HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA
* * * * Department of Community & Economic Development Budget Hearing * * * * House Appropriations Committee Main Capitol Building Majority Caucus Room 140 Harrisburg, Pennsylvania Thursday, March 24, 2011 - 10:00 a.m. --oOo—
BEFORE:
Honorable William Adolf, Jr., Majority Chairman Honorable Douglas Reichley Honorable Gordon Denlinger, Subcommittee Chair on Fiscal Policy Honorable Thomas Killion, Subcommittee Chair on Health and Welfare Honorable David Millard, Subcommittee Chair on Health and Welfare Honorable Mario Scavello, Subcommittee Chair on Education Honorable John Bear Honorable Martin Causer Honorable Jim Christiana Honorable Glen Grell Honorable T. Mark Mustio Honorable Bernie O'Neill Honorable Michael Peifer Honorable Scott Perry Honorable Tina Pickett Honorable Jeffrey Pyle Honorable Curtis Sonney Honorable Joseph Markosek, Minority Chairman Honorable Cherelle Parker, Minority Subcommittee Chair on Health and Welfare Honorable Steve Samuelson, Minority Subcommittee Chair on Education BEFORE: (CONT'D) Honorable Matthew Smith, Minority Subcommittee Chair on Economic Impact and Infrastructure Honorable Greg Vitali, Minority Subcommittee Chair on Fiscal Policy Honorable Matthew Bradford Honorable H. Scott Conklin Honorable Paul Costa Honorable Deberah Kula Honorable Tim Mahoney Honorable Michael O'Brien Honorable Ronald Waters
IN ATTENDANCE: Honorable Matthew Baker Honorable Kerry Benninghoff Honorable Vanessa Brown Honorable Michelle Brownlee Honorable Mark Cohen Honorable Margo Davidson Honorable Gary Day Honorable Pam DeLissio Honorable Gene DiGirolamo Honorable Adam Harris Honorable Sue Helm Honorable Dick Hess Honorable Thaddeus Kirkland Honorable Jerry Knowles Honorable Kevin Murphy Honorable John Myers Honorable Marguerite Quinn Honorable Rick Saccone Honorable Jerry Stern
ALSO PRESENT:
Dr. Edward Nolan, Majority Executive Director Joanne Hunt, Majority Administrative Officer Jeanna Gettys, Majority Administrative Asst. Darlene Schaffner, Majority Budget Adm. Asst. Kathryn Vranicar, Majority Budget Analyst Miriam Fox, Minority Executive Director C O N T E N T S
Witnesses Page
DCED C. Alan Walker, Acting Secretary 8 Bryce Maretzki, Deputy Secretary 44 of Administration Richard Hudic, Executive Deputy Sec. 83 CHAIRMAN ADOLF: Good morning, everyone. The hour of 10:00 having arrived, I would like to call to order the House of
Representatives Appropriations Committee meeting and a budget hearing for the
Department of Community and Economic
Development.
My name is Bill Adolf. I am the
Republican Chair of the committee. I am from
Delaware County. And what I would like to do is have the members of the committee introduce themselves. Chairman Markosek likes to introduce his members.
And the time is yours, Chairman.
REP. MARKOSEK: I thank you,
Chairman Adolf.
And, first of all, welcome,
Secretary-designate Walker.
ACTING SEC. WALKER: Thank you.
REP. MARKOSEK: I look forward to your testimony.
To my right is Miriam Fox, who is our Executive Director of the Appropriations
Committee. To her right is Rep. Ron Waters from Philadelphia County and Delaware County. REP. WATERS: Yes, that's right.
REP. MARKOSEK: Behind us is Rep.
Greg Vitali, Delaware County. Also to our right is Rep. Paul Costa of Allegheny County;
Rep. Scott Conklin of Centre County; Rep. Tim
Mahoney of Fayette County; Rep. Deb Kula of
Fayette County; Rep. Mike O'Brien from
Philadelphia County; Rep. Cherelle Parker from
Philadelphia County; Rep. Matt Smith from
Allegheny County; Rep. Steve Samuelson from
Lehigh County.
Also with us are some visiting legislators. We have Chairman Thaddeus
Kirkland from Chester County, who is here, as the Minority Chair of the Tourism Committee in the House; as well as Rep. Margo Davidson is here from Delaware County; and Rep. Pam
DeLissio is here from Philadelphia County.
Thank you, Mr. Chairman.
CHAIRMIAN ADOLF: Thank you, Mr.
Chairman.
To my immediate left is the House
Republican Executive Director, Doctor Ed
Nolan. And then I would like the other members of the Republican committee to the identify themselves and the county they represent.
REP. PERRY: Good morning, sir.
Rep. Scott Perry, northern York and Cumberland counties.
REP. GRELL: Good morning,
Secretary. I am Glen Grell, representative from the 87th District, which is in Cumberland
County.
REP. MUSTIO: Good morning. Mark
Mustio, 44th District, Allegheny County.
REP. CAUSER: Good morning. Marty
Causer, McKean, Potter and Cameron counties.
REP. SONNEY: Good morning. Curt
Sonney, 4th District, Erie County.
REP. O'NEIL: Good morning. Rep.
Bernie O'Neil, Bucks County.
REP. REICHLEY: Doug Reichley,
134th District, from Berks and Lehigh counties.
REP. PEIFER: Good morning. Mike
Peifer, Wayne, Pike and Monroe counties.
REP. MILLARD: Good morning. David
Millard, 109th District, Columbia County.
REP. CHRISTIANA: Jim Christiana, 15th District, Beaver County.
REP. KILLION: Tom Killion,
Delaware and Chester counties.
REP. PYLE: Good morning. Jeff
Pyle, Armstrong and Indiana counties.
REP. DENLINGER: Good morning.
Gordon Denlinger from eastern Lancaster
County.
REP. PICKETT: Tina Pickett,
Bradford, Sullivan and Susquehanna counties.
REP. SCAVELLO: Good morning.
Mario Scavello, Monroe County.
CHAIRMIAN ADOLF: Thank you.
Also in the audience is Chairman
Jerry Stern of the Tourism and Recreational
Development Committee, Rep. Jerry Knowles, and
Rep. Rick Saccone. And I apologize if I am missing someone.
Rep. Dick Hess is also here. Thank you.
I think that should be it. And I am sure there are going to be other members that come in during the testimony.
With us today is the Secretary of
Community and Economic Development, C. Alan Walker.
Good morning.
ACTING SEC. WALKER: Good morning.
CHAIRMAN ADOLF: For your information, Mr. Walker has been appointed the next Secretary of the department by Governor
Corbett. Mr. Walker comes to DCED from
Bigler, Pennsylvania, where he was president and CEO of Bradford Energy Company,
Incorporated.
He has also served as a member and chairman of several boards, including the
Pennsylvania Chamber of Business and Industry,
Team Pennsylvania, Pennsylvania Coal
Association, and the Pennsylvania -- and
Pennsylvanians for Effective Government.
DCED offers business assistance, including startup location, expansion and investment. It is also committed to helping
Pennsylvania develop and enhance its communities with downtown revitalization programs.
Welcome. Good morning.
ACTING SEC. WALKER: Thank you.
CHAIRMIAN ADOLF: If you would, Mr. Secretary, I would like you to identify your colleagues that are sitting at the table with you, and make some brief opening comments.
And what we are going to try to do today because, in reviewing the various budgets that come before us, this department has had as many changes as any that has come before us, and there are an awful lot of questions. I can just see by the number of legislators' names that have been put in front of me.
So, I am going to ask my colleagues on this committee if they would try to concentrate your questions on the business before us, which is the budget and their budget request as well as policy changes towards this committee. I am asking you to follow that.
And I am also going to ask the
Secretary to try to explain these new policies that we are developing here, to the best of your ability. And the time is yours.
ACTING SEC. WALKER: Thank you.
I would like to introduce Bryce
Maretzki, who is my Administrative Deputy, and Rick Hudic, who is my Executive Deputy; and I think many of you know them already.
Thank you, Chairman Adolf and
Chairman Markosek and members of the committee. It's a pleasure to be here today to discuss the proposed budget for the
Department of Community and Economic
Development.
A little over two weeks ago,
Governor Corbett proposed a streamlined 2012 budget for DCED that focuses all budget resources on economic growth, job creation and community development.
The proposed budget maintains level funding for critical community and economic development initiatives, while eliminating programs that are duplicative, ineffective, inefficient and otherwise wasteful of taxpayer resources.
Throughout the budget process, I have learned that Pennsylvania has some of the most innovative and creative tools for economic development in the country.
Pennsylvania's economy has performed better than the economies of its neighboring and competitor states throughout the recession that began in late 2007.
From 2007 to 2009, Pennsylvania's gross domestic product growth was at 3.8 percent; over three times the national rate of
1.18 percent; and it exceeded GDP growth rates of our neighboring and competitor states to make us 14th in the nation.
Additionally, Pennsylvania's unemployment remained below the national rate throughout the recession, and its personal income per capita and volume of exports exceeded the national average, also surpassing income per capita and export values of all neighboring and competitor states.
That said, taking into account our location, infrastructure, skilled workforce and strong network of colleges and universities, Pennsylvania should not settle to be in the middle of the pack - we should strive to lead the nation.
In the past, DCED was a maze of programs that was challenging for businesses, communities and even those within government to navigate, and costly for the state to administer.
The budget proposal reduces the number of programs from 127 to 56, funding only those programs focused on economic and community growth that have demonstrated returns on investments and align with the core functions of this department.
By concentrating all budget resources on the core mission of the agency and building upon the department's strengths and assets, DCED positions Pennsylvania's job creators to succeed and thrive in a global economy.
Moving forward, DCED and all DCED programs will be guided by three core principles:
Partnerships, which are forging new partnerships with the private sector, other public entities and DCED programs to enhance regional delivery of economic development services;
Performance. Advancing performance-based program initiatives evaluated by defined metrics, providing consistent and positive returns on investment for taxpayers;
And competition. Moving away from the old entitlement-based funding and ensuring that each program has infused a level of competition for resources. This will help drive regional projects and encourage community and economic development organizations to work in partnership to compete for scarce Commonwealth resources.
The new DCED will focus on modernizing economic development delivery services and proactively addressing the needs of business. All programs have been either consolidated or streamlined to achieve at least one of the following four objectives:
Promote job creation by ensuring capital for the creation, location, retention and expansion of private business is available at each step of the business life cycle for all types and sizes of businesses;
Attract businesses to relocate or expand current operations in Pennsylvania and promote Pennsylvania as a top tourism destination for both domestic and international visitors and businesses; Encourage a more coordinated, regional approach to the delivery of economic development services and tools;
Create attractive livable communities by revitalizing downtowns and surrounding neighborhoods, providing assistance to local governments to ensure fiscal stability and intergovernmental cooperation, and promoting sound land use practices.
By staying true to our principles and concentrating on the core mission of the agency, entitlements are replaced by a competitive application and defined evaluation process, maximizing every community and economic development dollar spent.
This strategic and innovative budget proposal represents a new way of doing business for the department and its economic and community development partners. The proposed budget restructures the department, consolidating like programs and creating new initiatives designed to support businesses and communities, and vastly improves our level of customer service. Below are the agency's key programs, which focus on driving job creation, community development and economic growth.
The Liberty Loan Fund consolidates six existing authorities and DCED funds under the umbrella of a single authority.
Currently, there are a variety of economic development programs and revolving loan funds that address narrowly defined needs or uses and are highly constrained by inflexibility on the part of end-users.
By pooling the resources from these funds and programs and unshackling the constraints, the Commonwealth will be able to leverage new private dollars using the pooled assets of the existing programs and create flexible financing tools that can quickly adjust to changing economic conditions.
Our goal is to create a governance structure that is a true public/private partnership and includes representation from the executive branch, legislative branch and, most importantly, the private sector.
The PA First Fund combines the
Opportunity Grant, Customized Job Training, and Infrastructure Development programs to create an economic development tool that streamlines financing for business owners seeking funds for capital improvement costs, job training and infrastructure projects.
This fund would be available to for-profit businesses, non-profit entities, municipalities and municipal authorities working on behalf of businesses. Combining programs under one umbrella and removing existing restrictions and fund limitations provides the necessary flexibility to quickly respond to companies' needs.
Discovered in PA and Developed in
PA will help small- and medium-sized businesses identify and assess the technical and/or financial assistance needed to help them become more competitive and grow their operations in the Commonwealth.
The program will develop and deploy regional experts who will have knowledge of all technical and financial services available.
In addition, the Governor's Action
Team will develop a structured and targeted outreach to more than 2,000 high-growth companies that have experienced at least
20-percent growth each quarter over the last eight quarters.
More than 70 percent of all new net jobs created in Pennsylvania are created by less than 1 percent of companies. We need to ensure our homegrown businesses have what they need to continue growing in Pennsylvania.
Partnerships for Regional Economic
Performance will encourage a more coordinated regional approach to the delivery of economic development services through partnerships of existing providers and the utilization of state economic development resources in a cohesive and cost-effective manner to create and retain jobs within the Commonwealth.
The PREP program will push for a more coordinated and regionalized approach to
DCED's economic development system, with single- or multi-year grants driving the selection process via a public/private advisory board.
The advisory board will help define a comprehensive economic development approach and quantitative metrics to assess performance and ensure consistent and positive returns-on-investment for taxpayers.
World Trade PA will continue to be a priority of DCED. Pennsylvania's increasing global opportunities are demonstrated, in part, by the growth in exports which have doubled from 4 to 8 percent of our economy within the past eight years. As the 18th largest economy in the world, I believe developing a diverse economy across industry sectors and a strong international business development plan are crucial to the
Commonwealth's economic success.
Another key component of DCED will be to serve as the critical liaison between our state government and businesses. In a report from Moody's Economy.com, Pennsylvania ranked 26th in the nation in average job growth from 2009 to 2011.
The current bureaucratic process at the state and local levels can be confusing and debilitating to job creation and economic growth. Because of this issue, the Governor has asked me to serve as a liaison among all agencies for business climate competitive issues.
The Governor's Action Team will help businesses navigate through the governmental process, assisting with regulatory issues, permitting, and workforce development.
GAT will be a public partner for job creators stymied in their efforts to move a project from start to finish; however, neither GAT nor I will be able to alter any statutes or regulations or affect whether or not a permit is issued. By serving as a partner with business, DCED will be highly effective in facilitating job creation and economic growth in Pennsylvania.
Overall, all programs and efforts refer back to our core mission and principles: building public/private partnerships; advancing performance-based initiatives; encouraging competition for funding; improving the economic development delivery system; and providing a user-friendly experience for the department's clients and partners.
Just in the few months that I have served as Acting Secretary, I am amazed at the opportunities for job creation already in the pipeline. For a number of reasons, our workforce, our location, our commitment to creating a better business climate and our new energy discoveries, Pennsylvania is getting a much closer look from businesses than it has in many years. We need to be ready to make job creators choose to start up, relocate or expand right here in Pennsylvania.
In order to be as productive as possible, we need to continue to foster partnerships and communications among our offices, lawmakers, communities and investors who are committed to improving our community and economic development.
I sincerely believe that we can do great things these next several years by working together to make smart investments in projects that will strengthen Pennsylvania now and into the future.
From 1840 through the 1960 census,
Pennsylvania was second only to New York State in population and economic growth. As late as the 1950 census, we had a larger population than California. I believe with the proper development of our shale gas deposits,
Pennsylvania can again become a top-five economy in the U.S.
We owe it to our citizens to create a business climate that encourages growth and development.
I will be glad to address any specific questions that you may have at this time. Thank you.
CHAIRMIAN ADOLF: Thank you, Mr.
Secretary.
At this time, I would like to acknowledge the presence of Rep. Vanessa Brown and Rep. Adam Harris.
The first question will be asked by
Rep. Jeff Pyle.
And I would like to remind the members of our rules. We will keep our questions to ten minutes; and we will have a second round, if needed.
There are many questions that need to be directed to the Secretary regarding the budget request here as well as the policy changes, so try to keep your questions to that point as well as the time limits.
And, Mr. Secretary, try to keep your answers to a brief as possible. Thank you.
REP. PYLE: Thank you, Mr.
Chairman.
Mr. Secretary, thanks for being with us today. I appreciate your attendance.
That was a very informative presentation.
My questions pertain mostly to the
Commonwealth Financing Authority, CFA. I think it is fair to ask as a baseline of sorts so that all of Pennsylvania knows just where we are starting out in terms of debt held by the citizens of Pennsylvania from CFA.
What -- And I don't know this question. But excluding H2O PA, which we all know is paid out of the Gaming Fund and the endorsements and stuff, how much debt are we holding in CFA right now?
(Mr. Walker privately confers with panel members.)
ACTING SEC. WALKER: Just a little over $2 billion.
REP. PYLE: Okay. Now, CFA finances the H2O PA Program, which is very vital to us in the west where the areas tend to be more rural and whatnot.
I know a lot of the local municipalities have made application for H2O
PA assistance, and I have seen a few of these projects doing extremely well, you know, addressing sanitary and clean water, the potable supply issues.
I am informed there is a remaining amount left in the H2O PA pot to draw from.
How much is that amount?
ACTING SEC. WALKER: Well, we are looking at capacity right now. But we believe, under the current consumptions, it is roughly $182 million.
REP. PYLE: A hundred and eighty-two?
ACTING SEC. WALKER: Correct.
REP. PYLE: Do you — Just — Not to force your hand, but do you have any idea when those announcements might be made?
And like I said, we have a bunch of ducks on the pond. I am serious.
ACTING SEC. WALKER: Well, I hope that sooner, rather than later, our goal is to make sure the money is released before this construction season. So, I am hoping it is sooner rather than later.
REP. PYLE: That's — I know we are coming up on that very quickly.
ACTING SEC. WALKER: Yeah.
REP. PYLE: That's the reason for my question.
ACTING SEC. WALKER: One of our problems is the structure of the CFA. We really haven't been able to have a forum there for the last five months, which is one of the reasons we haven't been able to vote on these projects. So, I mean, we are hoping people will cooperate moving forward and we will get the proper attendance at the meetings.
REP. PYLE: I certainly would concur with you and support your position. We have got a lot of rural areas that are under either DEP or EPA edict -¬
ACTING SEC. WALKER: Sure.
REP. PYLE: — to separate storm and sewer; and to install, for the first time, fresh construction and whatnot. And that's about the extent of my questions. Thank you very much for being here today.
Thank you, Mr. Chairman.
ACTING SEC. WALKER: Thank you. I will add that H2O is a great program, and I think we should push to get as much money out to these communities as quickly with that.
CHAIRMIAN ADOLF: Thank you.
Rep. Greg Vitali.
REP. VITALI: Thank you, Mr.
Chairman.
And thank you, Secretary-designee
Walker, for coming here today.
I want to focus my first question on policy that the Governor set out on page
81.14 of his budget. And he said -- And I will quote, he said, the DCED Secretary is empowered to expedite any permit or action pending in any agency where the creation of jobs may be impacted.
And you sort of expounded upon that in the next-to-the-last page of your remarks, where you said that the Governor's Action Team will help businesses navigate through the governmental process, assisting with regulatory issues, permitting, and workforce development; and you will not be altering any permits or statutes.
Those of us in the environmental community who are concerned with the environment are sort of very concerned about what role you may play in the issuance of permits.
And we are not just talking about the Marcellus Shale drilling permits; we are talking about permits with regard to what the company can emit into the air, what pollutants. We are talking about permits as to what pollutants that a company can discharge into the water, permits with regard to crossing the streams.
There are a multiplicity of permits both non Marcellus and Marcellus. And these permits are complicated processes that require public comments, in some cases public hearings, and require getting information from the permit applicant, which sometimes is not always the best information on first pass.
So, I guess my question really is, what do you see your role being with regard to the issuance of permits by the DEP in particular?
ACTING SEC. WALKER: Well, certainly, I won't be issuing permits. I will not be overruling the permit decisions.
But I can give you one example already of a company that wants to move to
Clearfield County from Oklahoma, and they are planning on hiring 200 welders, and they will pay considerably above the average wage for people in Clearfield County; and Clearfield
County has a very high unemployment rate.
They got the letter from the air quality people at DEP that said: We are reviewing your permit. We will give you a decision in 180 days.
Well, they wanted to start hiring in March and start hiring -- doing training in
March, and this letter is dated January 13th from the DEP office to the company.
I got involved through an unusual set of circumstances. But I asked for permission of the Secretary of DEP to call the office to see why the permit was being held up and why it couldn't be issued, rather than waiting the full 180 days to let them know.
So, I talked to the company to see what their needs were, what the problem was.
Then I called the Office of DEP, and said, will this permit be issued? And they said, yes.
And I said, well, why are you going to wait the full 180 days? And the person on the phone said, well, I don't have anybody here to type the permit.
So, that's the type of situation I plan to get involved in - to expedite permits that are being held up for bureaucratic reasons.
REP. VITALI: Okay.
It was my -- And my question involved, I mean, shouldn't it be Secretary
Krancer who makes these decisions with regard to the issuance or non issuance of permits?
And, obviously, in a extreme situation you involve not having a typist, I mean, we all could agree to that. Some were talking about the situations where, perhaps, the company has not filed proper information; its information is lacking.
What I am trying to get at is, should it be the role of Secretary Krancer to make sure these permits are happening in a responsible way, balancing the need for jobs with regard to the needs for protecting the environment?
What I am trying to get at is, what is your role, being that Secretary Krancer is in this?
ACTING SEC. WALKER: I will certainly abide by any decisions that DEP makes relative to permits.
I am not here to overrule the technical part of it or the technical merits of it. So, if they should decide a permit would not be issued, I am not going to try to have it turned around.
I am merely here as an expediter to make sure permits get their proper attention.
Our bureaucracy in Pennsylvania isn't working especially well, and some departments work better than others. But we have to get our employees to understand that business has huge capital commitments waiting out there and there are a lot hinging on these permit decisions.
That we need to educate our people who do the permit review that putting something on the bottom of the pile because they don't like somebody or whatever, or they are having a bad day, isn't an acceptable way of doing business.
REP. VITALI: And no one can agree with that more than me.
But my hope is that the issuance of permits will be based on fair weighing of the various concerns and various public comments, hearings, that the production of required information will have its due course and then
Secretary Krancer's authority will not be undermined or blind.
ACTING SEC. WALKER: Yeah. I don't see that happening. Because again, the statutes and regulations in Pennsylvania about public comment period are very clear. I don't ever see even trying to get around that. They are very clear.
REP. VITALI: Yeah. I mean, the sad reality is that permits have been improperly issued. And if they are not challenged, they will go into effect. That's simply the nature of permits, and that's why we are concerned.
Okay. Let me move on to my second question, and that involves: You know, one of the missions of DCED is to promote business opportunities, and one growing source of business opportunities in Pennsylvania is the green business.
It is not only solar and wind, but businesses, you know, with regard to recycling and conservation and so forth.
As DCED Secretary, what plans do you have to promote good green businesses in
Pennsylvania?
ACTING SEC. WALKER: Well, it is my hope that over the next few years, we will be able to develop a state energy policy.
Because the national government has not done a very good job of developing a national energy policy.
And as far as I am concerned, there is room for just about every type of energy and that includes green energy and renewable energy. So, I think whatever is out there and can be competitive, we certainly should be looking at it and encourage it.
REP. VITALI: Okay. Thank you.
CHAIRMIAN ADOLF: Thank you.
So nice to see that Rep. Vitali and the Acting Secretary agree on what is necessary for both the environment and the business here in the Commonwealth.
Rep. Tina Pickett.
REP. PICKETT: Thank you, Mr.
Chairman.
You mentioned in your opening remarks the PREP program, Partnerships for
Regional Economic Performance, and its consolidation of several appropriations. It is the local development districts, the small business development centers, the industrial development centers, and the industrial development assistance.
Do you anticipate that this new initiative will be implemented through legislation or by departmental guidelines?
ACTING SEC. WALKER: I think it may need a little bit of legislative help, but a lot of it will be done through department guidelines.
This is the brochure we put out now to companies that are looking at Pennsylvania, and it is called the Business Assistance
Programs. It is more complicated than the
Clinton health care plan, and we really need to figure out how to simplify it.
And, I mean, we are not customer friendly, so we have got to simplify; and that's what we are trying to do with the PREP program.
REP. PICKETT: I could agree with you on that. When people come into my office for some help, it's like: Okay. Here is the book. Let's see what we can do.
ACTING SEC. WALKER: It takes a PhD to figure it out.
REP. PICKETT: And can you give us some sort of a timeline for having this together?
ACTING SEC. WALKER: As quickly as possible. Hopefully, everything will be up and running by summer.
We are already doing the meetings with the regional offices to tell them what we are trying to accomplish. We have had seven regional meetings; there are two today.
And we have gotten very good feedback. There is very good enthusiasm about what we are trying to accomplish.
Basically, we are looking for a one-stop shop where a customer or a potential job creator is greeted in a very positive manner and directed in the right direction to get to the program that they need to help them.
REP. PICKETT: And did you define those regions to date?
ACTING SEC. WALKER: We will stay with the same regions we have.
REP. PICKETT: The same regions?
ACTING SEC. WALKER: Yes.
REP. PICKETT: Okay. All right.
Thank you very much.
Thank you, Mr. Chairman.
CHAIRMIAN ADOLF: Rep. Mahoney.
REP. MAHONEY: Thank you, Mr.
Chairman.
Good morning, Mr. Secretary. I am over here.
ACTING SEC. WALKER: Oh.
REP. MAHONEY: The big guy over here.
ACTING SEC. WALKER: I still haven't learned the Ds from the Rs.
REP. MAHONEY: It is pretty easy.
ACTING SEC. WALKER: Well, for some reason I noticed the Ds are on my left and the
Rs are on my right.
REP. MAHONEY: What I want to ask you about is, DCED consolidated the Accessible
Housing Program home modification into
Keystone Communities' line item along with some other programs. The Accessible Housing
Program empowered people with disabilities and the seniors to remain in their homes at a lower cost instead of going into nursing homes.
The program has been cut about $2 million over the past three years, and the funding levels in this year's budget are not clear on how much funding is going to go into those programs. Could you elaborate on that?
ACTING SEC. WALKER: We plan to roll that into a community program. I would expect it is going to be a very similar number.
As you probably are aware, we did get a lot of money from the federal government for some of these weatherization programs and doing exactly what you are talking about, handicapped accessibility.
The federal money will continue to run for another year, so it may not be quite as critical for the state dollars for this year until the federal money actually runs out.
REP. MAHONEY: So, you are saying it is going to be almost the level of funding from last year for this?
ACTING SEC. WALKER: Yes, yes.
REP. MAHONEY: All right. Thank you.
Thank you, Mr. Chairman.
CHAIRMAN ADOLF: And thank you,
Representative.
The next question is from Rep.
Mark Mustio.
REP. MUSTIO: He knew it was coming to the right side. Rep. Mahoney got him going.
Welcome.
ACTING SEC. WALKER: Thank you.
REP. MUSTIO: My question relates to the Weatherization Assistance Program that your department administers. And prior to the receipt of the stimulus money, in the General
Fund language was that 15 percent of the funding will be -- of the LIHEAP funding will be provided to that program.
With the addition of the significant dollars to the stimulus, the
Governor at the time wanted some flexibility and changed -- wanted to change in that language from a guaranteed 15 percent to up-to-15 percent.
And I was wondering if your departments would support returning to that language of guaranteeing 15 percent of the federal LIHEAP dollars that come to the state be applied to that program?
ACTING SEC. WALKER: It is certainly something that we will look at. And being from a low-income, bad weather county, I am very sensitive to the needs of low-income people to keep heat in their homes during the winter. So, I am in support of the program in general, and I am certain some people will look at.
REP. MUSTIO: Well, the LIHEAP dollars themselves certainly pay those bills, but the Weatherization Program itself obviously helps to lower those costs. So, what additional information would you need to consider when you would be looking at this?
I mean, have you done -- has the department done studies on the Weatherization
Program and its effectiveness in the past?
ACTING SEC. WALKER: Yes. Since the program started, we have done 30,000 homes. We do a very detailed audit. We know it is working extremely well in reducing energy consumption in the homes that have been involved in the program.
The Weatherization Program runs for another year, so it will probably be pretty much status quo for the next year.
REP. MUSTIO: That information and the studies that you have conducted, is that information that you can make available to our committee?
ACTING SEC. WALKER: I would be happy to. Because that program is subject to a very, very strenuous audit. So, the numbers are there, and they are very good.
REP. MUSTIO: And that information is readily available to us?
ACTING SEC. WALKER: Yes.
REP. MUSTIO: Okay. Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Matt Smith.
REP. SMITH: Thank you, Mr.
Chairman.
Thank you, Mr. Secretary, for your testimony today.
I just want to explore, for a little bit, the Liberty Loan Fund that you mentioned earlier and that Governor Corbett mentioned in his budget address.
Can you go into a little bit of detail on how that fund and the authority that go into the fund will be structured, how many members do you anticipate, who will have the appointment ability for those members? Can you just go into a little bit of that detail?
ACTING SEC. WALKER: Yes, our proposal is that we would bring all DCED programs together under this fund that would be applicable. It gives us a pool of money of about $1.9 billion to work with for economic development programs moving forward.
We would use our certified capital providers to help identify the quality applications. But we want to go to a one-loan application system, which we don't have now.
Every one of our programs that we administer requires a separate application, so we want to eliminate that.
And we need the flexibility to transfer money between accounts. Right now, we cannot transfer money from one account to another should one program have a surplus in it and that really hinders our flexibility.
As far as the governing structure, we propose an authority. The legislation should be coming to you within the next couple of weeks.
Our initial thought is that we would have a 15-member board, with one appointment by each Caucus, which would be four.
We would have three -- two or three
Cabinet secretaries.
And then we would have public citizens that would be appointed by the
Legislature and the Governor, which would be eight of the fifteen seats.
And we feel one Caucus would appoint each -- one public citizen each, which means the Caucuses would control eight votes.
And then the executive branch would nominate the other four members.
And what we are really looking for is a public/private partnership that gives us flexibility and accountability, and we think this model is a great way to go.
REP. SMITH: And how would those terms be structured? How many years will they be staggered or will they -¬
ACTING SEC. WALKER: Well, that is what we are working on right now, are the details of that. But it is some way that a typical authority will be able to work and continue. REP. SMITH: Okay. And you mentioned the total fund would, I think, total
1.9 billion; and I think 220 million of that would be a transfer from the Tobacco
Settlement Fund into the new Liberty Loan
Fund.
Will that 220 million that's transferred from the Tobacco Settlement Fund into the Liberty Loan Fund be restricted and related only to health-related purposes, or will that 220 million be open to basically any purpose that might be submitted as part of an application?
ACTING SEC. WALKER: Well, the
Department of Health actually administers the health portion of the tobacco settlement money.
What we -- This is a trust that has been created. Money goes into this trust.
But once it is rolled into the new Liberty
Loan Fund, it would be able to be used for economic development in Pennsylvania.
REP. SMITH: So, it wouldn't solely be related to health-related purposes? It could be used for a wind farm in Bucks County or a coal plant in Bradford County, something along those lines?
ACTING SEC. WALKER: Whatever would meet our criteria that we set up, yes.
REP. SMITH: Okay. And does that open up the Commonwealth to potential litigation from the tobacco companies to the extent that we are going beyond the terms of the 2001 Tobacco Settlement Agreement?
ACTING SEC. WALKER: No, it doesn't.
REP. SMITH: Okay. So, your -- So, the department is confident that even going beyond the original terms of the agreement, that will not open the Commonwealth up to potential litigation from the tobacco companies?
ACTING SEC. WALKER: That is correct.
One thing I have learned since taking this job is, the Commonwealth of
Pennsylvania has the most conservative group of lawyers I have ever run across. They are certainly risk averse. But in their opinion, we are able to do this. REP. SMITH: Conservative not in the political sense but in the legal sense?
ACTING SEC. WALKER: No, in the legal sense. I am sorry if that word offended you.
REP. SMITH: You learn in this job to not be offended.
And is that 220 million the sole transfer from the Tobacco Settlement Fund into the Liberty Loan Fund? There won't be any other dollars transferred from the tobacco settlement?
ACTING SEC. WALKER: Well, earnings in the future.
REP. SMITH: So, but no additional funds will be transferred, that $220 million?
(Mr. Walker privately confers with
Mr. Maretzki.)
MR. MARETZKI: Yeah, the way we are looking at structuring it would be the assets of the endowment would be transferred into the
Liberty Loan Fund, which is somewhere around
$330 million.
REP. SMITH: Okay. So, you have the 220 and then an additional 110 in assets? MR. MARETZKI: Right.
REP. SMITH: And will those assets
-- You know, I am assuming that that would obviously -- It wouldn't take the form of a cash transfer.
So, will those assets--that 110 million that currently reside in the Tobacco
Settlement Fund and are in that sort of restricted account--have to be liquidated in order to be transferred?
Or could those -- How will -- Take me through the mechanics of transferring the assets.
MR. MARETZKI: They would continue to be managed by the new authority as they have been managed now.
And, you know, we would have to make decisions about making sure that the calls are -- you know, we have the cash available to make the cash calls on the equities and that there is the resources available to make sure that those investments are made. If ones needed to be liquidated, we potentially would have to liquidate them on a judicious basis. And then the other one -- REP. SMITH: So, you see, there is a potential for liquidation.
Would those, would that additional
-- Would the asset transfer funds be put into a restricted account or a sub account in the
Liberty Loan Fund so that those could be only used for certain purposes?
Or, as the Secretary testified with the 220 million, could those asset transfer funds be used for any purpose - coal plant, wind farm, whatever it might be?
MR. MARETZKI: Again, the endowment resources would be managed by the new authority, and those payments into the endowment would then have the ability to be used for a variety of uses based on the assets that are available in the endowment portion of the Tobacco Settlement Funds.
REP. SMITH: So, just so I am clear, would that be -- would that necessarily mean that they would be restricted in their use once that transfer is made to what they are used for in the endowment account?
Or, would the -- would that change once that transfer is made, so they would open those funds up to other possibilities?
MR. MARETZKI: We are going to have to look at that as part of a legislation packet.
REP. SMITH: Okay. And that would be included in it? That would have to be done legislatively?
The General Assembly would have to act on that particular component of the
Liberty Loan Fund as they would on -- as it would on the structure, and government structure, and all of those things?
MR. MARETZKI: Right, there will have to be legislation drafted that will address the creation of the authority and the assets that would be part of that authority.
REP. SMITH: Okay. And has the administration established any loan terms?
This is a loan -- I understand this is a loan fund. But have any terms of the loan, the interest, whatever it might be, would that all be established through the legislation or would that be established -¬
MR. MARETZKI: It would depend on the needs of the businesses. So, you know, machine and equipment may have different loan terms than infrastructure, or land and building, working capital may have different loan terms than the -- you know, than machine and equipment.
So, again, it will depend on the needs of the business. That really the ability here is to be a one-stop shop for the businesses to address their business financing needs--working capital, land and building, equipment, those kinds of things--that currently now they have to navigate themselves or with the help of DCED or other economic development partners.
This becomes a place. And so, the terms will be structured based on the needs of that particular business.
REP. SMITH: In other words, the discretion for the terms of the loan would be solely within the Liberty Loan Fund governing body jurisdiction?
That the authority would be able to establish whatever loan terms that the authority deemed appropriate for that particular business? MR. MARETZKI: Guidelines would probably -- would need to be written that would identify sort of the broad parameters of those loans.
REP. SMITH: And do you anticipate that those guidelines would be done through the legislative process or through the regulatory process?
MR. MARETZKI: No, I mean, probably through the -- through guidelines as we draft them now annually and they are part of the administrative process.
REP. SMITH: And does that discretion, you know, with the Liberty Loan
Fund differ from the Commonwealth Financing
Agency's ability?
In other words, does the CFA have the ability to set its own terms now with the entity they are providing the assistance for?
MR. MARETZKI: Some are done by stat -- You know, the statutes of the different programs that the CFA manages determine the loans and grants.
And then the board works -- You know, again, they set up the particulars administratively with the board to determine the needs of the businesses, under the prescription of the statute, to roll out the funds.
Some of them are done through grants. Some of them are done through loans.
But loans are structured as, you know, based on, you know, 10 years, 20 years, depending on how they need to be done.
REP. SMITH: But, and just to sort of touch base on something that Rep. Vitali raised with respect to some permitting,
Secretary Walker. Would you be open to possibly dispersing some of the authority to expedite permitting among a few Cabinet secretaries?
Because the way I understand it right now, that the expediting of permits resides solely -- And I understand the distinction between granting and denying the permits and that is not what you are going to be engaged in.
But the expediting of the permits rests solely with you. Would you be open to, you know, establishing three or four other individuals--Secretary Krancer, the new DCNR
Secretary--in terms of dispersing some of that ability so it doesn't rest solely with you?
ACTING SEC. WALKER: Well, I am hoping that as we move forward, each department will function more efficiently; and the ideal is that I don't have to get involved in any of this.
REP. SMITH: So, you would be open to involving Secretary Krancer, DCNR, other
Cabinet secretaries in the decision as to whether, you know, for instance, the example you gave, um -¬
ACTING SEC. WALKER: Yeah, I -¬
There is no way I can go around them. I have to work with them. They are partners in this.
REP. SMITH: So, they are equal partners? There is not one Cabinet secretary that has more authority and discretion than any other one?
ACTING SEC. WALKER: All I can do is bring the attention to the fact that a permit is hung up, okay, but I can't bypass the process.
REP. SMITH: So, they would be involved in the expediting of the permit?
ACTING SEC. WALKER: Yeah, because it is their department, not mine.
REP. SMITH: Okay. And one other question, just to touch on something I would like to touch on --
CHAIRMIAN ADOLF: Rep. Smith, you can save that second question for the second round. Your time has expired.
REP. SMITH: Okay. Thank you, Mr.
Chairman.
CHAIRMIAN ADOLF: Rep. Mario
Scavello.
REP. SCAVELLO: Thank you, Mr.
Chairman.
And good morning, Mr. Secretary.
ACTING SEC. WALKER: Good morning.
REP. SCAVELLO: First, I want to applaud what the Governor is doing. Because in my area, we have trouble getting permits.
And we have had a decision -- We have come to the decision to get the parties all together. That if you have a company that wants to come to Monroe County, you get the legislators, you get the IBA, the PennDOT folks, the DEP, conservation district, and put a timeline in place so that this company would know how long it is going to take them to go in the ground.
Because it -- In many cases, they will just leave. You know, they will try to get a discharge permit. And it has taken them six months, you know. And those types of things need to be addressed to try to help these companies because we have lost a lot of opportunities because of that.
ACTING SEC. WALKER: You are right.
REP. SCAVELLO: I have read your comments. And one of the biggest industries in our area--and its number two in the state, number one in Monroe--is tourism. There are a tremendous amount of jobs.
And very few -- I don't know if you have any comments about tourism. So, I just want to ask you: Will you partner with and seek input from the tourism industry as the administration sets it priorities?
ACTING SEC. WALKER: Yeah, I think we actually have a very good relationship with them. One thing that I have found: That as we go through the numbers, the tourism industry in Pennsylvania is getting a pretty good shot in the arm from the hotel tax.
REP. SCAVELLO: Um-hum.
ACTING SEC. WALKER: And the number of -- Hotel occupancy in Pennsylvania is running significantly higher than it is in other states. So, that's where they get the bulk of their money.
What we want to do moving forward is have a much better web site, VisitPA.com, that really coordinates tourism in the state.
And also, more of a co-op approach, where we help these local tourism authorities be more efficient in how they buy their advertising by using a statewide approach.
We think we can be much better in helping them negotiate contracts than letting every tourist district do -- negotiate contracts on their own. So, we think there are some efficiencies that can be picked up.
But it is a very large industry, as most people know. It is a $31 billion industry, and it is not something we are going to walk away from.
REP. SCAVELLO: Yeah. My former director of our area, obviously, he had talked about that. Buying it in bulk so that -- And you can get a much better price. You can save. So, if that is something you are doing,
I commend you; and you will be able to save dollars.
And what are your plans for a state tourism office? And how do you plan to structure it? Do you plan to have an office in tourism or?
ACTING SEC. WALKER: Well, yeah, we are certainly studying it. Because, remember, tourism is a very big part of our economy. It ranks -- It's certainly in the top five of our industry, so it is not something we are going to walk away from.
We will do everything we can to help these people, but they are getting a real shot in the arm from the hotel tax.
REP. SCAVELLO: Yeah. In our area, it is now -- Well, we -- Monroe is looking at about 200,000 or so in that area. But I do agree that the hotel tax, and especially this year, that it's been up. But in a bad economy and as gasoline prices rise?
Because, you know, where we are, we attract from New York and New Jersey markets and from Philly; and so, we have had a pretty good ski season -¬
ACTING SEC. WALKER: Yeah.
REP. SCAVELLO: -- and the rooms have been full.
Well, I thank you very much. I am looking forward to working with you.
ACTING SEC. WALKER: Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Parker.
REP. PARKER: Thank you, Mr.
Chairman.
Welcome, Mr. Secretary.
ACTING SEC. WALKER: Thank you.
REP. PARKER: Obviously, of all of the departments coming before us, a lot in major changes taking place in DCED: $223.5 million budget, consolidation of 127 programs now to 56.
Just so that we, as legislators, can wrap our arms around this, would the department be able to send us a list of all of the 127 individual programs?
And then the departments, the newly created departments that they have been merged in to, how much the new department is being awarded and how much the previous program was funded?
So that, we can sort of keep track according to each of the new departments that have been -- or programs that have been created.
ACTING SEC. WALKER: We will be very happy to do that.
REP. PARKER: Thank you, Mr.
Secretary.
I want to sort of go back to one of the first questions that was asked in regards to the Partnership for Regional Economic
Performance. And one of the things I think I noted was that we will be developing a public/private advisory board, sort of in each of the regions.
I want to know if you could just clarify for me: Will the department select the individuals from the public and private sector who are going to be a part of the board?
Or what is the sort of eligibility process? Should we sort of begin telling stakeholders who presently now work in those regions that they should be sending, you know, requests for participation?
How does that work? Clarify it for me.
ACTING SEC. WALKER: Well, we are still working on all of it, so we don't have all of the details. As soon as we have the details, though, we will have you involved.
REP. PARKER: Okay. But I think you mentioned during the summertime?
ACTING SEC. WALKER: Um-hum.
REP. PARKER: Before the summer you expect to have it done but probably not before.
Because the Governor has been very insistent of, on numerous occasions, that this budget will be passed before the deadlines, but do you expect to maybe have those guidelines established before the budget is passed or probably a little bit afterwards? ACTING SEC. WALKER: Well, if you tell me when the budget is going to be passed,
I will answer that.
REP. PARKER: Well, according to your legal, he says that he assures the people of the Commonwealth that it will be done by the deadline. So, if that's what he is insisting, do you think it will be done before the deadline?
ACTING SEC. WALKER: Well, it will be coming along simultaneously. But, yeah, I would hope by June 30th, we have all of these programs up and running.
REP. PARKER: Okay. In addition to that, I want to know -- That you mentioned earlier, the boundaries, the regional boundaries. And this comes to mind as it relates to our small business development centers.
Particularly, I know in our five-county region in southeastern
Pennsylvania, we rely heavily on the small business development centers. And right now, they sort of work together as a group when applying for federal funding. Now each of the small business development business centers will be working sort of within the regional -- with the regional advisory council or groups in the areas that they serve. Will that in any way, shape or form have a conflict with the federal money that they apply for or any granting?
And does that put them sort of at odds with one another? When in one instance, on the federal level when they apply for funding, they were working together? And then, as working regionally, they find themselves competing with each other?
Is that something that you have heard since sort of rolling out the program?
ACTING SEC. WALKER: No. I -¬
Actually, I think it will be just the opposite because what we are trying to do is encourage more regional cooperation.
And the regions know how they can work together. And when they can work together more efficiently from state dollars and federal dollars, we are certainly going to encourage that.
Because the old territorial lines that have been established in Pennsylvania, some of them just aren't applicable any more.
So, we are going to encourage the regional approach wherever we can.
REP. PARKER: Well, I was happy to hear that. Because when I think about the southeast--and our five-county area in the southeast, it's Bucks, Chester, Montgomery,
Delaware and Philadelphia--you know, I sort of think of a city-lined avenue. You know, one side of the street is Philadelphia and the other side is Montgomery.
Where my district is, one side
Philadelphia, the other side Montgomery,
Cheltenham Township. And when we join together to form sort of intergovernmental, municipal planning arrangements, we do use a regional approach.
We just want to make sure that those special services, districts, and existing relationships that have been developed in a particular region are sort of not going to be dismantled with the implementation of the new advisory councils that are. Which is why I asked, where are you going to pull the membership of these advisory councils from? Are you going to seek input from legislators? You know, who do you recommend?
I know you will go back sort of through the DCED records to find out who was involved in what transaction, but -- and what community had any input or recommendations, local community development corporations.
I mean, we know that the people who know best about the neighborhoods that they live in are the people who are actually there and working there on a daily basis. And I just want to make sure we are not making decisions on the top without making sure that the people who are on the ground doing business in that neighborhood, that they can't, you know, make a contribution to the process.
ACTING SEC. WALKER: No, I agree with you. The people in the local neighborhoods know what works. They know the process the best. But we are trying to encourage intergovernmental cooperation. REP. PARKER: Um-hum. In addition to that, I want to talk about -- And the reason why I sort of asked for that overview of the, you know, the new programs that are created versus the ones that have been consolidated at the funding levels, because one in particular is the Keystone Communities.
And, you know, when you talk about our Main Streets and our Elm Streets, the great thing about these programs is that when much of the focus had been on the center uptowns. In the Philadelphia region, for example, Center City.
These programs focus on what I often consider to be the heart and soul of towns and communities and counties across the
Commonwealth and that is the local neighborhood, commercial quarters.
And so, when I am walking through those in Chestnut Hill and Mount Airy and my region and they hear about these proposed programs, what they say to themselves is, what is this going to mean for access to revenue and resources for the small business in our neighborhood commercial corridor, sort of? You know, at what level are they going to be funded?
So, can you just sort of talk about your commitment and thought process as it relates to stabilizing those local corridors?
ACTING SEC. WALKER: Well, number one, we will honor all commitments that have been made up until now.
And in studying the program, what we found is a weakness in the Main Street
Program. That you cannot be a Main Street
Program and an Elm Street community at the same time.
What we want is the ability to look at the entire community and figure out how to bring everything along simultaneously.
And I am a big fan of exactly what you are talking about. My home community is a
Main Street community. It has encouraged the community to think strategically.
We have done some wonderful things with our core area, but we haven't been able to address our neighborhoods because we can't qualify for Elm Street as long as we are in
Main Street. REP. PARKER: Right.
ACTING SEC. WALKER: And I think that's a weakness in the program.
The other weakness I see is the sustainability because only 15 percent of the communities who enroll in Main Street stay in
Main Street.
And we have got to do everything we can to encourage continuation because, generally, the process works extremely well.
In your area, one community where I think it has worked extremely well is West Chester,
Pennsylvania. They have done a great job with their downtown.
But, sustainability has been a weakness in the program; it is not part of the national model. And we want to really push the sustainability as we develop the Keystone
Communities Program moving forward.
REP. PARKER: Okay. Another question, Mr. Secretary, is the issue of the land use and technical planning grants.
You know, I am not sure again how it works sort of outside of the five-county and/or tri-state region as it relates to southeastern Pennsylvania. That's what I know. It's work I have done in the past.
But, you know, it is very difficult for a community, for example, that is bordering one city in another county. Each of these regions have their own land uses, zoning requirements, and the land use and technical planning grants are very important for sort of merging the bureaucracies and making each of the two municipalities and counties sort of get through that structure in order to provide stabilization there.
So, I wanted just to make sure that the department had a focus on the importance of those grants and their value.
ACTING SEC. WALKER: We do, and we understand the frustration of our customers having to work with multiple municipalities.
So, anything we can do to encourage cooperation and to streamline the process, we are going to try to do.
And I would agree with you - it is very important.
REP. PARKER: My final question,
Mr. Secretary. CHAIRMIAN ADOLF: Rep. Parker?
REP. PARKER: Yes?
CHAIRMAN ADOLF: Your final question will have to wait for the second round. You are ten minutes in.
REP. PARKER: Okay. Thank you, Mr.
Chairman.
CHAIRMAN ADOLF: Thank you for your cooperation.
Rep. Gordon Denlinger.
REP. DENLINGER: Thank you, Mr.
Chairman.
And welcome. Good morning.
ACTING SEC. WALKER: Thank you.
REP. DENLINGER: First a question on an item on the Pennsylvania First Fund, the
Opportunity Grant Program.
Back in 2007, Auditor General Jack
Wagner issued a critical report on that program, specifically some of the measurements under it and so forth. I am wondering--I realize you are fairly new in the role--have you had a chance to review his report?
And do you have an action plan at this point for dealing with those points of criticism?
ACTING SEC. WALKER: I have not reviewed his recommendations. But we are establishing new metrics for all of our programs. And any criticism that he made, we will certainly factor in and address.
REP. DENLINGER: Very good.
And then, just briefly, I would like to back out to 20,000 feet, if we may?
This is my fifth budget on the
Appropriations Committee. And I have watched us pump hundreds of millions, billions, into economic development. And there are some issues in and around state-sponsored, centralized, economic development as it relates to government.
One is always the somewhat incestuous relationship of money and power and the danger that can flow from those getting closely combined. Money defines for us the power, eventually, in all systems. So that concern, I will set out as number one.
Number two is the difficulty that governments have picking winners versus losers in the economic landscape. And we try. And often, government is two, three, five years behind the private sector in terms of, you know, who the real winners are.
And I am wondering-- I guess coming from a personal belief--that ultimately it is the private sector that generates true jobs growth, not so much government.
Can you share with us your philosophy of how the best in economic growth does happen and how you will employ that philosophy with the concerns that I have stated in your role as Secretary?
ACTING SEC. WALKER: Well, one thing is, I think we are going to tend to move away from grants and go more towards loans; and we are going to require a much larger, private match moving forward.
So, if you get a large private match, I think you are betting on the people running the company, you are betting on the technology.
But I think the days of entitlement money and handouts are over. They clearly have to prove to us that they have something that is viable, and we are really going to try to pump up our metrics to help us identify the winners.
Boy, I have had some great opportunities come across my desk in just the two months that I have been here. So, there are some very exciting things out there. And all of the ones that I have seen so far are legitimate companies.
And what is happening is what I said in my opening remarks: Because of what's going on in Pennsylvania, our geographic location and our potential indigenous energy sources, we are getting a look that we didn't have for a long time. So, I am excited because it seems to me we are going to have some incredible opportunities.
But by stiffening or tightening our requirements for the -- what the private sector is willing to put in, I think you separate, right there, a lot of good programs from bad programs and you eliminate the people who are just looking for a handout to do something silly.
REP. DENLINGER: Very good. Well, we will look forward to your progress along the way. Thank you.
ACTING SEC. WALKER: Thank you.
REP. DENLINGER: Thank you, Mr.
Chairman.
CHAIRMIAN ADOLF: Thank you.
Rep. Deb Kula.
REP. KULA: Thank you, Mr.
Chairman.
Good morning, Mr. Secretary.
ACTING SEC. WALKER: Good morning.
REP. KULA: Mine will be brief questions. They really don't require, maybe, some follow up, if you could provide us with some information.
The Governor has requested significant consolidation of programs within
DCED, including the reduction of 127 programs to 56 programs. Could your office provide the committee with a spreadsheet listing exactly which programs are being consolidated? And maybe, more specifically, at what funding level will the program receive?
ACTING SEC. WALKER: Yeah, we have already made that commitment.
REP. KULA: Also, how did the department determine which programs to eliminate and which to continue?
And was a study conducted in order to reach that decision?
And the groups that were affected in your -- did you consult with them during your decision-making?
ACTING SEC. WALKER: The answer to that is yes.
We -- You know, I have been here nine weeks. We were given a pretty short period of time to figure out how to meet budget requirements. And like every other department, we were told we have got to take a cut. And it is shared sacrifice.
So, we really had to look at, very quickly, how do we streamline the process and how do we streamline the programs and streamline the delivery system.
What I have found is a very competent core of people at DCED. I have been very impressed with them. And when you turn on the creativity spigot, they have come up with some wonderful ideas.
And, yes, we have worked with our stakeholders to figure out what is the best way to do this. We are out now meeting at the regional offices.
And as we go through the programs and our plans to streamline, we go to this one-stop shopping. It has been met with great enthusiasm. So, I know we have met with over a thousand people.
REP. KULA: And I can appreciate maybe streamlining things.
But when you looked at -- Let's talk about the Housing and Redevelopment
Assistance, Accessible Housing Program, New
Communities Program. Main and Elm Street, I mean, we are talking that that budget before was at 27 million in '10-'11.
If you put all of those together, and now Keystone Communities Program is proposed at 12.5 million, so it seems like there is a significant lesser amount that many programs are going to have to pull from.
ACTING SECRETARY WALKER: Well, we can -¬
REP. KULA: Can you explain how you came up with how much money is put into these different programs?
ACTING SEC. WALKER: Yes. We were looking at what we felt we needed to make the programs work, given the overall guiding principle that the deficit is somewhere between $3.5 and $4.5 billion.
So, we all -- I mean, we knew we had to reduce funding for these programs. But we feel that we were able to do it in a pretty good manner without destroying the programs, and keep them going in a good manner until the economy starts to turn around and more funding is available.
REP. KULA: And as to how those are funded, since there are a variety of programs within that funding pot -¬
ACTING SEC. WALKER: Um-hum.
REP. KULA: — is there going to be criteria set up as to how you choose which program gets funded in this particular round or who doesn't?
I don't know how the grant -- the applicant will look at: Do I have any more consideration than anybody else? Or what do I need to do to promote my particular request more than someone else?
So, I mean, all of those criteria will be afforded to all of the grantees.
ACTING SEC. WALKER: Well, each of our programs has its own metrics. They know what the metrics are. So, they just have to do the good job of meeting what the metrics are and the best programs will be funded.
REP. KULA: Okay. We look forward to receiving the spreadsheet and where you have gone with all of these programs. Thank you.
ACTING SEC. WALKER: Okay. Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Glen Grell.
REP. GRELL: Thank you, Mr.
Chairman.
Thank you, Mr. Secretary.
I think I am in line with what Rep.
Kula was just asking about. I want to talk about affordable housing initiatives.
And I think one of my colleagues already touched on the accessibility provision. The Keystone Communities, does that envision -- Or does that include, going forward, Accessible Housing? The program, a line item that is called New Communities? And also, the Housing and Redevelopment Assistance
Program?
ACTING SEC. WALKER: Well, I -- The bulk of it, you understand, is handled by the
Pennsylvania Housing Authority.
REP. GRELL: Well, there has been a
$17- and $18-million line item for Housing and
Redevelopment Assistance, and I am just wondering where that goes in the new combination of programs.
I understand and appreciate the streamlining. I am just trying to understand where that particular initiative will be housed.
ACTING SEC. WALKER: Accessible
Housing will be included in that program.
REPRESENTATIVE GRELL: I am talking about the Housing and Redevelopment
Assistance, which at least in my community has been used for some affordable senior housing projects that have been successful. And sometimes they leverage -- Well, they always leverage private dollars, but they sometimes leverage tax credits as well.
ACTING SEC. WALKER: Okay. Bryce,
I am going to ask you.
MR. MARETZKI: Yeah. Kind of what we are going to focus on in the Keystone
Communities is really the best elements of
Main Street, Elm Street, which were the parts of New Communities; Enterprise; and then the
Core Community development portion of the
Housing and Redevelopment Assistance.
There have been some very good projects done under Housing and Redevelopment
Assistance.
REP. GRELL: Um-hum.
MR. MARETZKI: And we are going to, under Keystone Communities, we are going to make it competitive. We are going to be looking at driving partnerships--public/private partnerships, public/public partnerships--to get the best projects forward to use this $12.5 million.
What we are trying to go away from is sort of the old sort of mentality of, you know, we are setting aside X amount of dollars for X communities.
And so, the principles of the department have really been what have driven the work of the Keystone Communities. And the
Core Community development pieces of the
Housing and Redevelopment Assistance line will be the features embedded in Core Communities
-- in Keystone Communities.
REP. GRELL: Okay. So, if some -¬
If the developer is out there looking to do a senior housing -- an affordable senior housing project, they would be looking toward the
Keystone Communities Program for their direction and application and their opportunity?
MR. MARETZKI: Potentially, as some portion of the funding they need.
They may need to look at new markets, tax credits under the Housing Finance
Agency, or a whole variety of putting together a package of projects.
REP. GRELL: Okay. As far as tax credits, I don't see a line item. But maybe it is not part of the line item spreadsheet that we have.
But I understand neighborhood assistance tax credits are proposed to be increased to 18 million; is that correct?
MR. MARETZKI: That is correct.
ACTING SEC. WALKER: Yes.
REP. GRELL: Okay. So, those funds would still be available.
Do you know what your plans are for how those tax credits will be allocated, especially on housing projects?
MR. MARETZKI: We are still -- We will be working out the criteria for the awarding of the credits, the neighborhood assistance credits, as we have in previous years and as the new budget year hits.
REP. GRELL: Okay. But based on what you have said, philosophically, I don't see that you would be earmarking a certain amount of those tax credits for affordable senior projects, or something like that?
MR. MARETZKI: (Nods negatively.)
REP. GRELL: The best projects, the cream rises to the top. Fund the best projects, go for the most private participation and chance of success.
MR. MARETZKI: Right. And, obviously, the credits require the private match; and so, we will be using those in tandem.
REP. GRELL: Right. Okay. Well, I appreciate that. Thanks for your expertise.
Thank you, Mr. Chairman.
CHAIRMIAN ADOLF: Thank you.
I want to acknowledge the presence of members of the Appropriations Committee who have arrived and the Chair did not notice them
- Rep. John Bear and Rep. Matt Bradford.
At this time, Rep. Michael O'Brien has a question.
REP. O'BRIEN: Thank you, Mr.
Chairman.
Good morning, Mr. Secretary.
ACTING SEC. WALKER: Good morning.
REP. O'BRIEN: Good to see you again.
As you know, I have an interest in foreign trade. And I have a belief that we need to work to bring American jobs back to
America. So, in World Trade PA, we see that there is $6.3 million allocated.
And, Mr. Secretary, could you speak for a moment on outposts that Pennsylvania has around the world to try and solicit business?
ACTING SEC. WALKER: Yes, this is one of our real success stories. And we just saw the latest figures that our exports for
Pennsylvania will cross $35 billion for 2010.
Our biggest trading partner is
Canada. Our second largest, believe it or not now, is China. But we do a lot of trade with
Mexico and Brazil.
But our delivery system is working extremely well. We have 28 agents, who are on a commission basis, who represent us in slightly over 50 countries.
We have a great measurement for whether that system is working or not.
Everything is monitored. We know what the delivery is. We know what the sales results are.
It is working extremely well. We are about to get an award from a major service that recognizes our program in our delivery system. And I think probably the ultimate compliment, or maybe flattery, is the fact that New York State has requested a meeting with us through their Lt. Governor who would like to come to Harrisburg and hear all about our program because New York State wants to copy Pennsylvania's program.
So, I guess maybe that's the sincerest form of flattery.
REP. O'BRIEN: So, you monitor our return on investments?
ACTING SEC. WALKER: Yes, and it is very, very good.
REP. O'BRIEN: And can you provide that to the committee?
ACTING SEC. WALKER: Certainly.
REP. O'BRIEN: Thank you.
I would like to turn our attention for a moment, if we can, to program consolidations and port operations, and port operations.
So, if we look here, it appears as though there is going to be over a 22-percent cut in port operations between Philadelphia,
Pittsburgh and Erie. Certainly, if we go to the Port of
Philadelphia and we see the results of our international trading partners--with vehicles rolling off ships from Kia, Hyundai, who is bringing railcars in; Pennsylvania workers are doing the final assembly on this-- I need to ask, is this cut to the port operations -¬
And before I ask my questions, a gentleman from -- The gentleman, Mr. Pyle, yesterday made some comments about it being in the gas belt, with work needing to be done on the locks to keep freight moving.
Where are these cuts coming from in the port operations? Are they debt service that has been put to rest? Is it cuts in operating?
Where are the cuts coming from, Mr.
Secretary?
ACTING SEC. WALKER: Mr. Hudic, do you want to try that?
MR. HUDIC: Sure.
Several of the cuts were one time, one-time programs, one-time contracts that have expired. Additional cuts were made because of shared sacrifice. The debt service was also included, actually in a different line item. That that
$4 million is still there.
So, all in all, it represents, you know, about a $734,000 cut. So, those one-time contracts subtracted out is what that actually is.
REP. O'BRIEN: As we do in expansion.
But in -- As we finish the widening of the Panama Canal, now we can anticipate more cargo on the East Coast, making
Philadelphia more viable; and because of our intermodal system, double-stacked rail, with just a far more desirable location.
Is there any anticipation of the
Commonwealth taking a position in the expansion of the Southport Project, or to go to our friends out west fixing the lock system to make capital investments into this transportation?
ACTING SEC. WALKER: Pennsylvania is a top-ten state as far as ports and freight that moves in and out. But we are a bit constrained, as you know, by the draft on the Delaware River. And that is unfortunately -¬ or fortunately under the control of the Army
Corps of Engineers, not the State of
Pennsylvania.
And until the draft, or the channel, is deepened right to the Port of
Philadelphia, we are a bit constrained. We can do a Panamax vessel at the size of the
Panama Canal now, but we cannot do a Panamax vessel for the new canal and we need to be able to do that.
And the same thing in the western part of the state: Until the federal government comes up with the money to repair the lock system, we are constrained.
And again, it is not the state's role; it is not the state's responsibility.
Navigable waterways are the federal government's responsibility. So, we really need to work on the federal government to get the funding to do what needs to be done.
REP. O'BRIEN: As part of
Pennsylvania, I would encourage the department to take a serious look at the southward expansion of the Port of Philadelphia and to take an active interest in that.
And I thank you for your testimony,
Mr. Secretary.
Thank you, Mr. Chairman.
ACTING SEC. WALKER: Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Doug Reichley.
REP. REICHLEY: Thank you, Mr.
Chairman.
Mr. Secretary, I will try to go through these questions as efficiently as possible. I was going to ask you about the
Discovery PA. But your answers on the Liberty
Loan Fund sort of intrigued me, so I would like to go back to that if you don't mind.
You responded to Rep. Smith by stating conclusively that an alteration of the use of the funds from the tobacco settlement would not violate the original terms of the
Master's Settlement Agreement. Why not?
ACTING SEC. WALKER: Well, again, I am relying on my attorney to tell me that it is not. But we can give you a legal opinion on that.
REP. REICHLEY: They are not here today, I gather?
ACTING SEC. WALKER: They are not.
REP. REICHLEY: Okay. Well, if you wouldn't mind, if you would ask them to supply a little more legal basis than just sort of blunt -- in other words, that it's legal.
ACTING SEC. WALKER: Yeah.
REP. REICHLEY: Has this been done in any other state where the state has altered the terms of the use of funding?
ACTING SEC. WALKER: Yes.
REP. REICHLEY: What state?
ACTING SEC. WALKER: We will get you a list with many of them. Many of them, yeah.
REP. REICHLEY: Has there been any litigation associated with that, or you may not know that as well today?
ACTING SEC. WALKER: I do not know that. I think the litigation in general is whether or not the whole concept is legal.
REP. REICHLEY: Which concept? The settlement agreement?
ACTING SEC. WALKER: Yes, the settlement -- The Master Settlement Agreement, is that legal? Because, number one, not all states participate. And, you know, is it legal?
REP. REICHLEY: Okay. The development of this board which would oversee all of the funding-¬
ACTING SEC. WALKER: Right.
REP. REICHLEY: —your assistant mentioned, I think you did too--it would be composed of a number of legislatively appointed members.
Would it be similar to the operation of the CFA now where you would require a super majority for the approval of any particular loan?
ACTING SEC. WALKER: Actually, we think that is a huge bottleneck in the process. And we are hoping it requires a simple majority.
REP. REICHLEY: And you mentioned there would be the development of guidelines.
There was an increasingly frequent usage of non-legislatively approved meetings in the last administration to implement policies. And I am a little concerned when you say you are not going to seek statutory authority, you are not going to seek regulatory approval - you are going to utilize guidelines.
Just how much advance notice is the
Legislature going to be receiving for the guidelines that would be utilized for these loans?
ACTING SEC. WALKER: Yeah, we are working on drafting the legislation. Now, you will have it within two weeks. I think all of your questions will be answered when you see the legislation.
REP. REICHLEY: But if I -- I believe what I heard your assistant say is-¬ that you to one of the representatives on the other side of the room--you were not going to utilize legislative, or regulatory, means for publication of what the guidelines would be to be utilized in approval of these loans.
MR. MARETZKI: We don't.
We won't know until the statute is passed what we will have to -- need to do under regulations versus what we will be able to do under guidelines. REP. REICHLEY: Will the legislation be limited to permission to reconcile the various balances in these other loan funds?
Or, actually within the course of a fiscal year, do you believe you would need to come to the Legislature to ask them for permission to move funds from one category to another?
MR. HUDIC: And If you don't mind?
The 28 programs that would be consolidated under the Liberty Loan Fund, which, again, is really about the predictability and ease of entrance in and out of the system. So, the experience for the user could say, on June 1, they applied for X.
And by June 30th, they are going to have an answer.
The original and legislative intents were for each of these 28 funds that already exist. You know, the small business versus all of those.
We are not looking to alter what any of those intents are, especially as the
Legislature worked very hard in making them clear on - this is what we would like those dollars to be invested in.
What part of the legislation would do is permit that transferability among those funds and do that in an annual financing package that will also be overseen by this authority and allow them to look at what those are.
And we are not looking to alter what the original intents of what those 28 programs were designed to do, which you created in the -¬
REP. REICHLEY: And I appreciate that.
But I am just going back to some of the earlier statements that were made in today's hearing. That you envisioned a flexibility being afforded to you to transfer funds from one of these loan funds right now to another. And the concern, again, harkening back to the last administration flexing transportation funds--for instance, without any legislative approval--is a practice which
I don't believe was well received.
So, I am asking: Do you intend to include in the legislative proposal an aspect that the Legislature would have to approve mid-year transition of funds?
Or is this going to be done on July
1 and, therefore, the amount of money you had set aside from the small business development fund, or a development fund, whatever it might be, is set for the remainder of the fiscal year?
MR. HUDIC: Well, by the very nature of the makeup of the board, the
Legislature will be involved in that particular authority.
And none of those transfers would be done by the department without the authority actually taking the action to make that happen, that that would have to be done through the legislation. So, you know, that will have to be a debate -¬
REP. REICHLEY: Is it your position that, quite possibly, we would have legislative appointees to this new board; therefore, we would be able to reject their proposed transfer of funds?
MR. HUDIC: That you would be part of that debate process on how to make that happen.
Currently, what happens -- I mean, we have balances. There is a huge need for land and building as there used to be, as there may have been for some technology.
But there are big balances left here. Why shouldn't the opportunity be for rapid deployment, be able to be used for different funding opportunities? That would be brought before the board, before the authority, in order -- before something like that would happen.
REP. REICHLEY: The last two questions. I don't want my time to expire before I get these answered.
You mentioned, I think in your statements, that there would be individual loan criteria that would be utilized. Does that mean per applicant, though, that Rep.
Smith mentioned, you know, a wind farm in
Bucks County is going to have a different criteria in evaluating that request for a loan than would a green job center in York County or a coal operation in Armstrong County? ACTING SEC. WALKER: As I see it, the authority would operate as a bank ward and each project would be judged on the merits of the project.
REP. REICHLEY: So, it is going to be individual-by-individual application criteria then?
ACTING SEC. WALKER: Sure.
REP. REICHLEY: Okay. Is the
Governor then proposing to put in place any criteria, within the legislation you are asking, to ban applicants who have contributed to political campaigns to the executive branch?
ACTING SEC. WALKER: I don't know.
REP. REICHLEY: Okay. You might want to think about that some.
Thank you, Mr. Chairman.
CHAIRMIAN ADOLF: Thank you.
Rep. Paul Costa.
REP. COSTA: Thank you, Mr.
Chairman.
Mr. Secretary, thank you.
Before I start, I want to preface my remarks by: I understand that we have to make cuts and we have to make consolidations.
But I want to follow up on what
Rep. O'Brien was talking about, the -- One of the program consolidations is Pennsylvania ports. If you add all the lines together, it comes out with a 22.2-percent reduction in their lines.
So, like for the Port of
Pittsburgh, can they assume that their line items are going to be cut by that amount? Or it could be more, or less?
ACTING SEC. WALKER: Again, it is going to be determined by need. It may be more, or it may be less because some of these ports have pretty good alternative funding sources.
REP. COSTA: Okay. So, there is no predictability on what, how they can adjust their budget or they -¬
ACTING SEC. WALKER: Well, as we work through the process, there certainly will be predictability.
But again, understand, we have had to take a very big hit as a department.
And again, we are looking at shared sacrifice. If anybody wants to restore money to any of our programs, we will be happy to oblige them.
REP. COSTA: And I appreciate the shared sacrifice as long as it is across the board and everybody is doing it, but some things don't seem to be that way.
One of the other consolidated programs is the marketing to attract tourists; they took a 70-percent hit. You talked about earlier in one of your replies, was that the tourism industry is going to receive a boost from the hotel tax.
If we reduce their marketing and their tourism promotion by 70 percent, less people are going to come in, less people are going to stay at hotels, less money is going to be paid for the hotel tax; so, we are actually going to be hurting ourselves.
ACTING SEC. WALKER: Well, I don't think that is what is going to happen.
But again, we want to really beef-up the state's web site because we think that is a much more efficient delivery system.
And we want to do this cooperative advertising, which, again, we feel will give us a much bigger bang for our buck.
But again, the local tourist groups are going to have actually more money to spend because of the hotel tax. And how they spend it is up to them. And if they do it right, then their tourism should really increase, not decrease.
REP. COSTA: Just so I am clear, nothing has changed, though? The hotel tax from last year to this year? The hotel tax still remains the same, so you think that we are going to have an increase in tourism?
ACTING SEC. WALKER: We have already seen the figures. We had a 20-percent increase in room occupancy in Pennsylvania in
2010.
REP. COSTA: I would like to take credit for some of that in Pittsburgh, for the film tax credit. Again, they have teased me about plugging it.
The Pittsburgh Film Office has booked over 32,000 room links in the
Pittsburgh area alone, and that's money that keeps coming back in. ACTING SEC. WALKER: Sure.
REP. COSTA: So, I hope you are right. I hope that this cut to the marketing does not hurt our long range.
Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Scott Perry.
REP. PERRY: Thank you, Mr.
Chairman.
And thank you, Mr. Secretary.
Just a couple of acknowledgements.
First of all, I understand that your DGO has gone down nearly 15 percent; and I think that that's great. That for me, that is the right direction - smaller, more efficient government.
The second thing I would like to acknowledge is your prowess as a business creator and a job creator, especially in a depressed area of the state; and just say, we are really happy that we have somebody that has pulled the wagon in your position.
ACTING SEC. WALKER: Thank you.
REP. PERRY: That having been said, a couple of questions. I would like to start out with the
Life Sciences Greenhouses when it was originally -- the Tobacco Settlement Fund was originally passed, there was a one-time amount of a hundred million dollars appropriated to that.
In 2008, I think we gave another $6 million. And for the last five years, the
Legislature has been asked to pony-up $3 million. And every time they have said, this is the last time you are going to have to do this.
What are your thoughts on, should that money be used for operating expenses as opposed to -¬
It's my understanding that the -¬
That incubator, so to speak, those companies operating, they are supposed to be self-supportive, but we keep on appropriating money for operating costs. What are your thoughts on that?
ACTING SEC. WALKER: I think it is a great program that we need to encourage because that's probably where some breakthroughs will come in technology moving forward.
So, I certainly don't want to de-fund it. I think it is a very good program.
REP. PERRY: All right. On to the
Liberty Loan Fund, a couple of questions there.
I am looking at about 1.8 transferred assets from CFA, PEDA, MLF, SPF, et cetera, but I am not sure those cash assets are, in the transferred assets, I am not sure they are liquid.
Are they liquid? And if not, what is the -- how will they become liquid if used?
ACTING SEC. WALKER: Okay. Bryce, do you want to address that?
MR. MARETZKI: The assets would be managed by the new authority. And so, they wouldn't be transferred; they would be managed by the new Liberty Loan Fund authority that would have new -- a new board structure put into place.
And they would then have the ability, the trustee for the assets, would have the ability, and the board, based on an annual's financing strategy that would be provided to the Legislature, proactively to say, here is how we anticipate the needs of financing will be for the coming fiscal year.
We will then need to move funds between the various pots that is managed by the new authority to address, again, land and building, working capital, machine and equipment, those kinds of needs, based on what businesses are saying they need.
And it is the flexibility of those funds and the ability to move then between those funds and address the needs of businesses that give us what we think is a better sort of way to deliver economic development services in Pennsylvania.
REP. PERRY: And I appreciate that.
I must tell you that there are many of us that are concerned about transparency and accountability in this consolidation and being able to track where those monies are coming from, where they are going to, and how and if they are being used effectively.
And we are not sure, based on even your description of the structure, that we are able to do that. And so, when you come out with the specifics of that plan, just please address that very particularly for us - or I think there potentially will be some issues.
Now, regarding some of this, how the money is allocated out to your individual
ED--is it--economic development centers or your IDAs, et cetera, they have their own board, so to speak. And those projects are vetted through there and then come back through where they charge fees. They actually make money via the process.
How is that going to be altered with this new board? Will they no longer be charging fees? Or who is going to be manager in this deal?
ACTING SEC. WALKER: Yeah, that's something that we are looking at right now.
But I want to tell you why I think this fund is important. H2O Fund, the requests that have come in are over $2 billion. If we are able to pull these resources, we are going to be able to fund a lot more of those projects that are extremely important. Because, as you know, many communities are under mandates with the
Chesapeake Bay issue.
REP. PERRY: Right.
ACTING SEC. WALKER: Right now, at best, if we move forward, we may be able to fund up to $172 million.
The need is so much greater than that, we feel we have to have flexibility in funding to help some of these communities move forward. And then this will help give us some of that flexibility.
REP. PERRY: And I appreciate that,
Mr. Secretary.
I am just concerned on a couple of levels. Are the locals going to still be involved? And I think you have answered that with Rep. Parker.
But then if that's the case, are we just doing the same thing but putting a different name on this? Or -- Because I have got to tell you, I am not sure I see the difference there.
ACTING SEC. WALKER: Well, I think we are going to be much more oriented toward metrics in the future and being able to measure success, being able to measure progress.
And we are certainly going to get away from the grants per say. I mean, we may do a few grants.
But we are looking for how do we get the best bang for our buck in what appears to be a turnaround, a potential turnaround, for the Pennsylvania economy.
REP. PERRY: Okay. The final question here, and this is a little more philosophical.
In the past few years, Pennsylvania has spent more money than any other--except for Ohio one year--in economic development spending, where meanwhile we are 45th in job growth.
I am just wondering, you know, we hear things about the terminology--in preferably the last eight years--press release economics. We are actually renting jobs. If you consider corporations like Sony and
Volkswagen, where the taxpayers and other businesses, owners, have put in millions and billions of dollars into these folks and then they have gone and taken the jobs with them.
What is your philosophy on economic development being seen as a core function of government--and I am talking other than infrastructure, like roads and sewer and water and that type of stuff--as opposed to corporate welfare?
What is your philosophy? And where do you see DCED heading in the future regarding that?
ACTING SEC. WALKER: Number one, I think it is a tool we have to have just to be able to talk with people who are looking at
Pennsylvania.
That's the first I have heard your figure as far as us being number one. I am really surprised at that. Because when you look at North Carolina and Tennessee and
Georgia and what they are spending, I have a hard time believing we are spending more than they are.
But what happened in Pennsylvania, as you well know, we lost the coal industry, which went from 400,000 employees down to 7,000 employees. We lost the steel industry.
And combined with that, we had a lot of our manufacturing being lulled away by the South, by the southern states.
I think we need these tools to remain competitive. And again, as I meet with these companies who are looking at
Pennsylvania, you have to have something to talk to them about or they are not even going to look at us.
I don't look at it as corporate welfare because of the tax revenues that these companies generate when they come in here.
We have to have the tools to have a level playing field to bring them in. Because
I will tell you that the South is not standing still. Unfortunately, we are on the verge of losing a couple of other major industries.
Tennessee, North Carolina and
Georgia, they are extremely aggressive at trying to get manufacturing jobs out of the
Northeast, you know. And we have to level the playing field.
REP. PERRY: Thank you, Mr.
Secretary. And congratulations. ACTING SEC. WALKER: Thank you.
REP. PERRY: Thank you, Mr.
Chairman.
CHAIRMIAN ADOLF: Thank you.
Rep. Scott Conklin.
REP. CONKLIN: Thank you, Mr.
Chairman.
Thanks for coming, Secretary
Walker. It is a pleasure seeing you here today.
ACTING SEC. WALKER: Thank you.
REP. CONKLIN: My question has to do with DCED and the Governor's commitment to going into a lot of these abandoned industrial sites, abandoned spaces, and helping the communities rebuild those to make them job ready or make those sites ready to bring folks in.
What's the commitment that DCED and the government has to add?
ACTING SEC. WALKER: Well, we know that for to bring in a lot of people, we have to be site ready; so, wherever we can help communities who are working on that.
I don't think the state can go in and do the program for the local communities.
The local communities have to know what they want, and they have to think with a vision.
But, certainly, the state is going to partner with them if there is a good project out there.
REP. CONKLIN: Actually, where this is going is, normally, you could ask questions about whether it's supports around the state or other parts. This is actually a project that you will probably know quite well.
As you know, the state has put out to bid earlier on the Moshannon Valley
Hospital; out for a half a million dollars; no one bid on it.
Recently, they have resubmitted again for $225,000, I believe. And I am hoping that we may have someone bid on it.
But at the end of the day, I don't believe that is going to happen.
My question is, and the reason I brought that question forward, is that that particular incident, I do know that the partnership has a plan for that piece of property. And I am hoping I can work with DGS, along with yourself, to--I mean, if it does not sell--to secure that property.
But at the same time, you are well aware of some of the obstacles that will -¬
They will need some money to put in that, you know, to bring jobs into it and reuse that piece of property and that that was the reason
I was going down that road.
ACTING SEC. WALKER: Yeah. I mean, you know those people well. I know those people well. That project has not been brought to my attention yet.
REP. CONKLIN: No, no. Nor it will until after it -- this last -¬
ACTING SEC. WALKER: Yeah. But it is something that will certainly receive fair consideration.
REP. CONKLIN: Thank you. And just a quick follow up, to what a few folks. But you were talking about the hotel taxes being done. And the counties, can you tell me, do all counties have a hotel tax?
Because the counties had to vote on those. In my district, there isn't -- many counties don't have a hotel tax. ACTING SEC. WALKER: It's not many, but not all counties do have the hotel tax.
REP. CONKLIN: And the only other reason I am just bringing this up is that you used the figure of a 20-percent increase in -¬
ACTING SEC. WALKER: Yes.
REP. CONKLIN: -- motel?
ACTING SEC. WALKER: Hotel room occupancy.
REP. CONKLIN: I was told by the gas industry that they are the reason for that
20-percent increase - that folks who are coming to work and they are, you know, living there. And my only fear is, is that, you know, we use statistics - they come in.
If you're able to break that down to actually how many folks are coming in as a tourist and how many folks are actually coming here for a job?
Which I am for, don't take that wrong.
But many times, those rural counties don't have a hotel tax so there is no hotel fee. And many times that figure, I believe, may be many of those rural counties that are having folks coming in, working within those regions.
So, if you ever do -¬
ACTING SEC. WALKER: Well, the one county I know best is Clearfield County, and their revenues from that tax were up $60,000 in 2010.
REP. CONKLIN: Yes.
ACTING SEC. WALKER: And they feel like they have died and gone to heaven.
Because in Clearfield County, you can do an awful lot with $60,000.
But we will get you the statistics.
REP. CONKLIN: Yeah.
ACTING SEC. WALKER: But the flaw in the legislation, though, as far as the
Marcellus Shale people: If you take a room for over 30 days, then you are exempt from the hotel tax.
So, we are not getting quite the bump from the Marcellus Shale people that you would think we are. Because they will take a hotel for -- or a motel for a year, they will take all of their rooms; so, after the 30 days, it no longer applies. REP. CONKLIN: Maybe, if you can, you can help us out where that loophole or flaw is. And it may, perhaps, be something that the Legislature would like to take that on.
ACTING SEC. WALKER: Okay. Thank you.
REP. CONKLIN: Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Tom Killion.
REP. KILLION: Thank you, Mr.
Chairman.
And good morning.
Just a couple of quick questions.
First, Rep. Cherelle already touched on the
HRA funding. And I just want to add that that has been very helpful, especially to the older communities in Delaware County. I am pleased to hear, you are going to look at worthwhile programs.
You mentioned in Pennsylvania the
Housing Finance Agency. Has there been any discussion in the administration about moving the housing programs from DCED to PHFA?
ACTING SEC. WALKER: I would say that is definitely on the table, yes.
REP. KILLION: Okay. Great.
And one last question. I got -- I received an e-mail regarding federal funds for
Family Savings Accounts. And, apparently, we can apply for it, but it needs to be done by
June 30th.
Is the administration -- Are you looking to do that?
ACTING SEC. WALKER: We are studying it. It is a very expensive program to administer, relative to the benefit that comes out of it. So, yes, we are studying it.
REP. KILLION: Okay.
ACTING SEC. WALKER: We have to make a decision.
REP. KILLION: Do you think you will have a decision by June 30th?
ACTING SEC. WALKER: Oh, yes, certainly, we will have a decision.
REP. KILLION: Okay. Thank you.
CHAIRMIAN ADOLF: Thank you.
Chairman Markosek.
REP. MARKOSEK: Thank you, Mr.
Chairman. Mr. Secretary, I am just sitting here, and when you testified earlier about the
Tobacco Settlement Funds, and I think your staff person had mentioned that there was $220 million from that fund that would be moved over to this new Liberty Loan Fund, and then he mentioned about the endowments and under
$110 million. Did I hear that correctly?
MR. MARETZKI: The endowment currently -- According to our stats, the endowment currently has $333 million in the endowment portion and the settlement fund has
$220 million.
REP. MARKOSEK: And a portion of the endowment will be moved over to the
Liberty Loan Fund as well?
MR. MARETZKI: Correct, it would be a portion of the endowment that would be moved into the Liberty.
REP. MARKOSEK: Okay. The
Governor, when he spoke at his budget address, he never mentioned that. He talked about the
220.
And we can't find anything in our literature here that would indicate that. So, all of sudden, I am sitting here, and instead of a $220 million transfer from really what is essentially health care funds over to a discretionary loan fund, and then you tell me you have got another $110 million on top of that - that's a huge amount of money that is, what we thought was to be used for health care related issues that is now in an economic development fund.
Which nobody here disagrees with economic development, but all of a sudden, you know, we have got these surprises that are coming at us.
And it is very disturbing, I know to our Caucus members. And from what I have heard, some of the testimony on the other side, I think there has been some questions as well.
It would seem to me -¬
ACTING SEC. WALKER: Well, we would like to get back to you with the specifics of that.
But, remember, the Department of
Health does administer the health care part of the tobacco settlement money, that they have money to do the health part.
REP. MARKOSEK: Right. But the fact that we are moving that money at all, I think, is one big question.
But the fact that now, you know, having heard that it was two hundred and some million and now it is over 300 million, that we really -- I wasn't at least aware of until
I got here today. To a fund that -¬
And I was trying to follow along with you when you were telling me the make-up of the board, of the 15-member board of this.
It didn't sound to be particularly bipartisan.
Obviously, you all, each Caucus, sounds like it will get a little say.
But it seems to me that in your efforts to congeal a lot of these line items and, to use your words, make it easier for people to find and to identify - that may be so, but will it necessarily make it easier for people to access? Which is really what we are all about here with this -- these loan funds.
If all of these groups that we have talked about here, whether it's supports or the Housing Finance folks or whatever - sure, they might be able to find the correct place to go, but if it is going to be much more difficult for them to access these funds, what good is doing that? How does that create a sense of, you know, folks growing in economic development in the Commonwealth?
ACTING SEC. WALKER: Well, I mean, if -- You know, I think it is going to be just the opposite; it is going to be easier to access the funds.
Because again, right now, the
Commonwealth Financing Authority has not been able to have a meeting for five months because we can't get a quorum there, and we are sitting on money that should be going out to these H2O projects.
But, Bryce, do you want to address that number again? Because I don't think that's accurate.
MR. MARETZKI: Yes. The number, as it has been stated, is 220 million that is currently in the endowment.
And we are going to need to get back -- We will outline for you specifically and we will address all of your questions about the Liberty Loan Fund and layouts of where all the dollars will be coming from.
And we can have follow-up conversations and get back to you on that. I don't want to get sort of into it.
REP. MARKOSEK: Well, we would appreciate that, and we will look forward to getting that information.
And I just want to comment: Just with all of the movement of all of these various line items and whatnot, it almost seems -- sometimes I sit here and wonder, what do we need an Appropriations Committee for?
Why not just have all of this money, you know, just give it to the Governor and let him decide where it is going to go, and if we are not going to have much control over it?
So, I think our Caucus is very concerned about a lot of what's going on here with these changes in DCED. And from what I can tell, I think there is some widespread concern across the Legislature in both
Caucuses.
Thank you.
ACTING SEC. WALKER: Well, again, I believe an authority will address the concerns that you have and will function at much better than the system we have right now.
CHAIRMIAN ADOLF: Thank you.
Rep. David Millard.
REP. MILLARD: Thank you, Mr.
Chairman.
Thank you, Mr. Secretary, for being before this committee today.
Rep. Scavello touched on something with regard to tourism. And your answer to him was along the lines of a web site being more user friendly, and cooperating with the local tourist agencies so that they would be able to negotiate contracts on their own, perhaps do a better focus of their tourism hotel tax dollars with marketing.
Is that your only focus, as DCED
Secretary, in the areas of tourism?
ACTING SEC. WALKER: No. We will do anything we can to help tourism. As far as
-- What do you mean by our only focus?
REP. MILLARD: Well, I am sure that what you gave was a limited scope there. I am just curious as to what other cooperation you could offer to the TPAs.
ACTING SEC. WALKER: Well, again, I think Pennsylvania, as far as tourism, has an incredible story to tell. I believe our web site and really beefing that up is going to help tell the story; and if that's the way information is conveyed, especially to younger people now; and we haven't done a particularly good job on that in the past.
But again, remember, they only get seven -- And, traditionally, they have only gotten 7 percent of their revenue from the state funding, the other 93 percent pretty much comes from the hotel tax; so, what we do isn't going to impact on them too much.
But again, I understand the importance of tourism and I also understand that Pennsylvania has a unique history; and anything that we can do to help promote tourism, we will.
But we are really focusing on job creation and how do we use our money most efficiently.
REP. MILLARD: And I am glad to hear your positive comments with regard to them because the TPAs are also interested in working with you in a positive manner.
So, my next question here would be, do you support the concept of a Pennsylvania tourism commission, a public/private entity outside of state government?
ACTING SEC. WALKER: I am a great believer in public/private partnerships. I don't know the details of it, but I certainly would be willing to take a look at it.
Again, to me, we have the most interesting state in the country. We have the most interesting history of any state in the country. Anything that we can do to promote that to the benefit of tourism and to the benefit of our economy, I am certainly going to support.
REP. MILLARD: And I know the TPAs were interested in that, if you had any type of a timeframe on any cooperation with the
Pennsylvania tourism commission. Because that was something, apparently, that had been discussed during the setting up of your new departments under the new Governor.
Now, I would like to switch over to the H2O Program. You mentioned two figures.
You mentioned 2 billion and then you mentioned what I believe to be an amount available in the H2O Program right now at 172 million; am correct in that?
ACTING SEC. WALKER: That's what we feel we can support right now through the revenues that we have coming in, yes.
REP. MILLARD: Now, would this be for the round that ended July 1st of last year? Are these the ones that are kind of in waiting?
ACTING SEC. WALKER: Yes, there is a very, very long list. And we have not been able to move any of the projects forward because we have not been able to have a quorum at our meetings for the last five months.
REP. MILLARD: So you, obviously not having had a quorum, you can't give us a timeframe as to when decisions will be made?
ACTING SEC. WALKER: I think when we get a quorum at a meeting, there will be decisions made. We are hoping it will be by
May.
REP. MILLARD: Now, out of that 172 million, how many total applicants are there on the table right now to share in that 172 million?
ACTING SEC. WALKER: Well, again, the total need, based on the applications, is
$2 billion. I can't give you the exact number, but it has to be close to a thousand.
I don't know whether you know it or not.
MR. MARETZKI: Yeah, I may have the actual for that.
ACTING SEC. WALKER: We can get you that.
MR. MARETZKI: We can get you the number.
REP. MILLARD: Okay.
ACTING SEC. WALKER: And we do have a ranking system and a priority system. That
I have reviewed it. I think it is very good.
We would be able to fund every water and sewage project that has a rating of
65 or above. Which means: Under our system, it generates need; that we understand the mandates that are under the Chesapeake Bay initiative; and we would be able to fund every request that has a rating of 65 or above.
REP. MILLARD: Mr. Secretary, you just answered my next question for me.
ACTING SEC. WALKER: Okay.
REP. MILLARD: From time of decision to delivery of funds, if you are successful in making decisions on these, when could the successful applicants expect their money? What's the turnaround?
ACTING SEC. WALKER: Do you have any idea on that?
MR. MARETZKI: I am sorry, say that again.
ACTING SEC. WALKER: When can the -- If we vote on it in May, how quickly can the successful applicants get their money?
I think that money is available, isn't it?
MR. MARETZKI: Yeah.
ACTING SEC. WALKER: I think the pool of money is available, so it would be fairly quickly.
MR. MARETZKI: Yeah, yeah.
REP. MILLARD: And are there any flood control projects included in that?
ACTING SEC. WALKER: I can't answer that.
I know the focus has been on the sewage treatment systems, the stormwater systems, and the municipal water systems.
Again, a lot of that has to do with the Chesapeake Bay initiative, which affects a lot of communities in the Susquehanna River
Basin; and many of them are poor communities that really have tremendous need.
Flood control, I don't -- I don't know.
REP. MILLARD: Okay.
MR. MARETZKI: There have been flood control projects approved as well as in the current application form.
REP. MILLARD: Well, I think you,
Mr. Secretary, just described the priorities; and I just wondered if flood control projects were up in there in the priorities.
Thank you, Mr. Secretary.
ACTING SEC. WALKER: Thank you.
REP. MILLARD: Thank you, Mr.
Chairman.
CHAIRMIAN ADOLF: Thank you.
Rep. Steve Samuelson. REP. SAMUELSON: Thank you, Mr.
Chairman.
A few questions, first on the transfer to the tobacco settlement.
As I am looking through the budget book that the Governor provided, the section of the tobacco settlement does talk about how this fund historically has been used for health care related items - health care insurance for the uninsured; medical care for workers with disabilities; hospital and compensated care; several different categories enumerated right in Governor Corbett's own budget book.
And so, it would seem to me that transferring 220 million that had been used for health care related items to economic development is a significant shift in priorities.
Following up on the discussion of the H2O and how those are going to be funded--and I know Rep. Millard just asked if flood control is going to be a priority in them--last week, we talked about the D budget, and there is a flood control program that is actually being eliminated in the proposed budget the Governor has put forward.
In today's discussion when you say that there is, possibly, by pooling all of these funds into one large fund, that there might be more resources to address programs like the H2O applicants, the backlog of applicants there.
I am looking at the other programs that are in that exact fund, if that fund now also includes what we had been using for renewable energy, what we had been using for solar energy. What we had been using for business in our sites, which has helped those older industrial sites.
In my community, the Bethlehem steel property that has been redeveloped with the help of our business and our site program, clean energy program.
So, if we are pooling all of this and saying that there is more available for
H2O Programs, aren't you also saying that there is less available for renewable energy, solar energy, clean energy, all of the other things that are going into that fund? ACTING SEC. WALKER: No, I actually think there is going to be more money available for all of those projects and all of those programs. H2O is just one example because the need there appears to be so great.
REP. SAMUELSON: Isn't it a finite amount of money that you are transferring into the fund if you -- if each of these priorities has to compete against each other, rather than having a defined program?
Rather than having a defined H2O
Program and a defined renewable energy, clean energy program, if the programs have to compete against each other, that that doesn't
-- that that's not some kind of a -¬
ACTING SEC. WALKER: Well, in reality, they are competing against each other now. You know, there is limited financing available for each program.
But we think we can really increase the size of the pot and make more money available for each program.
REP. SAMUELSON: How would we be increasing the size of the pot?
ACTING SEC. WALKER: Because right now, there are monies in funds that are not being used; we would be able to transfer. And also, we can use that fund as collateral and be able to borrow against it.
REP. SAMUELSON: A similar question on how some of the DCED programs would work, we have had -- I know you talked in general terms about eliminating inefficient programs and level funding programs that work.
Now, some of the programs that I see eliminated, or consolidated, I would not characterize as inefficient.
I know the small business development centers, which it has a statistic from decades in our state, and it has a wonderful record. I think there are about 18 different small business centers helping thousands of companies over the years.
How would this work, though, if there is -¬
ACTING SEC. WALKER: It is not going to be eliminated; it is going to be rolled into the new program.
REP. SAMUELSON: But if the small business center, which in the past has had a set budget from the state, now would be in a new fund, Partnerships for Regional Economic
Performance, competing against three other programs--industrial development, local development, industrial resource--is that competition on a quarterly basis, on a monthly basis?
ACTING SEC. WALKER: No, it is competition for quality of programs.
We are trying to raise the bar. We are trying to raise the standard. We are trying to get the people in the delivery system to set their sights a little higher.
I mean, you have got groups now that don't even speak to each other. We have got to figure out how to eliminate that. And one way to do it is, by combining these programs to make sure people do cooperate.
There is a lot of duplication. We are trying to eliminate as much duplication as we can.
REP. SAMUELSON: Well, I guess my concern is that you are setting up a game of survivor where each program tries to vote the other one off the island in order to get their own -- to get their programs funded.
And I noticed that the pot of money here that we were just talking about is going from 15 million down to 12 million; so, a
20-percent loss of funding as these four existing agencies compete to be able to continue to deliver services to small businesses across the state and manufacturers.
MR. HUDIC: If I could? We are hoping that the efficiency is realized by asking each of these regions to develop a, you know, a three-year strategic plan that includes budgets that would also match what each of these individual, four line items have been consolidated to do. That those effects would be actually very minimal, and we can point to numerous examples of how that will occur.
But each of those regions will be made up of several partnerships, including those four affected line items, and will -- we are anticipating budgets to be drawn-up for each of those. It could be multi-year grants.
So, they would have that opportunity.
You had mentioned specifically the SBDCs, and there's -- all of them have similar concerns.
And that, we are not, in any way, trying to jeopardize any federal matching or federal dollars.
And through that individualized line item budgeting per regions, which actually is important for them to work together, may give them the ability then for us to aggregate those dollars. And they will
-- It won't affect a federal match for them.
REP. SAMUELSON: There is also some -- On small business, there is new federal money available for the Small Business
Jobs Act; 29 million has been earmarked for
Pennsylvania.
I notice that it is not being spent until the next budget year. I wonder why the department is not trying to get some of that funding that has already been earmarked for the current -- for current needs for small businesses.
MR. MARETZKI: We actually have to
-- we have to put together. We have to get the funds. We have to get -- We are working on putting in RFQ, RFP, out on the street, to get applications from economic development groups for those funds. So, we don't anticipate actually spending any of those funds until the start of the new fiscal year.
REP. SAMUELSON: But Pennsylvania is not delaying in asking for it?
MR. MARETZKI: No, no, no, we're — we'll -- We are not delaying at all.
Absolutely. No, we're -- but we're -- we need to have our ducks -¬
I mean, the federal government is saying you need to make sure you have a good plan in place for how you are going to roll out those funds once you get them.
REP. SAMUELSON: Okay. And a final question, I know we are talking about many housing programs. This question directly concerns PHFA. And I know we don't have a budget hearing on PHFA, but the Secretary, I think, sits on the board for.
ACTING SEC. WALKER: Yes.
REP. SAMUELSON: One of the proposals over there that the Governor has put forward is elimination of the HEMAP program, Homeowners Emergency Mortgage Assistance
Program. It has been around for 29 years since the Thornburgh administration, and it has helped thousands of people avoid foreclosure.
Is Governor Corbett saying that the foreclosure crisis is over in Pennsylvania and we no longer need a HEMAP program? Will there be any discussions with -¬
ACTING SEC. WALKER: I think what we are saying is the federal program now is so much larger than the state program. Even though the concept was developed in
Pennsylvania, now the federal program really has so much more money to throw at it and put into it that we will let the federal program take the lead.
REP. SAMUELSON: Okay.
ACTING SEC. WALKER: It is helping a lot more people than the state program is.
REP. SAMUELSON: And a quick follow up, my understanding of that federal program is that has to be expended by September 30th,
2011; so, what would happen if somebody needs mortgage assistance in the fall or the next winter or next spring or next summer or sometime in the next 29 years after this money runs out in the next few months?
ACTING SEC. WALKER: Those are questions for the Housing Authority and Brian
Hudson.
REP. SAMUELSON: Okay.
ACTING SEC. WALKER: That's his program, not our program, so.
I guess I sit on the board, but they haven't had a meeting since I have been appointed.
REP. SAMUELSON: Okay.
ACTING SEC. WALKER: So, I haven't been to one of their meetings. But that's his issue.
REP. SAMUELSON: I appreciate that.
But I know you do have the Governor's ear and just to -- Our view is that the Emergency
Mortgage Assistance Program is an important part of our safety net in Pennsylvania. I hope there would be a way to -¬
ACTING SEC. WALKER: The last thing in the world I want to see is somebody lose their home, so I hear what you are saying. REP. SAMUELSON: Thank you, Mr.
Secretary.
CHAIRMIAN ADOLF: Thank you.
Rep. Ron Waters.
REP. WATERS: Thank you, Mr.
Chairman.
Thank you, Secretary Walker.
I want to ask you about the program that the federal funds that are available in the budget for the Family Savings Account
Program.
ACTING SEC. WALKER: Yes.
REP. WATERS: I would like to ask you about the status of that. Because from my understanding, it has to be applied for. And as of now, they have to have application from the state.
ACTING SEC. WALKER: Yeah. And again, that question came up earlier. We are reviewing that, and we will have a decision in a timely manner on what we are going to do.
It is an expensive program to administer for the number of people who participate in it. There are not a lot of participants. REP. WATERS: Okay. I would say that let's see whether we do have some numbers that are counter impressive on.
And I am sorry if I missed the question earlier. Maybe you had -- It was asked when I stepped out. But I want to find out from you, do you believe that, with your ability, that the program should move forward or not?
ACTING SEC. WALKER: That's what we are looking at right now. And we have to look at participation. And again, at what's the benefit to the State of Pennsylvania. So, yes, we are looking at it.
REP. WATERS: There have been some
-- Well, then do you know that there have been some success stories?
And that the ripple effect as a result of the people who have graduated from that program have gone on and with more successful lives here in Pennsylvania?
ACTING SEC. WALKER: Yes, there are some success stories.
REP. WATERS: Okay. All right.
Thank you. I am glad to hear that you said that there are success stories.
Another question is a follow up on what we were talking about in the tourism. I heard you mention earlier about the fact that over the last couple of years that the tourism industry has increased. Participation, people coming to visit Pennsylvania, the numbers are good over the last couple of years.
ACTING SEC. WALKER: We know that hotel occupancy is up substantially in
Pennsylvania. It has been up substantially for the last two years relative to the national average. Whether that's because of tourism or Marcellus Shale or whatever, I don't know that breakdown. All I know is that hotel occupancy is up substantially.
REP. WATERS: Yes. Well, from what
I gather, it is up too. And the people in that industry, they're just so very happy then. You know, in the Philadelphia area, they have just expanded the Conventional
Center, which will be great for bringing more people into the region.
Hopefully, it will benefit the state, at large, because that means more tax revenues coming into our state.
But I heard you talk about the development of a web site.
ACTING SEC. WALKER: Yes.
REP. WATERS: Rather than using what has been proven over the last couple of years to -- Well, I don't know if you would say it is proven. But, obviously, something has helped to attract the increased tourism that we have, besides what's going on with the
Marcellus Shale.
ACTING SEC. WALKER: Yeah, their delivery system is still going to be there; we are not eliminating their delivery system.
We are just saying we are going to beef-up the web site at the state level on
VisitPA.com because we know it is getting a lot of hits and we want to have a first-class web site.
REP. WATERS: Well, great.
The web site, have you talked about
-- Well, how do you plan on finding the providers for that web site?
ACTING SEC. WALKER: The providers?
REP. WATERS: Yes. I mean, do you want to have someone that is going to develop some new web sites? Or doing the RFP? Or what does that process require?
(Mr. Walker privately confers with
Mr. Maretzki.)
ACTING SEC. WALKER: Yeah, we will do the regular RFP, and it will be a competitive process.
REP. WATERS: It will be a competitive process?
ACTING SEC. WALKER: Yes.
REP. WATERS: Will you have any idea about when we can expect that RFP to be to be announced?
ACTING SEC. WALKER: No, but it will be as soon as we can. I mean, we are dealing with an awful lot of issues. And as quickly as we can get that up and running, we will.
REP. WATERS: You know, and I thank you for that.
I just want to just ask you if you would be so inclined to share that RFP information with us. Because we have--when I say we, I mean the Pennsylvania Legislative Black Caucus--have a web site too, and we would like to work in conjunction with state government to make sure that we use our web site in an effective way to help out with that process.
ACTING SEC. WALKER: Sure. Thank you. I appreciate that.
REP. WATERS: I thank you too.
Thank you, Mr. Chairman.
CHAIRMIAN ADOLF: Thank you.
Rep. Matt Bradford.
REP. BRADFORD: Thank you, Mr.
Chairman.
And thank you, Mr. Secretary.
I just have kind of a hodgepodge of questions to follow up on a couple things that were asked.
One of the first questions is, yesterday, the Transportation Secretary came in and talked about the potential use of tolling. And in our neck of the woods, southeastern Pennsylvania, the transportation and congestion is a major impediment to job growth and quality of life.
And I just wanted to know--since we pay the Act 44 tolls and that increase and we take the need for investment in transportation seriously-- I am wondering what your opinion is from a business and economic development standpoint on the use of tolling in that kind of scale.
Potentially in the public/private partnerships, what will be the impact - realizing there was great resistance regionally to tolling when it was proposed for
Route 80?
ACTING SEC. WALKER: Well, I mean, if you are familiar with the issue, the problem was not the tolling but the way it was presented and the fact that certain rural poor areas of the state felt they would be subsidizing mass transportation in urban areas.
So, I think if it were structured that it were perceived as fair and it went -¬ and it would apply to all interstates and the money would be used to fix infrastructure and to make sure our bridges and roads were maintained in first-class condition, I don't think there would be the opposition moving forward that there was to Act 44.
I mean, we all know - we need good highways.
REP. BRADFORD: I agree.
ACTING SEC. WALKER: But again, that's not my issue. I mean, you are really asking that as Joe citizen, not as an economic development person.
REP. BRADFORD: Actually, I was asking it as in your role as Secretary in terms of the impact on business.
ACTING SEC. WALKER: I have found that user taxes, if imposed fairly and equally across the board, are generally accepted. But you can't toll one interstate and not another.
REP. BRADFORD: Right. Based on your answer, which was a little defensive, I guess you didn't support I-80 tolling?
ACTING SEC. WALKER: I -- I never had -¬
REP. BRADFORD: I only ask — I am asking you as a citizen.
ACTING SEC. WALKER: I was not opposed to the concept; I just thought the legislation was flawed. REP. BRADFORD: Well, I can tell you, from -¬
In our neck of the woods--and, you know, again, maybe this is a little bit of commentary--we pay the tolls. I pay it actually even though the two stops on the
Turnpike aren't exactly in my district.
To drive from one part of my district to the other, we pay the tolls. We, at home, pay the toll on the Turnpike to drive up from Lansdale to the mid-county exchange.
We now pay the increase for the borrowing that was done, but.
So, I can tell you, I think we all have our own issues with the way that the Act
44 tolls were done.
ACTING SEC. WALKER: But how the
Turnpike revenues are used are very clearly defined by the legislation.
And again, I think if it were made clear that all of the money would be used for highway maintenance or State Police protection on interstate highways, and it was all interstates so that one region didn't all of a sudden have an advantage over another region, I think it would be looked at differently.
REP. BRADFORD: So I understand, your position is, we need to toll every interstate before we toll any interstate?
ACTING SEC. WALKER: If you're going to toll one, you better toll them all if you want to be fair and if you want to be able to pass the legislation.
REP. BRADFORD: Is that the position of the administration?
ACTING SEC. WALKER: I have no idea. You're asking me as a citizen, not -¬
REP. BRADFORD: No, I was now asking you as the Secretary. If you want, we can preface every question.
As the Secretary, do you believe it is an unfair impact on business in terms of regionalization of Pennsylvania to have tolling?
ACTING SEC. WALKER: No, as long as it is done consistently across the board.
You can't toll I-80 and not toll
I-81 or I-83 because it gives the trucking companies in that region a tremendous -- Or let's say Interstate 78, it gives the trucking companies then in those regions a tremendous competitive advantage; so, that's why the impact has to be equal on everyone.
REP. BRADFORD: Okay. So, as the
Secretary, all interstates or no interstates but nothing in between -¬
ACTING SEC. WALKER: It is not an issue I am going to deal with.
REP. BRADFORD: Hold on. Can I finish my question, Mr. Secretary, real quick?
ACTING SEC. WALKER: Yes.
REP. BRADFORD: All interstates or no interstates, is that your position as
Secretary?
ACTING SEC. WALKER: Within the
State of Pennsylvania?
REP. BRADFORD: Correct.
ACTING SEC. WALKER: Yes.
REP. BRADFORD: Okay. So, if we don't get tolling on I-80, we will be taking them off of my businesses locally because we pay the tolls.
ACTING SEC. WALKER: But that is the Turnpike, that's different.
REP. BRADFORD: Well, that's -- it's -¬
ACTING SEC. WALKER: I mean, if you want to make Interstate 80 the Pennsylvania
Turnpike North, then it is different.
REP. BRADFORD: Considering I am in
Montgomery County, yes. But.
CHAIRMAN ADOLF: You know, we had the Transportation Secretary in just yesterday.
ACTING SEC. WALKER: Um-hum.
CHAIRMAN ADOLF: The question was not asked of the Secretary yesterday, so we will move on from the tolling of highways and try to get back on DCED.
Thank you.
REP. BRADFORD: Thank you, Mr.
Chairman.
I was pretty sure he supported the tolling so that's why I didn't ask him.
Real quick, I just want to ask something also about the Liberty Fund. And I appreciate that you have taken quite a few questions on it, and I realize it is a complex issue.
One of the issues I have in particular is, there are all of these different funds being compiled. And I assume there are bond indentures that were based -¬ that is the original source of funds for these programs.
Won't compiling them all into one violate the underlying bond indenture?
ACTING SEC. WALKER: No, because every commitment that is there will be honored and be part of the obligation moving forward.
Actually, the funds will be kept intact. What we want to do is the ability to borrow within the funds.
REP. BRADFORD: But my understanding was you wanted to take from
Peter a little bit for the sake of Paul. And
I assume if you're using alternative energy money to build a coal-fired plant, that's probably not consistent with the underlying bond indenture.
ACTING SEC. WALKER: Well, we certainly would not violate any of the bond covenants. That's a contract.
REP. BRADFORD: Okay. Would you look to refinance it in order to have a new bond indenture? Would there be a securitization? Is that what is being proposed here?
ACTING SEC. WALKER: If it is a better use of money and it creates more jobs in Pennsylvania, we are certainly willing to look at it.
REP. BRADFORD: Okay. So, for clarity: Some of these funds, like the H2O money, that's Gaming money that currently comes in; is that correct?
ACTING SEC. WALKER: Yes.
REP. BRADFORD: Okay. So, it would all go into this pot?
ACTING SEC. WALKER: Yes.
REP. BRADFORD: And some of the money, like the Alternative and Clean Energy
Program, that was part of the -- And this is before I got here. But the Alternative Energy
Investment Act, that money, was that borrowed money?
ACTING SEC. WALKER: I don't know.
MR. MARETZKI: Yes, it would.
There was a statutory authorization to bond -¬ to borrow up to a certain amount of. REP. BRADFORD: Okay. And now, we will put that all together. So, we will go to
Rep. Samuelson's point about competing interests.
That money would be restricted?
Would there been restrictive covenants that certain money would only be used for alternative energy as opposed to economic development as opposed to some other use?
ACTING SEC. WALKER: Well, certainly every commitment that is there now would be honored.
But again, as I am trying to explain, we would have a much bigger pool to work with moving forward. So, there would be more money -- I mean, we are raising all boats. There would be more money available for everyone, for all of the programs.
REP. BRADFORD: It is an interesting concept, I give you that.
Let me ask you this: Going through these line items, which ones have stagnant funds? Which ones is there funds of such large -¬
I mean, you are talking about $2 billion, 3 billion -- I apologize, 2 to 300 million being siphoned off of the tobacco settlement. Where does the rest of this money come, if not securitization?
There is just stagnant money sitting in these accounts?
ACTING SEC. WALKER: Well, do you want to?
MR. MARETZKI: There are assets.
There are assets sitting in various funds that would be managed by the new authority.
REP. BRADFORD: Assets meaning loan repayment?
MR. MARETZKI: Loan repayments, yes, absolutely.
REP. BRADFORD: Okay. So, if we are talking about securitizing those loan repayments? Come on, $2 billion.
Or are we saying it's $2 billion over the lifetime of those loan repayments?
MR. MARETZKI: The assets equal about $1.9 billion.
REP. BRADFORD: In repayment?
MR. MARETZKI: And we get repayments on an annual basis. You know, we are always getting repayments.
And so, we would be able to use those loan repayments. We would potentially be able to use those assets to collateralize new opportunities.
And so, it would be a combination of using the assets that are currently in these various 28 programs and managed by the
SPF and PEDA and those kinds of programs.
REP. BRADFORD: So — I am sorry.
I apologize.
MR. MARETZKI: So, that's how it would be structured.
REP. BRADFORD: So, in 2011, there would be $2 billion in available assets to potentially loan out again, without a securitization?
MR. MARETZKI: No, there would be
$1.9 billion in assets available to this new authority. And we would then have to figure out how much was it -- how much is available in loan repayments and how much might be able to be -- go out to the -- into the markets to purchase new bonds based on sort of the repayments, or the securitization of those assets.
REP. BRADFORD: Right. And securitization is a fancy word for borrowing against loan repayment, that is what you are discussing?
MR. MARETZKI: Um-hum.
REP. BRADFORD: What you are proposing to do is loans -- You are proposing, potentially in 2011, going out and borrowing against loans that are in repayment?
MR. MARETZKI: Correct.
REP. BRADFORD: Okay. So you potentially are looking to borrow against the
$2 billion in assets?
MR. MARETZKI: Correct.
REP. BRADFORD: Okay.
Do you propose doing an R cap, a capital assistance budget as well for additional borrowing?
ACTING SEC. WALKER: Hum-um.
REP. BRADFORD: How much borrowing do you suspect we will be seeing in the next year?
MR. MARETZKI: That's the
Governor's budget. ACTING SEC. WALKER: Yeah, that's the Governor's call, not our call.
REP. BRADFORD: Okay. But is the
Governor committed to $2 billion in securitization, additional borrowing?
MR. MARETZKI: No, we don't know how much additional borrowing we might need to do. It will be based on the annual financing strategy that we would have to put together and present to all of you based on the $1.9 billion in assets that would be now managed by this new authority.
REP. BRADFORD: But this proposal assumes we are going to borrow against the 1.9 in assets, 1.9 billion in assets.
MR. MARETZKI: It means that there may be some borrowing done. Yes, that there likely will be borrowing that would be done against these assets.
And you would -- Again, the strategy would outline where we think we would potentially use those funds across the needs for businesses.
ACTING SEC. WALKER: Yeah, we were asked to be creative in our proposals, and we thought this was a very creative way to put -¬ to develop some potential for economic development fund moving forward.
Actually, we see it as a positive for the Commonwealth.
REP. BRADFORD: Mr. Secretary, I appreciate that. I realize it is a pretty complex plan. So, I do appreciate what you have done here.
I guess one last thing, and it goes under the item -¬
CHAIRMAN ADOLF: Representative, we are going to move to the second round, okay?
Your ten minutes are up.
Just a quick comment. I would appreciate receiving the total assets that you are going to be transferring. I think the committee would like to have that, a breakdown, of what is liquid and what the other investments are, okay, that you are going to be managing. Okay?
And we are going to move to the second round. And, Representative, you will have an opportunity to have some follow-up questions. MR. MARETZKI: Yeah. Can we make sure we clear up a question that came from
Rep. Smith about the Liberty Loan Fund?
What would be transferred from the tobacco settlement are the venture capital -¬ the Venture Capital Investment Program and the
Venture Capital Guarantee Program. Those are the two programs that the assets of those two programs would be transferred into the new
Liberty Loan Fund.
Those are the only two that would be under now the new Liberty Loan Fund authority. So, I just want to make sure we clear up all of that.
CHAIRMIAN ADOLF: Thank you.
Rep. Doug Reichley.
REP. REICHLEY: I think, needless to say, there is a lot of confusion on this side of the room here from all of the funds that are going back and forth.
I think you have already said you are going to submit, in writing, a more detailed description.
That your reference just now in reference to this question, I think is from the fourth iteration that we have heard this morning on the amount of funds.
I have information that there's -¬
60 million was provided in the Tobacco Venture
Capital Fund back in 2001 and 6,000 [sic] in
2008. And so, that would sound like $66 million dollars that you are only seeking to transfer over?
MR. MARETZKI: We will have to get you the details.
REP. REICHLEY: Yes, quickly.
MR. MARETZKI: We'll get you the details.
REP. REICHLEY: And if you can get to it--to try to hasten this along here--to put in writing, as much as possible, that the need you will have to go out to liquidate or securitize funds to accomplish all of the goals you are looking to perform within this
Liberty Loan Fund.
The second thing, that if you can clarify in writing--getting back to one of my earlier questions--the degree to which you believe, under your proposal, you can transfer funds beyond what the legislative designation was, where there was, for instance, an H2O money.
They are not saying -- It doesn't sound like they are proposing to transfer H2O money into this budget. If there is -¬
Like I said, if there is an analogy to these other funds, if there is any kind of legislative designation to the use of those funds, your belief as to your ability to transfer funds from those accounts for purposes other than what was originally intended.
On the issue of the Discovery PA and the Partnerships for Regional and Economic
Performance, it sounded like you are going to be trying to merge these agencies on a regional basis.
I guess part of the concern in the
Lehigh Valley -- And I think I would ask you,
Mr. Hudic, on your tours over the state, it didn't sound like you have a stopped plan in the Lehigh Valley.
And Rep. Samuelson and I both come from there. And with it being estimated as the largest area for green job growth in the state, we would ask you to, perhaps, recalculate your visiting agenda, to make sure you have a stop in the Valley.
MR. HUDIC: Sure.
REP. REICHLEY: But is it your plan, though, having the regions compete against each other then for funding?
Because, as you can imagine, the agencies from those areas are very concerned that their missions are going to be shortchanged if they are forced to more or less compete, not only on a region-by-region basis but also against each other within their region to maintain some kind of propriety for funding.
MR. HUDIC: Well, you know, it's -¬
With reduction costs and our desire to streamline in how people work together regionally, and get them towards keeping an outline, it has been met with overwhelming acceptance - the notion that the Commonwealth will invest in regional strategic planning for all of these groups to work together.
The very notion of individuals or entities competing in and amongst each other would destroy even that collaborative sharing of best practices, not only just from the
Valley, but from the Valley to Erie and all over the Commonwealth. That that would be terrible for the whole process.
Because I think that is what we are trying to foster, is everybody working together.
So, the competition really is about a competition to a quality standard, and what are those standards, and what are we expecting people to reach.
And how do we develop them with each of these local partners, and say, hey, how do we make you get to be a, you know, a gold service provider? And how can we help you compete to reach that standard, not necessarily within each other?
Obviously, the sharing of best practices is critical as we make that happen.
And not all regions are the same, the Valley is very, very good with the partnerships that you have there. But you would be surprised at the rest of the
Commonwealth, how they don't have it as good as maybe some of the rest do.
REP. REICHLEY: Well, I appreciate that. That would be great.
And then when you are doing this, you should be inclusive of all of the relevant parties, including the MRC, IRSC (phonetic) folks.
MR. HUDIC: Absolutely.
REP. REICHLEY: And if you can keep in mind that we don't necessarily have anything against the Philadelphia area in terms of their regional capacity, but we don't want to be evaluated based upon what they are offering as a regional and be competing against the Valley that is competing against this area, the central part of the state, up in Scranton, or wherever it might be.
ACTING SEC. WALKER: Something that should make you feel good is: Since I have been in this position, about 50 percent of the inquiries have come from the Lehigh Valley.
So, somebody is doing a good job.
REP. REICHLEY: We are persistent.
Thank you.
CHAIRMIAN ADOLF: Thank you. For the members' information, we have moved back the afternoon session from
1:00 to 1:30 for the hearing on the Department of Health.
The next question will come from
Rep. Greg Vitali.
REP. VITALI: Thank you, Mr.
Chairman.
And thank you, Secretary Walker, for your patience.
I want to move back to the
Governor's budget policy with regard to giving you the power to expedite permits. And you sited the example of a--in support of this--of a company's application in Clearfield County.
Was that Allied Production Services?
ACTING SEC. WALKER: Yes.
REP. VITALI: Okay. Now, you got me thinking, because that's important.
Because if what you are saying is true there, that may point to the need for more personnel in the DEP. And if what you are saying is not true, then it probably shouldn't be used as evidence to support this policy.
So, I actually called the DEP. And I spoke with a high-placed official there, oh, maybe an hour ago. And let me just sort of compare what he said versus what you said because I think it is important to understand
-- to figure out what is happening here.
He said that your characterization of this was not even close to being accurate.
He said there was intervention by you. There was intervention by Senator
Scarnati, that moved it up along the list.
He said, in this particular case, the application was applied for January 5th.
On February 18th, there was a conference call to deal with efficiencies. There is an engineering review. It has to be published in the Pennsylvania Bulletin. And, yes, they did bump you ahead of other people.
And you live in Clearfield County, right? This is your home.
ACTING SEC. WALKER: I do.
REP. VITALI: This is your home turf?
ACTING SEC. WALKER: It is.
REP. VITALI: Was this some — Did you know some of the players here? ACTING SEC. WALKER: I did not.
REP. VITALI: Okay. And he said that it is now scheduled for -- now it is scheduled for approval on late April.
So, I mean, that's how he characterizes this. And he is a high-placed person. He reviews the records.
And you characterize this as a situation where a permit wasn't approved, it was sitting there, and the reason they told you it wasn't being approved and they were going to wait out the 180 days is because they had no one to type it.
So, it is important to know what is the case here.
Is this for a lack of the typist and no one else who cared?
Or is this because it is simply, you got involved and you bump it up in line and it is going to be approved?
Now, what is the case here?
ACTING SEC. WALKER: I didn't change the process at all. And I knew it had to be published in the Pennsylvania Bulletin; they made that clear. But again, they had the 180 days.
I said, it is very important to these people that they be able to plan, so they can start their hiring and training.
REP. VITALI: Um-hum.
ACTING SEC. WALKER: Is it possible that it can be issued? Under the criteria that you have for the 30 days and the public comment period, can you issue it in April? He said, if I have somebody to type it.
REP. VITALI: I think that it -- I think it is something worth examining because his characterization of it was not the same.
ACTING SEC. WALKER: There were three of them on the call from that office, so they can all verify what they said. I mean -¬
REP. VITALI: Well, I think it bears close to review.
ACTING SEC. WALKER: And I have no idea who he talked to, so.
REP. VITALI: I have his name here, but I -- And he was quite fond of me saying that, but I have been around long enough to know that's not a good idea.
But I would suggest what may have happened here is that you may have bumped that project ahead of another project.
But I am not sure this is evidence in support of the proposition that this -- the
DCED getting into DEP matters is a good idea, because, A, you are from that county and maybe that's why they called you.
But I think it is a situation where this committee needs to compare what you initially represented to us versus the actual facts and that might be helpful.
ACTING SEC. WALKER: That would be fine. If you want to have a special hearing on that, I have no problem with that at all.
REP. VITALI: The second thing I would like to go to is, you talked about the -- your plan with regard to creating jobs as your role as DCED Secretary because part of your mission is to spur business and green jobs are a growing sector of the economy.
And you talked about, you had a -¬ that there is a plan to develop an energy policy. And I just kind of want to get at whose plan is it. Is it a DCED plan? Is it your plan? Who is heading it up? What is the timeframe?
What is this energy planning commission you referred to?
ACTING SEC. WALKER: I believe there is somebody in the Governor's office who is developing an energy plan. That is not within my department.
REP. VITALI: Okay. Well, let me get back to what you plan to do and with regard to the resources you have and the programs you have. What plans you have as
Secretary of DCED to develop good green jobs, that is, jobs in solar, jobs in wind, jobs in energy conservation, jobs in recycling.
Do you have any plans, moving forward, to develop jobs in this area?
ACTING SEC. WALKER: Yeah. I mean, we have a number of proposals that I think are very good from solar companies, biomass companies, alternative energy companies; and we are doing everything we can to encourage them to move forward in the State of
Pennsylvania. I think you are going to see some very good things in that area.
REP. VITALI: I hope so. Thank you very much.
CHAIRMIAN ADOLF: Thank you.
Rep. Mario Scavello.
REP. SCAVELLO: Thank you, Mr.
Chairman.
And thank you, again, for being here today.
I just want to clarify. I was at a
CFA meeting back in December, I believe.
ACTING SEC. WALKER: Um-hum.
REP. SCAVELLO: And they were able to -- They had enough people there at the conference to come up with a decision. I didn't want -- I personally asked not to because I couldn't get -- You know, we were at an impasse on what was going on.
But there was just one Governor's appointment that was not there. But all you needed were the four Caucuses and one vote from the Governor's group. And the two of them were there. So, they did have a quorum.
ACTING SEC. WALKER: Well, but that was a different administration. And again -¬
REP. SCAVELLO: Yeah, exactly, it was a different administration. But, I mean, it was the Rendell administration. But I heard that they were unable to meet because they didn't have a quorum; is that right?
ACTING SEC. WALKER: It's not meet; they haven't been able to vote because they haven't been able to come up with the -¬
REP. SCAVELLO: -- agreement.
ACTING SEC. WALKER: Yes.
REP. SCAVELLO: Oh. Well, then I misunderstood then. Yeah, that that's true because everyone is, you know, pulling the string their way.
ACTING SEC. WALKER: Yeah. So, the projects have been sitting there for five months with -- You know.
REP. SCAVELLO: Yeah, that's true.
Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Matt Smith.
REP. SMITH: Thank you, Mr.
Chairman.
Thank you, Mr. Secretary, for going through, particularly with respect to the
Liberty Loan Fund, a great deal of detail for us. So, it is much appreciated. I just want to touch on one aspect that just sort of came up with Rep. Reichley's question.
Rep. Reichley had stated something.
I want to make sure I am clear on it. That the H2O money will, in fact, be transferred over to the Liberty Loan Fund; is that correct?
ACTING SEC. WALKER: It will be a fund within the Liberty Loan Fund, yes.
REP. SMITH: So, it would be transferred over?
ACTING SEC. WALKER: Yes.
REP. SMITH: Okay. And then on the issue of securitization of the 1.9 billion, the way I understand securitization is, it is basically a matter of stretching out the taxpayers', the Commonwealth's debt obligations over a longer period--almost like refinancing a home--in order to create a larger, up-front pool of money.
And I am just wondering, with that additional debt, do you have any estimate on the annual debt service that will be necessary to cover that additional debt? ACTING SEC. WALKER: We don't at this time.
But again, when you have over $2 billion of H2O projects that need funded, we were looking for a creative way to come up with the biggest pool of money that we could come up with.
REP. SMITH: Sure, and I don't disagree with that.
But the fact is that that will create additional longer-term debt for the
Commonwealth. And I just -- I think it would be helpful for the General Assembly, through the Chairman, if you could provide some specific itemization of what the additional debt service would be to the Commonwealth once this securitization is accomplished.
ACTING SEC. WALKER: Yeah. Well, for one thing, I can't imagine borrowing at that level; so, it is a little bit hypothetical. But we can come up with an example for you.
REP. SMITH: Okay. But it is within the realm of possibilities that the 1.9 billion will be securitized in order to create a larger pool of funding?
ACTING SEC. WALKER: Yeah, if the legislation is passed. I mean, we haven't even -- you don't even have the legislation yet.
REP. SMITH: True.
And just to sort of transition to something you said in your opening statement, you noted that there are basically four areas where Pennsylvania -- because of these four areas, Pennsylvania should be not in the middle of the park but a leader among states.
And I think those four areas were our location, our infrastructure, our skilled workforce, and the fourth one was our strong network of colleges and universities.
And when I read that, I notice that two are directly related to having a great educational system, including specifically the statement that, quote, we have a strong network of colleges and universities.
And I just would like some comment from you on, I mean, what type of message it sends to businesses looking to locate in
Pennsylvania that the Governor wants to cut Higher Education funding by over 50 percent.
Because if I am a business person and I look at Pennsylvania as having a skilled workforce and a strong network of colleges and universities and the new Governor wants to basically gut funding for Higher Education at those same colleges and universities, it seems to send a mixed message to businesses looking to locate here.
Can you elaborate on that?
ACTING SEC. WALKER: Well, I don't think so. Because, remember, we are number two in the country for private universities.
They function well without much state aid.
You know, we have a great educational system. I think the educational system will survive intact.
But a lot of businesses are more concerned about the vocational training and what we are doing to train our workforce than having the four-year Liberal Arts degree from a college.
REP. SMITH: So, is it the department's position that the emphasis in terms of attracting businesses to locate in Pennsylvania should be on the vocational schools, the private institutions, and not the state system schools and not the state -¬
ACTING SEC. WALKER: Well, we don't have a position for -¬
REP. SMITH: — research and training (phonetic) that come out of the state?
ACTING SEC. WALKER: We are pro education, but we don't have a position on -¬ a priority on it, one way or the other.
Because everyone -- every industry has different needs. The biomass people need to train scientists, but the Marcellus Shale people need trained welders; so, it is whatever the need is in a particular area.
REP. SMITH: Sure.
And I would note here, specifically with the University of Pittsburgh and Penn
State, they would, I think, argue that they provide a tremendous, direct economic benefit, number one, in jobs created through research and development, but also in the training that they provide in the area that you mentioned with the med's and ed's area. Certainly, biotechnology is one of
Pitt's strengths--I know--and in terms of training, you know, both at the graduate and post-graduate level.
And I am just concerned that the
Governor is sending a little bit of a mixed message to businesses. Because on the one hand, we are emphasizing our strong network of colleges and universities. And on the other hand, we are saying, well, they can survive the 50-percent cut. It won't really be too much of a big deal for them, either through increased tuition or direct layoffs that those universities might incur.
So, you know, I would just ask, you know, when you -¬
ACTING SEC. WALKER: I think we are all pro education; it's a matter of how much resources we have to deal with it.
REP. SMITH: Yeah. And I would just say, you know, it is a matter of priorities. And then, perhaps, you know, an area to look at would be a severance tax to provide some funding for the Higher Ed cuts, in fact fill those Higher Ed cuts that we are currently experiencing.
So, I think it is a matter of priorities. I just think the Governor's priorities are misplaced in this instance, so.
Thank you, Mr. Chairman.
CHAIRMIAN ADOLF: Thank you for your editorial comment.
The next question will be by Rep.
Parker.
REP. PARKER: Thanks again, Mr.
Chairman.
And thank you, Mr. Secretary.
Just two issues I wanted to speak about, the first was the Ben Franklin
Technology Development Fund.
You know, more went in. Every governor since 1983 has increased the program.
Obviously, we see a decrease in funding, a very small decrease.
But I wanted to sort of reiterate for the record and sort of hear your response about the importance that this group has then had, the impact that it has had and its importance to the Commonwealth of
Pennsylvania. I know in southeastern
Pennsylvania, the regional group, they have done an outstanding job in sort of trying to accelerate technology-based economic development initiatives and activities.
And particularly for us now, I know it was very popular maybe about five to ten years ago to talk about something we were calling a digital divide--but right now infrastructure--in making sure that we connect impoverished communities to the technology that would sort of connect them with employment, educational opportunities, and so forth, which is becoming even more important.
So, I just wanted to hear what your thoughts were on that issue.
ACTING SEC. WALKER: I am a huge fan of the Ben Franklin's. I think they have done some wonderful things for the State of
Pennsylvania.
It is a program that I want to continue at least at the level that it is at now. I certainly, over the long run, as funds become available, I would like to see it increase. But they do have some revenues coming in that are not part of the budget process. So, it is not the end of the world.
I mean, they have other funds to work with.
Some of their investments that they have made are paying off, so I think they will be fine. But again, that is an area that I would like to see us invest more in as money becomes available.
One of the things I discovered early on in this job is, I looked at the challenges facing the State of Pennsylvania moving forward from an economic development perspective.
We have a real lack of venture capital in this state. And as a result, a lot of our great technology that is developed at
Carnegie Melon and Lehigh and Penn State and
Penn and Drexel is actually bought away by other states - Georgia, huge venture capital state; Texas; California.
And these venture capitalists, or angel investors, want their projects close to where they are located so they can keep an eye on them. So, we are not really getting the full benefit here of what we are developing here. And I hoping -- I don't know how we address it, but venture capital in
Pennsylvania is a huge problem.
REP. PARKER: Okay. Thank you.
Finally, you know, prior to this departing from all of this, Governor Rendell had extended his Executive Order in January charging -- basically charging DGS with doing its best to increase the participation of women, minorities, and disadvantaged businesses in the Commonwealth.
I believe when he took office, we were about at 2 percent, the Commonwealth was, as it related to the number of women and minorities and disadvantaged businesses actually doing business with the Commonwealth.
Last year when DGS gave its final report in the fall, we were at about 13.4 percent.
I was strongly encouraged when we had the DGS Secretary in. The other day in her testimony, she talked about Governor
Corbett's continued commitment to this area. But it also charged all Commonwealth agencies and departments to sort of work with the same spirit in lead roles in our chapters.
And I wanted to know, what was your philosophy and thinking? You talked about all of the programs and sort of the consolidation.
I know you are going to send that information to the committee via the Chair.
But what's your philosophy as it relates to increasing the participation of women, minorities, and disadvantaged businesses actually benefiting from the very programs offered by DCED?
ACTING SEC. WALKER: I think it is a great idea.
I certainly support that approach because the better the females and the minorities do and our population as a whole, the better the state is going to do. So, I am very supportive of it.
REP. PARKER: That's it. Thank you, Mr. Chairman.
Thank you, Mr. Secretary.
CHAIRMIAN ADOLF: Thank you.
Rep. Bradford. REP. BRADFORD: Real quick. In the last administration, one of the things that really seemed to work well for our local county municipalities was the Governor's
Action Teams working with coordinating the effort.
I was just wondering if that is something that you plan on continuing. Is it your office that does that? Or is it really
Governor Corbett? How does that call come into play?
ACTING SEC. WALKER: Well, again, the reporting function comes to me in my office.
I am a huge fan of the Governor's
Action Team. I think Mike Rossman, who heads the Governor's Action Team, is here today.
In my initial observation, it functions extremely well. And I would certainly like to keep it; it helps us streamline the process.
REP. BRADFORD: And one question--it may be a little at 30,000 foot--but I understand you -¬
You do sit on the Lt. Governor's special group for Marcellus Shale, special committee, commission?
ACTING SEC. WALKER: Yes.
REP. BRADFORD: Okay. What is your opinion on the potential for a severance tax on that industry?
ACTING SEC. WALKER: I have no position on that.
REP. BRADFORD: Okay. One of the last things -¬
ACTING SEC. WALKER: Do you want to talk about tolling again?
REP. BRADFORD: Did you come around?
CHAIRMIAN ADOLF: Let's not go there.
REP. BRADFORD: One of the quick things on -- one of the -¬
Let's do the restricted funds and the Liberty Fund, not to go back to which funds go to what.
But one of the things that worries me in that--and I saw the same thing with the capital budget process--is the kind of jobs we create. And one of the things is kind of a community mission.
I know if we are going to use funds for things like -- When we are going to use
Tobacco Settlement Funds, I think there are a lot of us who would like to see, in the legislation that comes, some kind of restriction - that those funds go for the health industry or health related. So, therefore, there is some tie-in.
But one of the other things too is, kind of, what kind of jobs we are creating and what kind of industries we are looking at.
One of the things I am kind of worried about--and even in the last administration-- I saw we were creating a lot service jobs potentially, but we weren't necessarily requiring a certain level of employment, whether it is a certain livable wage or employers that provide health care.
And I think that we should look at it in terms of maybe putting the regulations in the--given the authority--the legislation.
To make it clear that what we are looking to do is create good jobs here in
Pennsylvania, and not just use it as a, frankly, a corporate welfare for big businesses that are going to bring in--you know, for lack of a better word--McJobs that don't provide health care and benefits and salaries that we want to bring here in
Pennsylvania and incentivize.
If Pennsylvania is going to be -¬
If the Pennsylvania taxpayer is going to be a partner in these public/private partnerships,
I think we should make sure--maybe this is more editorial--but we should make sure that we are creating the kind of jobs that actually provide for Pennsylvania families.
ACTING SEC. WALKER: Yeah, I think we all know what it takes to support a family in Pennsylvania.
And I would agree with you.
Unfortunately, a job -- A lot of job creation moving forward will be in the service sector, not in the manufacturing sector.
But I think most of you probably have heard, one of our real successes is that
Volvo of North America is going to move their corporate headquarters to Pennsylvania. I don't think those are going to be minimum-wage jobs. So, those are the types of jobs we are after.
REP. BRADFORD: Thank you.
CHAIRMIAN ADOLF: Thank you.
Rep. Steve Samuelson.
REP. SAMUELSON: A quick follow up in one of your earlier statements about the
Family Savings Account Program.
I know this is a program that
Pennsylvania has actually put funds in to; I think over $9 million over the last decade or so.
And then I thought I heard you say earlier, there is some federal money available and Pennsylvania might not apply for it.
Now, my question would be -¬
ACTING SEC. WALKER: No, I didn't say that.
REP. SAMUELSON: Oh, okay.
ACTING SEC. WALKER: I said we -¬
If we are going to apply for it, we will be -¬ we will apply by the deadline, which is June
30th.
REP. SAMUELSON: Oh, okay.
ACTING SEC. WALKER: We are evaluating now whether we should apply or not.
Again, it is a very expensive program to administer relative to the benefits; so, we have to look at the whole program.
REP. SAMUELSON: You are evaluating whether you should apply?
ACTING SEC. WALKER: Yes.
REP. SAMUELSON: But you are going to apply, you said?
ACTING SEC. WALKER: I didn't say we were going to apply; we are evaluating whether we should apply. Because, right now, we have not made that decision.
REP. SAMUELSON: If you don't apply for -¬
ACTING SEC. WALKER: We have to look at cost benefit. We have to look at cost benefit to the taxpayers of Pennsylvania, so we are looking at the whole thing.
REP. SAMUELSON: If you don't apply, are you saying that you are not going to continue this program?
ACTING SEC. WALKER: If we do not apply, Pennsylvania would not be in the program.
REP. SAMUELSON: Does this program have a current fund balance from past appropriations?
MR. MARETZKI: I believe that we have had a little bit.
For the current fiscal year, we did not put any state funds into the program.
There was some fund balance that we were able to use for the program.
I don't know what the current balance is. I can get back to you with that.
We can get back to the Chair.
REP. SAMUELSON: Okay. Well, my understanding is, this is a program that helps low-income individuals save for the purchase of a home or a car or education.
ACTING SEC. WALKER: The maximum they can save is $1,200 under this program.
REP. SAMUELSON: Okay.
All right. Thank you, Mr.
Chairman.
CHAIRMIAN ADOLF: Thank you.
Mr. Secretary, I want to thank you and your staff for your testimony today - a lot of information. We expect to receive additional information from your staff. We are looking forward to working with you over the next term.
And I want to thank the members of this committee for their participation.
And I want to thank the stenographer that has been going strong since
10:00. So, I thank you so much. She hasn't taken a break, you know, and we want to thank her.
And I remind everybody that the
Department of Health hearing will start promptly at 1:30. Thank you.
ACTING SEC. WALKER: Thank you.
(At 12:50 p.m., the hearing concluded.) C E R T I F I C A T E
I, Roxy C. Cressler, Reporter, Notary
Public, duly commissioned and qualified in and for the County of York, Commonwealth of
Pennsylvania, hereby certify that the foregoing is a true and accurate transcript of my stenotype notes taken by me and subsequently reduced to computer printout under my supervision, and that this copy is a correct record of the same.
This certification does not apply to any reproduction of the same by any means unless under my direct control and/or supervision.
Dated this 17th day of April, 2011.
Roxy C. Cressler - Reporter Notary Public
My commission Expires 5/09/2013