVE MUNDY: Is that a perception

7 or a reality?

8 SECRETARY YABLONSKY: I'm just quoting the

9 facts from this survey.

10 REPRESENTATIVE MUNDY: And what do DCED's

11 people who are going out to do these interviews, what

12 do they do to dispel?

13 SECRETARY YABLONSKY: Well, we educate them

14 as best we can and we try to -- we try to get them to

15 understand. I mean, business taxes is a very

16 individual situation. Having been a CEO of companies,

17 I understand the end of the day, which most are

18 interesting in, is what are my taxes; not what company

19 B's taxes are. And it's a very situational kind of

20 thing.

21 So it's really dependent. And it also

22 depends upon how big of a change you're going to

23 effect in this from a year-to-year basis. So I think

24 over time we will continue to work on this. I speak

25 about it regularly when I'm out, as do many of the

69

1 other cabinet members and the Governor. And hopefully

2 over time we'll be able to change this perception that

3 exists. But at the same time, there are some things I

4 think we need to continue to do to move us in the

5 right direction and the Governor's proposal certainly

6 embodies a number of steps to that.

7 REPRESENTATIVE MUNDY: Well, I agree, and

8 look forward to your continued leadership on these

9 issues. Thank you, Mr. Secretary. Thank you.

10 SECRETARY YABLONSKY: Thank you very much.

11 REPRESENTATIVE MUNDY: Thank you,

12 Mr. Chairman.

13 REPRESENTATIVE FLEAGLE: The Chair thanks the

14 gentle lady and recognizes Representative Rohrer.

15 REPRESENTATIVE ROHRER: Thank you,

16 Mr. Chairman.

17 SECRETARY YABLONSKY: Representative, Good to

18 see you.

19 REPRESENTATIVE ROHRER: My questions will be

20 brief. The first one deals with the EIC program the

21 Department administers.

22 SECRETARY YABLONSKY: The educational

23 improvement.

24 REPRESENTATIVE ROHRER: Investment tax

25 credit, yes education investment tax credit. The

70

1 question has to do with whether or not there are any

2 plans, because I've heard this come through as a

3 rumor. I just wanted to have you confirm or deny it.

4 And that is that you, department, are contemplating

5 changing the way that program is administered from the

6 standpoint of how the tax credits are awarded to

7 applying companies.

8 Is there any contemplation of changing the

9 way that it's written right now, the law?

10 SECRETARY YABLONSKY: I am unaware of any.

11 No one has come to me with a suggested change.

12 REPRESENTATIVE ROHRER: Second one, and you

13 don't have any -- you can't answer this directly as

14 much as just awareness, I suppose. The Philadelphia

15 Inquirer in the business section on Sunday had an

16 article in here that was quite interesting. It was

17 entitled "Tax Break Debate Riles Right to Left." I

18 don't know if you saw that.

19 SECRETARY YABLONSKY: I did not.

20 REPRESENTATIVE ROHRER: It says, If you think

21 the world divides easily into categories labelled

22 liberal and conservative you're going to find that

23 Cuno case confusing. Nevertheless, you should pay

24 attention when the case is argued this week before the

25 U.S. Supreme Court.

71

1 Are you familiar with the Cuno case.

2 SECRETARY YABLONSKY: I am, yes.

3 REPRESENTATIVE ROHRER: Okay. I was not

4 aware that that -- that that case had been -- had

5 moved forward to the U.S. Supreme Court and having one

6 in a lower court case in Ohio. And they say in this

7 article that if -- if the court rules, as some are

8 thinking they may, it would pull the plug on hundreds

9 of state and local business incentive deals coast to

10 coast. On that list would be the Pennsylvania

11 Keystone Opportunities Legislation.

12 Just curious if you are aware of this, if you

13 are following this case. And obviously you don't make

14 a whole lot of plans until something is done, but just

15 whether or not you think this is applicable perhaps

16 and we should be watching it.

17 SECRETARY YABLONSKY: Very aware of it. Our

18 staff is, as well as the Governor's staff have been

19 following it since it hit the Circuit Court in Ohio 18

20 months or so ago, watching the case carefully in the

21 amicus briefs that have been filed on it. It

22 potentially could have no impact or it could have a

23 significant impact, like forcing us to eliminate a

24 number of programs like the Keystone Opportunities

25 Zone program. So we're watching it very carefully.

72

1 We're beginning to plan contingencies in

2 case -- as it's hard to predict, though, because of

3 the wide range of interpretation it could take. So --

4 but the answer to your question is we're taking it

5 seriously. We're watching it and we're preparing

6 ourselves for the eventualities of how the Supreme

7 Court rules.

8 REPRESENTATIVE ROHRER: All right. That's

9 basically all I was asking. I'm glad you are aware

10 and making plans. That's all I have. Thank you very

11 much.

12 REPRESENTATIVE FLEAGLE: This Chair thanks

13 the gentleman and recognizes Representative Manderino.

14 REPRESENTATIVE MANDERINO: Thank you. Good

15 afternoon, Mr. Secretary.

16 SECRETARY YABLONSKY: Good afternoon,

17 Representative.

18 REPRESENTATIVE MANDERINO: I guess the

19 benefit of going towards the end is all the questions

20 have been asked, save one.

21 I do want to talk about a small but important

22 to me, and I know many working families across

23 Pennsylvania, program that comes under your

24 department, and that's the Pennsylvania Family Savings

25 Account program. Very important project that allows

73

1 lower income working families to save money and get a

2 dollar match of state dollars for every dollar they

3 save for a home, for their children's education, or

4 some other major need.

5 Can you tell me from your perspective how the

6 program is doing in terms of meeting current demands

7 of people who are interested in family savings

8 accounts?

9 SECRETARY YABLONSKY: The program is

10 budgeted -- proposed budget flat at a million dollars

11 for the coming year, which would be matched dollar for

12 dollar, as I recall, from the federal government. I

13 believe this program is oversubscribed. It's a good

14 program, serves a good need, and there is more demand

15 than there is supply.

16 REPRESENTATIVE MANDERINO: Okay, because I

17 know in past years it had been at a higher level. And

18 so what I'm hearing you say to me is if the

19 legislature is interested in this -- from their point

20 of view in terms of increasing dollars in that

21 account, there is definitely the demand for it?

22 SECRETARY YABLONSKY: Yes, that's correct.

23 REPRESENTATIVE MANDERINO: I know that -- how

24 about how the monies are kind of being used. I know

25 there are a lot of different providers, and I guess

74

1 providers have kind of so much available that, you

2 know, they get -- I don't know if they get approved

3 for so much worth of funding. I'm familiar with the

4 few providers in Philadelphia and I know some of them

5 are oversubscribed. Others might be undersubscribed.

6 You know, are we -- are we kind of losing

7 opportunities for individual families because we

8 don't -- of the way we have allocated dollars and are

9 there any solutions that -- that might need to be

10 implemented either departmentally or legislatively to

11 address that?

12 SECRETARY YABLONSKY: I'm not aware of any

13 problems in the disbursement of the money where we're

14 leaving money on the table as a result of putting too

15 much money in one place and too little in another.

16 If that's incorrect, I would be happy to take

17 a closer look at it and sort it out. But I'm not

18 aware of any issues.

19 REPRESENTATIVE MANDERINO: Okay. And we're

20 not leaving money on the table at the end of the

21 fiscal year?

22 SECRETARY YABLONSKY: Not to my knowledge.

23 REPRESENTATIVE MANDERINO: Okay. And are you

24 aware, I think, that there's some additional federal

25 dollars being allocated in the upcoming budget that

75

1 would go towards something like this. Are you

2 familiar with that and do -- in order for us to draw

3 that down on a state level, does our pot have to get

4 bigger?

5 SECRETARY YABLONSKY: As I understand it,

6 there is additional matching money available so that

7 if we went above a million dollars we could get a

8 dollar-for-dollar match beyond that. I don't know

9 what the cap is. And I -- but you do need state money

10 to get the federal money.

11 REPRESENTATIVE MANDERINO: Yeah. I would be

12 interested if someone from your department could get

13 back to me about, you know, based on what we estimate

14 the feds have put in the budget this year, and I know

15 it's not a guarantee, but what does it look like is

16 the max that Pennsylvania would be entitled to, so

17 that at least we know, while we're dealing with the

18 budget, if we want to be able to draw down maximum

19 federal dollars to Pennsylvania, do we have to put any

20 more in this line item, and if so, how much.

21 SECRETARY YABLONSKY: We'll get the facts and

22 get back to you.

23 REPRESENTATIVE MANDERINO: Okay. Thank you.

24 REPRESENTATIVE FLEAGLE: The Chair thanks the

25 gentle lady and recognizes Representative Melio.

76

1 REPRESENTATIVE MELIO: Thank you. Good

2 afternoon.

3 SECRETARY YABLONSKY: Good afternoon,

4 Representative.

5 REPRESENTATIVE MELIO: I'm concerned about

6 safety of our ports, but the one question I have is I

7 heard a lot of controversy over drudging the Delaware

8 Canal between New Jersey and Pennsylvania.

9 SECRETARY YABLONSKY: Right.

10 REPRESENTATIVE MELIO: Could you give us an

11 update on that?

12 SECRETARY YABLONSKY: I haven't been directly

13 involved, but I'm obviously interested and been

14 following it, given the importance it plays to the

15 ports.

16 But as I understand it, you know we've built

17 the Philadelphia port business up quite nicely in the

18 last few years through military and commercial

19 activities. But we're starting to have problems with

20 cruise liners and others who can't get through at the

21 40 foot level. And we need to go to 45 feet. But

22 there's some issue with New Jersey. I don't pretend

23 to know the particulars, but I do know the Governor

24 and his staff are working hard to try to get a

25 resolution to get that project to move forward.

77

1 REPRESENTATIVE MELIO: Yeah, because what I

2 heard was that New Jersey says it's a waste of money

3 to dredge the river. And I know that -- I understand

4 the Governor Corzine and Governor Rendell are trying

5 to get together to resolve that issue. And I just

6 thought maybe you knew.

7 SECRETARY YABLONSKY: I don't know the latest

8 update.

9 REPRESENTATIVE MELIO: Okay. Thank you,

10 Mr. Chairman.

11 REPRESENTATIVE FLEAGLE: The Chair thanks the

12 gentleman and recognizes Representative Sturla.

13 REPRESENTATIVE STURLA: Thank you,

14 Mr. Chairman. Secretary Yablonsky.

15 SECRETARY YABLONSKY: Representative Sturla.

16 REPRESENTATIVE STURLA: One question and then

17 I have some comments. Just the question was asked

18 earlier about the Beaver Initiative for Growth. And

19 while I'm certainly not an expert on that issue, when

20 I had looked into that program several years ago, my

21 understanding was they were the equivalent of what is

22 in Lancaster County my Economic Development

23 Corporation, which is a not-for-profit corporation

24 that works to try and put together deals with

25 businesses and government, grants and things like

78

1 that.

2 And so my suspicion is that there's less

3 hijinks there than there is just jealousy about the

4 fact that somebody's actually getting something

5 accomplished in their counties.

6 But what I really want to talk about here is

7 the world trade program as it relates to something

8 that I heard the Governor say and I believe is part of

9 this program, which is that this world trade program

10 would involve alumni that graduated from our

11 universities that then returned to their home

12 countries.

13 And I want to applaud you for that. For

14 years I've been talking about trying to use our

15 institutions of higher learning as an economic

16 development tool and also to in one sense treat them

17 as an industry in Pennsylvania.

18 I think you start to get there when -- with

19 some of the Jonas Salk fund things that you've talked

20 about. And I guess given the fact that I think we now

21 have the highest number of students from foreign

22 countries in Pennsylvania, I understand that we have a

23 lot of young people that leave this state, but if you

24 can keep the percentage that leave the same and double

25 the number that come here to start with, you have a

79

1 net gain. And so in one sense I really don't care as

2 long as I have that net gain.

3 And I guess the other -- the point I'd like

4 to make is that I've always looked at those jobs in

5 higher education as nonsmokestack, well-paying jobs,

6 usually have benefits with them, whether it's from the

7 Ph.D. that's doing research all the way down to the

8 janitor that's working at the university. There's

9 also all sorts of off-shoots on jobs, whether it's the

10 person that's making sandwiches across the street or

11 whether it's somebody else that's serving those

12 students in other capacities.

13 So I've always viewed that as a positive for

14 Pennsylvania. We have that infrastructure here. Can

15 you -- I mean, are there any other things that you're

16 looking to do or do you think that we -- there's more

17 opportunity to work with our eds and meds in terms of

18 job growth here in Pennsylvania? And shouldn't

19 Pennsylvania be sort of the place that anyone thinking

20 about going to college says I better go check in

21 Pennsylvania because that's where I'm told you have to

22 go if you're going to get educated?

23 SECRETARY YABLONSKY: Well, the eds and meds

24 sector is now the number one job sector in the state.

25 They employ 1.1 million people, about the same number

80

1 of the manufacturing employed at its peak. And their

2 average pay is much higher than the state average and

3 typically has benefits. And in many communities the

4 hospital or the university or college is kind of the

5 anchor business, if you will. So it's an important

6 business sector for us economically in and of its own

7 right.

8 As you say, it also has the collateral

9 benefit of producing the workforce of the future or at

10 least a portion of the workforce of the future. And

11 anything we can do to keep more of those young people

12 here makes sense. That's part of the reason why we're

13 investing in so many of these economic and community

14 development projects.

15 And as you say, if we can increase the number

16 of them, and keep the percentage the same overall,

17 that's a benefit. The World Trade PA program is

18 specifically trying to use that. A lot of these

19 students come here, go to school, go back to their

20 countries, have a positive affiliation with the state

21 and would be the first ones to say you really ought to

22 look at Pennsylvania when you're thinking about

23 expanding in North America. We're going to work with

24 the universities in partnership to take advantage of

25 that feeling that we think is built up in four, six,

81

1 or eight years of going to school here.

2 REPRESENTATIVE STURLA: Okay. Thank you. I

3 appreciate that. Because I think this is one of these

4 great untapped resources that we have here in

5 Pennsylvania. Like I said, as I understand it, we

6 have, I think it's next to California or

7 Massachusetts, the second highest number of

8 institutions of higher learning of any state in the

9 nation. If other states went to try to build that

10 infrastructure that we already have in place, they

11 would be spending billions and billions of dollars to

12 get to the point where we are now. And with a small

13 investment I think we can outshine everyone else in

14 the entire country.

15 SECRETARY YABLONSKY: I completely agree with

16 you.

17 REPRESENTATIVE STURLA: Thank you.

18 REPRESENTATIVE FLEAGLE: The Chair thanks the

19 gentleman and recognizes Representative Wheatley.

20 REPRESENTATIVE WHEATLEY: Thank you,

21 Mr. Chair. And thank you, Mr. Secretary. I want to

22 try to make this as brief as I can. One, I want to --

23 I want to join the chorus of voices that are saying

24 congratulations and patting you on the back and

25 patting the Governor on the back about the initiatives

82

1 that this administration has undertaken to produce a

2 climate that is conducive to growth. And I think that

3 is very refreshing. And we look forward to

4 continuing -- continuing seeing that happen throughout

5 the rest of this administration. I mean, its time.

6 But the question that I have is really when

7 we paint this picture of rosiness, there are still

8 communities throughout the Commonwealth that are

9 suffering for lack of economic opportunities, for lack

10 of a community development strategy that's really

11 benefiting them in some form or fashion.

12 And I've said this numerous times, as

13 departments have come before us, you know, it would be

14 good if they would break down, when you talk about

15 your numbers and success stories, break down where

16 those successes are happening and for whom they would

17 be happening. Because I think we're missing

18 opportunity to really do some really significant

19 changes maybe with a more focused policy on some of

20 these tougher communities to develop.

21 And I know that in my own district we have ed

22 and med facilities that are there. And even though

23 they are spurring economic development and doing great

24 things for the region as a whole, there are

25 communities that are right around them that are dying,

83

1 almost with no real benefit for having them there.

2 And I think -- I don't know if you have any responses

3 or any strategies on how to change that slow death in

4 some of these neighborhoods and communities. I'm sure

5 there's -- not just from in my district. I'm sure

6 there's districts all across this Commonwealth that

7 has that. And how do you make these successes filter

8 down?

9 SECRETARY YABLONSKY: It's a very good point.

10 And we've been working to try to address some of those

11 issues that you brought up. I mean, part of it is

12 municipal finance stability, working with communities.

13 Like Wilkinsburg, for example, if you can't get the

14 municipality healthy it's very difficult to do any

15 growth in terms of economic development. So working

16 with various programs and planning and so forth to try

17 to help them. That's a piece of it. The second piece

18 of it is to try to get the universities and the

19 colleges to be more active in their communities, which

20 many of them -- most of them are.

21 But we have some real success stories there.

22 I mean, Lehigh University in Bethlehem, I mean, the

23 whole area that surrounded it wasn't so great many

24 years ago. It's now thriving and on the go. What's

25 happening in Lancaster, Franklin and Marshall, I do

84

1 think in Oakland and some of the surrounding areas in

2 Oakland there's been a positive result of what's going

3 on at Pitt, at CMU.

4 But I think getting the universities and the

5 colleges and the hospitals engaged is a good thing.

6 And then I think it goes back to the Community Action

7 Team and some of the things I talked about earlier,

8 but working on Main Street, Elm Street, doing -- we're

9 doing some work in East liberty right now that, as you

10 probably are aware of, to do some site development.

11 All of those activities, when you pull them

12 all together and you involve the community and the

13 private sector along with you, end up being changing

14 for those communities. It's not an easy and a quick

15 process. But you have to start somewhere. And I

16 think we've begun it in a lot of these communities,

17 and we need to keep at it.

18 REPRESENTATIVE WHEATLEY: And I appreciate

19 that. I guess one of the -- if I can ask this as an

20 add-on question, around affordable housing and what

21 you do around community development, I know that you

22 were recently announcing in downtown Pittsburgh

23 support for a private project.

24 What are you -- what is -- what is the

25 Department doing to ensure affordable housing is a

85

1 part of community revitalization so that when you are

2 doing these types of redevelopment efforts, the people

3 who are -- who are -- who are native to that can

4 afford to be a part of that and can continue to

5 prosper inside of whatever growth happens?

6 SECRETARY YABLONSKY: Right. Well, some of

7 the projects are market rate, like that project is.

8 Other projects have some support. The group that does

9 most of the kind of projects you're talking about is

10 PHFA, which has a strong set of financial resources

11 and programs that provide particularly low, mod income

12 type of housing.

13 I happen to be on the board of that

14 organization and work carefully with Brian Hudson and

15 the chairman Bill Shank on those programs. So I think

16 we're making progress there as well. I mean, there's

17 always more demand than there is available funds. But

18 I think that PFHA has done a nice job.

19 REPRESENTATIVE WHEATLEY: Do you think that's

20 a worthwhile strategy, that whenever we make

21 significant state investment to also try to have

22 housing units that are some part of that mix of

23 housing to have subsidized units so that you have a

24 great mix so that you don't -- I mean -- I mean, can

25 you talk about revitalization downtown and urban cores

86

1 or any area I think it's important that you allow for

2 all to have access to that.

3 SECRETARY YABLONSKY: I think mixed use

4 diverse developments make sense. So, yes.

5 REPRESENTATIVE WHEATLEY: And finally, I know

6 that we're getting late in the day. I just want to

7 talk about a program that you recently -- I want to

8 congratulate you again. You were recently within the

9 Wall Street Journal with the Pennsylvania Family

10 Savings Account. And if you would, just talk briefly

11 about what the program is, the advantage of the

12 program. Because I think sometimes people don't

13 understand some of these programs that we have that's

14 focused on working families, that's focused on

15 moderate to low income families, and many times we

16 view that as giveaways to those families that when we

17 do initiatives like this, but I think this is truly a

18 success sorry that you may want to let everyone know

19 what it is and how they can access it.

20 SECRETARY YABLONSKY: It is a good program

21 and it's a program that includes state as well as

22 federal dollars. And it's not designed to be a

23 handout. It's designed to be a helping hand, not just

24 with money, but with education on how to save and how

25 to build up wealth that you can use for a rainy day or

87

1 for major new projects going forward.

2 And we literally help hundreds if not

3 thousands of families with that program every year.

4 It's a great program and it's brought -- I don't have

5 any examples of particulars off the top of my head.

6 But it's brought a lot of people from not-so-great

7 situations to where they're actually saving money now,

8 maybe building a new house, maybe doing rehab on their

9 existing house. But it really has helped real people

10 in real situations.

11 REPRESENTATIVE WHEATLEY: And in the current

12 budget, I think, is funding for a million dollars. I

13 think that's where we typically have funded it the

14 last couple years.

15 SECRETARY YABLONSKY: We're at a million

16 dollars in this fiscal year and we proposed same level

17 of funding in '06-07.

18 REPRESENTATIVE WHEATLEY: And is that enough

19 to fund the demand? Are you seeing an increase in

20 demand? And if so, what that increase is?

21 SECRETARY YABLONSKY: There's more demand

22 than we have funds available. And I don't remember

23 the exact number, but it's pretty substantially over

24 the million dollars that we have available.

25 REPRESENTATIVE WHEATLEY: Now, it's my

88

1 understanding, too, that some of the funds that we've

2 allocated have traditionally come back into the

3 general fund for not being used. And I don't know

4 what the procedure is when you give to a program, they

5 don't use all their funds, does this go automatically

6 back to the general fund, or can you redistribute that

7 to other funds that are more in need?

8 SECRETARY YABLONSKY: I'll have to look in --

9 I haven't heard -- I've not been briefed on us having

10 unused funds at the end of this program. But

11 typically we do everything we can to make sure that

12 doesn't happen and that we either get an extension

13 into the next fiscal year, which is a process we go

14 through with the General Assembly and the Governor, or

15 if not we reallocate it to other worthy and

16 meritorious applicants. Because the last thing we do

17 is leave this money on the table.

18 REPRESENTATIVE WHEATLEY: All right. So I

19 would look forward to reading your response back to

20 the committee. And, again, I want to thank you,

21 Secretary, for the work that you have done with

22 Chairman Evans and Oliver and myself around the

23 grocery store initiative. And I look forward to doing

24 a lot of great things with you and the Governor in the

25 near future. Thank you.

89

1 SECRETARY YABLONSKY: Thank you.

2 REPRESENTATIVE FLEAGLE: The Chairman thanks

3 the gentleman and recognizes Representative Maher for

4 a follow-up question or two.

5 REPRESENTATIVE MAHER: Thank you,

6 Mr. Chairman. I haven't anticipated that today's

7 conversation would delve into tax policy, but since

8 you and Representative Mundy had a rather thorough

9 discussion, the Governor's proposal and his task force

10 and so forth, could you help me find the Governor's

11 tax proposal from this task force in this budget?

12 SECRETARY YABLONSKY: Well, I -- that's a

13 pretty big document. I don't exactly know which pages

14 its on, but I can tell you exactly what he's proposed

15 and then what he's suggested, if I may.

16 REPRESENTATIVE MAHER: Well, if I might cut

17 to the chase, I mean, there's this big proposal that's

18 out there. And then there's the budget. And never

19 the twain shall meet. And it strikes me that in this

20 case if the Governor's serious about whatever this

21 proposal is, then he ought to be factoring that into

22 his budget. And if he's not serious about it, he

23 ought to -- it seems to me the Governor's in favor of

24 his proposal until it comes time to actually propose

25 it. Then he's against it.

90

1 SECRETARY YABLONSKY: Let me try to be clear

2 about this. He has proposed in that document $221

3 million worth of additional business tax cuts, capital

4 stock and franchise tax phaseout, increasing the cap

5 in the net operating loss carry forward, and increase

6 in the research and development tax credit. Those are

7 all in that budget.

8 REPRESENTATIVE MAHER: Correct me, the

9 capital stock and franchise tax, that's already

10 existing law, right?

11 SECRETARY YABLONSKY: This is a continuation

12 and a small acceleration.

13 REPRESENTATIVE MAHER: Instead of breaking

14 the law we're going to go ahead and stick to it or

15 instead of repealing the phaseout we're going to stick

16 to it.

17 SECRETARY YABLONSKY: I don't know if I would

18 agree with that characterization, Representative. I

19 think that every year we've got to make sure we can

20 afford $100-plus million of phaseout. Keep in mind,

21 in the previous administration the phaseout of this

22 tax was stocks at one point.

23 REPRESENTATIVE MAHER: I'm keenly aware of

24 that.

25 SECRETARY YABLONSKY: So I think it's

91

1 important that -- to be able to look at affordability.

2 And there's $221 million of real tax cuts in there.

3 In addition, the Governor has --

4 REPRESENTATIVE MAHER: And these tax cuts are

5 very similar to the ones he vetoed in December.

6 SECRETARY YABLONSKY: He didn't veto anything

7 relating to the capital tax and franchise tax.

8 REPRESENTATIVE MAHER: No, in terms of the

9 NOL.

10 SECRETARY YABLONSKY: The NOL phaseout was a

11 part of the bill that he vetoed, House Bill 515. And

12 I know you've heard testimony on that, so I won't

13 repeat it in its entirety. But since you raised it,

14 he -- he agrees and I agree that reducing the CNI,

15 putting a single sales apportionment factor and

16 phasing out the NOL are all good things. But they

17 cost money and they have to be done in the context of

18 a budget. And we have to be able to afford them. And

19 if we can figure out a way to afford them, he's

20 supportive.

21 REPRESENTATIVE MAHER: And here's my analysis

22 again. It goes back to these were planks of this

23 proposal. They were passed by legislature, vetoed by

24 the Governor, now during his budget message he did

25 speak about these things --

92

1 SECRETARY YABLONSKY: Right.

2 REPRESENTATIVE MAHER: -- as though they were

3 part of this proposal that sounded, to innocent

4 listeners but when, in fact, it's not part of this

5 proposal. And I just -- maybe I do completely

6 understand. But it seems to me that if the Governor

7 actually is for these things then he ought to be for

8 them. If he's against them he ought to be against

9 them. But to say he's for them then veto them and say

10 he's for them and not include them in his budget is

11 very confusing.

12 SECRETARY YABLONSKY: Well, he -- I believe

13 he was clear --

14 REPRESENTATIVE MAHER: But I know you're not

15 the Secretary of Revenue, so.

16 SECRETARY YABLONSKY: I have plenty to do. I

17 think he was clear in his budget address in that he

18 had a portion of his tax comments that were in the

19 budget and another portion that he would be very

20 willing to sit down with the General Assembly and

21 discuss how we get it done. But he didn't see a way

22 to do it in the current budget.

23 REPRESENTATIVE MAHER: That's a very gracious

24 way it to put it. Thank you.

25 REPRESENTATIVE FLEAGLE: Mr. Secretary, I

93

1 just had one more thing that I'd like clarified. And

2 you mentioned. I jotted those down that 18 to 34 year

3 olds, Pennsylvania has the biggest outmigration --

4 SECRETARY YABLONSKY: That is correct. We

5 were -- I forget the time period, it was during -- I

6 think it might have been the whole decade of the '90s,

7 but it was in a Brookings study that identified that

8 we had the largest number of 25 to 34 year olds who

9 left the state.

10 REPRESENTATIVE FLEAGLE: 25 to 34 year olds.

11 SECRETARY YABLONSKY: Yeah, 25 to 34.

12 REPRESENTATIVE FLEAGLE: That left the state.

13 SECRETARY YABLONSKY: That's correct.

14 REPRESENTATIVE FLEAGLE: And then you said we

15 also have the largest college freshman influx from

16 other states.

17 SECRETARY YABLONSKY: That's correct.

18 REPRESENTATIVE FLEAGLE: Could you, I hate to

19 make you do this, but could you find those studies for

20 me?

21 SECRETARY YABLONSKY: Sure.

22 REPRESENTATIVE FLEAGLE: In a summary form

23 because I'll probably steal that information and use

24 it sometime. I'm not above that. But I would like

25 to, if somebody challenges me on it, I just don't want

94

1 to say, well, Mr. Yablonsky told me that in a hearing.

2 I would like to see. I mean, it's interesting

3 information. I'm sure I'll use that.

4 SECRETARY YABLONSKY: I'll be happy to get

5 sources for you.

6 REPRESENTATIVE FLEAGLE: Thank you. If you

7 can just get them to Chairman Feese and he can -- I'm

8 sure other people will be using that in one of their

9 speeches.

10 SECRETARY YABLONSKY: Certainly.

11 REPRESENTATIVE FLEAGLE: Mr. Secretary, thank

12 you so much for your patience today and for your

13 answers to the questions and to your testimony. That

14 concludes this hearing. The committee will adjourn

15 until March the 1st, tomorrow, Wednesday at 9 a.m., at

16 which time we will have the Pennsylvania Attorney

17 General in front of us.

18 SECRETARY YABLONSKY: Thank you,

19 Mr. Chairman.

20 (Testimony Dennis Yablonsky concluded at

21 4:44 p.m.)

22

23

24

25

95

1 I hereby certify that the proceedings and

2 evidence are contained fully and accurately in the

3 notes taken by me on the within proceedings and that

4 this is a correct transcript of the same.

5

6

7

8 Heather L. Artz, RMR, CRR 9 Notary Public

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25