COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES COMMITTEE ON APPROPRIATIONS [n re: 2000-2001 Appropriations Hearings Department of Community and Economic Development * * * Stenographic report of hearing held in Majority Caucus Room, Main Capitol Harrisburg, Pennsylvania Monday March 6, 2000 10:00 a.m. iON. JOHN 2. BARLEY, CHAIRMAN Ion. Gene DiGirolamo, Secretary ton. Patrick E. Fleagle, Subcommittee on Education Ion. Jim Lynch, Subcommittee on Capitol Budget Ion. Ron Raymond, Subcommitee on Health and Human Services ton. Dwight Evans, Minority Chairman MEMBERS OF APPROPRIATIONS COMMITTEE Ion. William F. Adolph Hon. Steven R. Nickol Ion. Matthew E. Baker Hon. Jane C. Orie Ion. Lita I. Cohen Hon. Joseph Preston, Jr. Ion. Craig Dally Hon. William Russell Robinson Ion. Teresa E. Forcier Hon. Samuel E. Rohrer ton. Dan Frankel Hon. Stanley E. Saylor ton. Babette Josephs Hon. Curt Schroder ton. George Kenney Hon. Edward Staback Ion. Frank LaGrotta Hon. Jerry A. Stern ton. John A. Lawless Hon. Stephen H. Stetier ton. Kathy Manderino Hon. Jere L. Strittmatter ton. Phyllis Mundy Hon. Leo J. Trich, Jr. Ion. John Myers Hon. Peter J. Zug Uso Present: Aichael Rosenstein, Executive Director Reported by: Dorothy M. Malone, RPR Dorotn4 M. M-l one Registered Professional Reporter 135 S- LanJis Street Hummelctown, Pennsijlvania 17036 \/ Also Presnt; (Cont'd) Mary Soderberg, Minority Executive Director Erik Randolph, Budget Analyst Dorol^ M- Malone Registered Professional Reporter 135 S- LanJis S*i«et {—lummelstown, Pennsylvania 17036 CHAIRMAN BARLEY: Good morning everyone and I would like to call the 'hearing to order and ask the members to be seated. Those making presentations if they would take their places. This is the first day of the final week of our hearings. We have the Department of Community and Economic Development. I had to look at my agenda. The Department of Community and Economic Development will be the first department making a presentation today. We have Secretary McCullough with us. Before we begin the hearing I would like to provide an opportunity for the members to introduce themselves. I am John Barley, Chairman of the Appropriations Committee. I'm a Representative from Lancaster County. REPRESENTATIVE MUNDY: Phyllis Mundy from Luzerne County. REPRESENTATIVE JOSEPHS: Babette Josephs, Philadelphia County. REPRESENTATIVE LAGROTTA: Frank LaGrotta, Lawrence, Butler and Beaver Counties. REPRESENTATIVE FRANKEL: Dan Frankel, Allegheny County. REPRESENTATIVE MANDERINO: Kathy Manderino, Philadelphia County. REPRESENTATIVE PRESTON: Joe Preston, Allegheny County. REPRESENTATIVE ORIE: Jane Orie, Allegheny County. REPRESENTATIVE ROHRER: Sam Rohrer, Berks County. REPRESENTATIVE ADOLPH: Bill Adolph, Delaware County. REPRESENTATIVE FLEAGLE: Pat Fleagle, Franklin County. REPRESENTATIVE DIGIROLAMO: Gene DiGirolamo, Bucks County. REPRESENTATIVE NICKOL: Steve Nickol, York and Adams Counties. REPRESENTATIVE COHEN: Lita Cohen, Montgomery County. REPRESENTATIVE ZUG: Peter Zug, Lebanon and Dauphin Counties. CHAIRMAN BARLEY: Michael Rosenstein, my Executive Director is seated to my left. Mr. Secretary, welcome. SECRETARY MCCULLOUGH: Thank you, Mr. Chairman. CHAIRMAN BARLEY: We will now provide you an opportunity to make a presentation to the Committee and then I am certain that there will be some questions. SECRETARY MCCULLOUGH: Thank you, Mr. Chairman. Chairman Barley, distinguished members of the Appropriations Committee. It's a pleasure for me to appear before you today to discuss the Department's budget proposal for the coming fiscal year. It's a proposal designed to help us build upon the success of our investments in Pennsylvania. And it's a proposal designed to open a world of opportunity for Pennsylvania's businesses, communities and families. In the March 2000 issue of "Site Selection" magazine, Pennsylvania is ranked ninth among the top ten states for economic development, recording the highest total of new corporate facilities and expansions in 1999. This is the first time Pennsylvania has ever been ranked in the top ten, and is an unprecedented national recognition of everything that the General Assembly and the Administration has done to energize our economic development efforts. Together we have designed initiatives with clear and identifiable returns on our investments. The success of these activities are what Site Selection has acknowledged. We have invested heavily in the 21st century's largest industry, tourism, to generate jobs, position Pennsylvania in the global economy and decisively link our efforts to grow businesses and jobs with our commitment to improve the quality of communities. The rate of growth in our tourism industry has exceeded the national average for the last four years. We have focused on the most immediate force in job creation — export growth -- simultaneously building abroad and at home. We are going from 3 to 17 foreign offices that now span every major market in the world. These offices are linked electronically with video conference capability to our ten regional export networks. Literally, no Pennsylvania business need travel more than 100 miles to reach any market in the world. Last year, our foreign offices generated $65 million in new business for Pennsylvania companies. We have diversified our financing programs to meet the needs of a changing economy. While manufacturing is still a primary target, we now fund tourism and service operations, even day care businesses. This realignment has created an arsenal that I believe 7 is far more strategic and effective. For calendar year 1999, these programs had a direct impact on over 120,000 jobs and generated a ten to one leveraging of private investment. With brains more valuable in today's world than bricks and mortar, we have tripled our investment in business focused job training and made it easier to access and use in real time. Our guaranteed free training program, which operates as a partnership with the State System of Higher Education and community colleges, has taken the hassle out of accessing training and so far has trained over 20,000 workers at a cost of less than $500 per trainee — a far bigger bang for the buck in this most critical of investments. We have undertaken bold initiatives to invest in the economy just now taking shape. Our first critical action has been to create new tools for investing in technology. We have partnered with the state pension funds to improve the availability of venture capital to create new businesses. Since the Tech 21 Report was issued with its Clarion call to invest in the new economy, this partnership has helped establish $400 million in new Pennsylvania focused venture funds. Last year, I spoke to you about the Pennsylvania Technology Investment Authority and the necessity of accelerating E-Commerce use among Pennsylvania businesses and citizens, investing in technology jobs and creating more flexible structures to meet the financing needs of knowledge based companies. I'm pleased to report that PTIA is helping us meet the challenges of the new century. In half a year's time, it has made investments in companies that will lead to over 7,000 technology jobs, and, it has funded initiatives that will bring cutting edge internet technologies to nearly 50,000 Pennsylvanians. We have also worked to change the focus of community development. We have sought to move from merely funding places to focusing on empowering people to change the places where they live. The common goal of all our actions in this empowerment focused approach to community development is to better link disadvantaged neighborhoods and communities to the new economy by emphasizing enterpreneurship and strategic planning. The flagship of this effort is the KOZ Program we created together. This program has been called the best tool for neighborhood rebuilding in the nation. In its first six months over 3,000 jobs have been created. It took the State of Michigan — the only state with anything close to KOZ's — two years to reach that level. Our broad-based project on community building has also been at the forefront of the trans­ formation of community development. It is the largest effort of its kind in the nation and it is designed to shift the focus of Pennsylvania's efforts from providing grants and loans to creating tools that enable families and communities to shape their own future. Finally, no effort to transform communities in Pennsylvania could be effective without engaging local governments in a true partnership. The Center for Local Government Services has given us that partnership. The center has fundamentally changed the nature of our relationship between the state and local governments as evidenced by its efficiency in delivering services and the overwhelmingly positive feedback from local officials. With your help and support, we will extend our investment in the jobs of the future. We will continue to build new foundations on the solid ground of our communities. And, we will continue our quest to make Pennsylvania the most customer-friendly, friction free state in the nation. Thank you again, Mr. Chairman, for the opportunity to appear here today. I'd be pleased to answer your questions. CHAIRMAN BARLEY: Thank you very much, Mr. Secretary. I now recognize Representative Cohen to ask questions. REPRESENTATIVE COHEN: Thank you, Mr. Chairman. Good morning, Mr. Secretary. SECRETARY MCCUILOUGH: Good morning. BY REPRESENTATIVE COHEN: Q I wanted to talk to you about the Ben Franklin Fund. We are, and I congratulate you on your investment and promotion of PTIA and also the Ben Franklin Fund. What we are hearing and what I would like to know how do we clear any impediments to the Ben Franklin Fund in providing its funding more quickly? We have been told that sometimes there is a three and four month lag to get funding to the start-up businesses. Is there any way that we can, number one, put more money and I did see there is almost a six percent increase in the funding to Ben Franklin. But how do we get them to act more quickly and fund these emerging companies more efficiently and more quickly? A Representative Cohen, in fact, we have proposed a $2.2 million increase in the funding for Ben Franklin in this budget.