Speaker Smith, President Pro Tempore Scarnati, Lieutenant Governor Cawley,
members of the General Assembly, distinguished cabinet, fellow citizens.
Pennsylvanians are people who embrace important qualities. We value service. We
value bravery. We value compassion. We saw these virtues on display last year
when floods hit our state. Our first responders, our firefighters, our police, our men
and women of the National Guard stepped into the breach to prove, once again,
that we are a commonwealth and act for the common good.
In Montgomery County, Robert Spitko, a firefighter from Norristown, and Rick
Russo, a swift water rescue boat crew member from Neshannock in Lawrence
County, learned of a woman who had been swept away. They tethered themselves
to rescue ropes and went through the swift and rising flood waters. They found that
woman clinging to a sapling. They brought her back safe.
In Lycoming County, State Police Corporals Brad Eisenhower and Larue Stelene
received calls about a woman and two children, ages 3 and 7, stranded on the roof
of their home. The buildings around them had already been swept away. These
brave men guided a hovercraft through those waters, at night time, and took that
family to safety.
For several years we have seen courage on display as members of our National
Guard served overseas in the War on Terror. I want to tell you about two of them.
Recently they were each presented with a heart. It might be close to Valentine's
Day, but that's not the reason. But it is out of love for their country, and what it
Specialist Ryan Petrill, from Luzerne County, was injured fighting in Afghanistan.
Sergeant Matthew Keeler, from Delaware County, earned his purple heart in Iraq.
We are grateful for their service, and even more grateful to have these winners of
the Purple Heart back home in Pennsylvania. Welcome home, men.
These six heroes are here today representing the thousands of others in their
ranks, who came through in our time of need, at home and overseas. Would you
join me in one final round of applause for them?
So, we ended last year with accounts of great courage. We began this new year on
a note of sadness. Joe Paterno, a legendary coach and an ambassador for
Pennsylvania in the world of sports, died. His commitment to Penn State and to the
futures of the athletes he guided can never be doubted. Nor can his place in our
history. Please join me in a moment of silence in honor of Joe Paterno.
Last year, when I stood before you, I spoke of a grave dilemma. The state had a
structural deficit of more than $4 billion. The public ledger demanded restraint. Our
needs as a commonwealth demanded action. We accomplished much of real
For the first time in 40 years, we spent less. Our state budget was passed on time
for the first time in almost a decade. And we imposed no new taxes on our citizens.
The reason was plain: State government has less revenue because our citizens
have less for themselves. We can't ask people to travel the road to recovery and
then turn around and add to the burden they must carry along the way. To prevent
cost reductions at the state level from being turned into new taxes at the local
level, we enacted property tax reform.
Tort reform brought relief to job-creators who feared entering a marketplace where
they could be forced to pay for damages that were not rightly theirs. I asked you
last year to send me tort reform and said I would sign it. You sent it. I signed it.
Early today, we passed legislation creating new Keystone Opportunity Zones. K-O-
Z's, as they are often called, offer tax incentives and development assistance to
businesses. They have the potential to bring thousands of jobs to Pennsylvania.
This sends a strong message that Pennsylvania's open for business.
After long negotiations, we are close to reaching a consensus on how to address the
impacts in the Marcellus Shale regions. I am pleased with the progress we have
made and I applaud the cooperative spirit you and your staffs demonstrated while
working to resolve this complex issue. I look forward to signing this legislation into
By keeping taxes in check and spending under control we continued to replace jobs
lost in the recession. Those jobs weren't created by decree. They grew because
Pennsylvania's budget, rather than postpone the inevitable, faced up to the
moment. We reduced spending to fit the realities of our time. Pennsylvania took its
first steps toward changing the culture of tax-and-spend.
Together, we showed we can make reforms that count. It is time to show citizens,
weary of empty promises and doubtful that real change can be believed in, that we
can accomplish more. In this administration we have decreased overall spending by
six percent. We reduced the state automobile fleet by more than 1,200 cars. In the
agencies that fall under the supervision of the governor, we have eliminated "per
diem" expense accounts. We insist on receipts. In every sense, the message of
reform is, "don't waste."
The alternative was to raise taxes to cover that deficit. What would this have
Last year alone, the personal income tax increase necessary to close that $4.2
billion gap would have cost the average Pennsylvania family of four $920 — just to
maintain a status quo that wasn't working. If we did so this year, we'd be taking an
additional $300. In two years, a two-income family of modest means would be
handing over an additional $1,200 simply to maintain a system that is just plain
broken, inefficient and in need of reform.
For families coming out of a recession, that's an inexcusable burden to impose.
Reform means understanding this simple truth: when you don't have enough to
spend, you spend less.
Reform also means knowing the difference between a "make-work" project and a
"save-jobs" project. It's the difference between merely propping something up, and
building on its real value. The Port of Philadelphia is a perfect example. The state
has advanced $15 million to continue deepening the Delaware River channel. This is
a project that links our economy to the world.
You see, the Panama Canal is being widened and deepened to accommodate the
new generation of tankers. Those ships can dock anywhere on the East Coast, from
Virginia to Boston. Anywhere except Philadelphia, where the river is too shallow.
We want those ships tying up to the docks of Philadelphia the world's best inland
port, once we complete the work. Estimates suggest that, over the next five years,
as many as 75,000 jobs will be created or saved, both directly and indirectly. This is
not just a compact with today's economy. It's a vindication of our history.
Philadelphia was founded as a port city. It received countless people into the New
World. Through war and peace it has been our gateway to the Atlantic and beyond,
and we intend to keep that gate open and welcoming the world and its commerce.
This is not only good for Pennsylvania. It is good for the region and the nation.
So, I worked with our congressional delegation both Democrat and Republican
alike, to send a message to the Obama administration: release the additional
money to complete this crucial economic development project. Judging from today's
news reports, it looks like we succeeded.
And, thanks to an innovative partnership, the giant shipbuilder Aker is currently
constructing two tankers. Because of that, Exxon-Mobil has ordered two of a new
generation of "supertankers." That shipyard will be booming for years to come.
More than 1,000 jobs have been saved. Thousands more will be spun off as those
tankers take shape and set sail.
Our energy producing fields continue to generate jobs. A somewhat overlooked
side-effect that benefits all Pennsylvanians, in every corner of the state, is the
estimated 40 percent average drop in home heating prices for Pennsylvanians who
use our clean, abundant supply of natural gas. In the southeast alone, the average
utility customer saved almost $700. The benefits of this growing industry are
reaching every corner of our state and we are determined to see this industry
produce new jobs and increased savings.
Right now, we are hard at work to bring a major natural gas processing plant to
southwestern Pennsylvania. The best argument we can make to the company
behind this project is Pennsylvania's embrace of free markets.
We also remain committed to dealing with the issues surrounding the closure of the
refineries in Philadelphia. As we build a new energy sector, I am not willing to give
up on the old one.
In Erie, the Governor's Action Team came to the aid of General Electric, which
already employed 5,000 people at its locomotive plant. We made it possible for
G.E. to expand and hire hundreds more at a new location in nearby Mercer County.
Business creates jobs where it feels welcome. Citizens live best when they are
employed and don't live in the constant fear that what they earn will be taxed
This approach works. Our unemployment rate dropped by almost a full percentage
point from the end of 2010 to this very moment, and, as the year began, it was still
nearly a full percent below the national average. Our private sector workforce grew
by 79,000 jobs.
In short, we continue to grow the kind of jobs that produce real prosperity. This is
the road to recovery. We are on it. It sometimes runs uphill but thanks to your
partnership in the past year, Pennsylvania is going in the right direction. We must
not turn back now. The old approach of tax-and-spend was comfortable for some.
In fact, it was so comfortable that it put our economy to sleep.
We cannot allow the debts of today to crowd out the dreams of tomorrow. If we
don't act to reconfigure government and revamp how it provides services, we will
find ourselves trapped in this same box every year. Difficult economies do not
follow calendar years. Nor do they respect state borders. They require us to map
state-level solutions to a national problem. Despite a catalogue of quick fixes at the
federal level, and a swirl of conflicting theories, we are still living through the most
difficult economic period in our lives.
So, today I bring before you a budget grounded in difficult realities but framed in
the optimism that we are solving our problems. Once again, revenues do not match
mandated, escalating costs. That means we must continue the course bravely
charted by this assembly in the year just passed.
I am submitting to you a budget proposal that is at once lean and demanding. In
the coming weeks we will sit down to work out the final details as we map out our
course. But this map comes with boundaries. We will not spend more than we have.
We will not raise taxes. There is no talking around these limits. Every dollar taken
in tax is one less dollar in the hands of a job-holder or a job-creator. Every dollar
spent by government is one dollar less in the sector that creates real prosperity.
I am bringing before you a budget built on the decisions of last year. It is a budget
that proposes more in the way of reforms by continuing to change the culture of
government from one of entitlement to one of enterprise.
These tough decisions will lay the groundwork for the prosperity of tomorrow. It
puts to you, the General Assembly, the question of precisely what role state
government and our taxpayers should have in a variety of endeavors. I look
forward to working with all of you in framing these priorities into a solid,
responsible spending plan.
One of the major innovations I propose this year, the use of block grants, will be
found in both our Basic Education and our Welfare budgets. Together, these two
departments account for more than 70 percent of our spending. When we include
Corrections and debt service, it's 90 percent.
So, with less to spend than we would like, we need to give more flexibility at the
level where this money will be spent: the county and school district.
The old way of doing things — the pattern of big government, big policy, big
spending — has left us with issues that will dog us long after this year's budget is
passed. Our costs are driven in two ways. In the present time, we must pay
expenses that run the state from day-to-day.
But out of immediate sight, yet threatening to undermine our present and future
budgets are three problems bigger than a single budget. There are legacy costs,
something which we will, whether we want to or not, be forced to address sooner
rather than later.
Also, it is absolutely critical that we repair our unemployment compensation
As expenses rise along with our debt to the federal government, the cost of
insuring workers threatens to overwhelm job creators. We have legislation in the
General Assembly and we need to act on it now.
Lastly, it is also critical that we address our transportation issues. This is not a
budget item. It is too large for that. Transportation must be confronted as its own
distinct and separate topic. This problem has grown for the past several decades
and it will not be solved overnight. But, whatever solution we enact must be a
I have spent significant time considering this issue with my transportation team
and developed some workable solutions. However, those solutions will only be
possible with your input, assistance and support. I look forward to working with
As we wrote this budget, we looked first at what state government is really meant
to do, and we asked if it would add or subtract from private sector jobs. For
instance, this budget maintains funding for career and technical education. There is
a very solid reason: it matches good jobs with trained people.
The widening gulf in family income tells us that we need to make certain our
workforce is paired with the best jobs available. It also helps us repay a vast debt
to the veterans now returning from service overseas. They are coming home after
serving us. The least we owe them is the training to land a good job.
Maintaining our commitment to the technical professions and practical trades keeps
a bargain with today and builds for tomorrow. As our energy sector expands and
manufacturing revives, Pennsylvania needs a trained workforce ready to meet the
demand for workers.
If we are going to harvest our resources, let's make certain Pennsylvania hands are
working the machinery of industry.
The demands of a mixed economy, where free enterprise exists alongside
government encouragement, teach some hard lessons. We cannot, in government,
simply conjure up jobs. We can help businesses get a start, but we can't carry
them. We can help train private sector workers, but we cannot be their employers.
We can, at best, act as partners.
Pennsylvania competes with every other state in the union for factories, offices and
corporate headquarters. The shorter we make the journey from the drawing board
to the ribbon-cutting, the better our chances of growing jobs.
So, I am bringing before you a new and innovative program to create a robust
employment market and a vital economy. We call it Jobs First PA. It comprises
• Pennsylvania Inc.
• The Comprehensive Job Matching System,
• Keystone Works, and
• The Targeted Industry Certificate Program.
We will roll out full details soon.
Briefly, Pennsylvania Inc. provides a single point of access between job creators
and state government to speed the time between an idea and a business. Keystone
Works would allow unemployed workers to continue their benefits while being
trained by companies with available jobs.
The idea is to get the recently unemployed back to work as quickly as possible. The
Targeted Industry Certificate program provides increased grants for college and
trade school students who are training for high-demand occupations.
In short, we are targeting our workforce toward the jobs. The goal is simple: if
there's a job to fill in a new or existing industry, we are determined to put that
career opportunity into the hands of a Pennsylvanian.
And, yes, this budget continues the phase out of the capital stock and franchise tax.
At the Department of Community and Economic Development, we are at work
finalizing a program I proposed last year, the Liberty Financing Authority. It will
merge several programs under a single umbrella. The Liberty Financing Authority
will provide the flexibility to direct loans to expanding businesses.
I want to be clear about this. The Liberty Financing Authority is not a series of
grants. These are loans, money that will be repaid and rolled back into the nest egg
from which we can help the next job-creator.
This line of underwriting might be the small difference in helping a job creator set
up shop or to expand an existing one. This is the time to invest in the future. These
programs can get us there.
One of our core functions is to provide for education at several levels starting with
our youngest. We have less money than I would like, so we must adapt.
Earlier, I mentioned our proposal to use block grants to give counties and school
districts the flexibility to adjust to their own, unique needs. That accounts for the
transfer of four separate line items in to a single block grant. Right now, education
spending is bound up in a thicket of outdated and time-consuming regulations and
The rationale here is clear. Local districts know better how to spend and allocate
resources than do bureaucrats in Harrisburg. We leave the Basic Education Funding
formula at its current level. There are no cuts. In fact, you will find a slight
increase. Just as we did last year.
There has been some confusion, even deception, about what we did and did not do
with the Basic Education formula last year. Some keep insisting we cut Basic Ed.
This urban legend was spread by those who have the most to gain from additional
funding at taxpayer expense.
Here is the truth. When the Obama Administration handed states billions of dollars
in stimulus monies the previous administration reduced the state's share in the
Basic Education funding formula. In its place, they put the stimulus funds. Almost a
billion dollars worth.
These funds were one-time only earmarks by the president. The last thing they
were intended for was to pay continuing, yearly, operating costs such as salaries.
The term everybody kept hearing was that the stimulus funds were for "shovel-
Instead, by accounting sleight of hand, someone buried our problems under a layer
of federal cash. Perhaps they misunderstood the meaning of "shovel ready." That
money is gone. It's not coming back.
What we did, my administration and the men and women of the General Assembly,
was to replace the state's share of money. In fact, at more than $5.3 billion, last
year's budget was the largest amount the state's taxpayers have ever put into the
Basic Education funding formula. The largest until this year.
So, I want the various special interests out there to understand this: If we are
going to debate education funding, let's use real numbers.
What Harrisburg can do for education is to set standards — both for our schools and
At the state level, we need to put things in the proper order when it comes to our
priorities: student-family-teacher, in that order. Education reform is absolutely
necessary. I want our public schools to work, to accomplish what we ask of them,
and to do it for every student of every background in every part of the state.
Every child can learn. We need to instill that faith in every school in the state. Every
school in Pennsylvania should be our best.
This also marks a moment when we need to open the discussion about how best to
finance higher education in this state. We need to have a thorough, public and
candid conversation about how best to deal with the spiraling costs and our own
One elected official recently laid out an ultimatum. He said: "Let me put colleges
and universities on notice: If you can't stop tuition from going up, the funding you
get from taxpayers will go down. Higher education can't be a luxury. It is an
economic imperative that every family in America should be able to afford." Those
were the words of President Obama in his State of the Union Address last month.
While I disagree with his prescription — which is to pass much of the cost on to the
states — I think he is right that we need to confront the problem. I think we need to
talk about this honestly and without rancor and dramatics.
To get that discussion started I am creating a panel on postsecondary education to
study our system and to make recommendations on how our universities can best
serve the students and citizens of this new century. I have appointed Rob
Wonderling to head this panel.
Many of you will remember Rob as an accomplished member of the Senate, and a
successful businessman, who now heads the Greater Philadelphia Chamber of
Commerce. I have asked Rob and his group to report back by Nov. 15.
As we continue to sort through the must-haves and the nice-to-haves, and
compress government into its core functions, public safety stands as a central
Citizens of the commonwealth must be protected. If we have no other job
maintaining civil order is it. Without safety there can be no society. My budget
provides funding for a new cadet class of 115 state police troopers to begin this
We have also streamlined public safety, bringing the state's Office of Homeland
Security into the fold with the state police. The floods of the past summer have
shown us all that a well organized emergency system is, quite literally, a matter of
life and death.
I'm pleased to say the budget also contains matching funds to continue our
recovery from this past summer's floods. And holding to our theme of reform, this
is the first time in 10 years that does not require an increase in the Corrections
Our Justice Reinvestment Initiative panel is at work finding ways to deliver justice
for victims and corrections for offenders while stemming the costs of imprisonment.
Our commitment to Pennsylvania's neediest posed a special challenge. Welfare
does not produce wealth. What we do in this field is a measure of our compassion
as a people and of our vision as leaders.
If we believe in society, we must accept that we have a duty to care for and protect
those among us who cannot fend for themselves. I am reminded of the words of
Franklin Delano Roosevelt. In the hardest of economic times he knew the danger of
turning a moment's help into a life's dependence.
In his third State of the Union address, he said:
"To dole out relief in this way is to administer a narcotic, a subtle destroyer
of the human spirit. It is inimical the dictates of a sound policy. It is in
violation of the traditions of America."
That's a powerful warning from a leader who was qualified to give it.
So what do we do? What tradition must we preserve? We can't maintain what we
have been doing for 40, 50, even 60 years, when it hasn't improved the lives of the
The budget I bring you is built to transform the public welfare system. Not to
eliminate it but to 'right size' it. It modifies programs to give incentives to those
who are able to transition from the welfare line to the employment line while it
gives real relief to our poor.
We are proposing to merge seven separate budget lines into block grants.
This innovation will give counties the flexibility they need to identify their most
pressing needs and apply funds as they know best.
All of these adjustments have been done with an abiding belief that the best route
from the welfare line is to the work line by focusing on job creation. There is no
other sensible way.
Yesterday marked the 101st birthday of Ronald Reagan, our 40th President. He was
a man who supported Franklin Roosevelt and also understood Roosevelt's own
warnings about the need for a balance between a vigorous government and an
He chose vigorous. Here is what he had to say:
"Government has an important role in helping develop a country's economic
foundation. But the critical test is whether government is genuinely working
to liberate individuals by creating incentives to work, save, invest and
Pennsylvania is, as I said, still in difficult times. Its future will rely on that sense of
purpose that Reagan and Roosevelt both embodied. Another Roosevelt -Teddy
Roosevelt — dedicated this building a century ago. He is often quoted as saying: "I
dream of men who take the next step instead of worrying about the next thousand
Here is that first step: We need a budget that employs simple honesty for the
common growth of our commonwealth.
We must continue the journey that will turn the road to recovery into the path to
Let's get started.