 All right, good afternoon everyone and thank you so much for joining us. It is budget day here in Harrisburg and we are so pleased to be joined by Governor Wolf who has carved out some time following his budget address to answer your questions from Facebook. Governor, welcome and thanks so much for being here. Thanks for having me, Ashley. It's good to be here. Absolutely. Well, we're going to get to those questions in just a moment. But first Governor, you delivered your second annual budget address on the house floor this morning. And for anyone who may have missed it, can you just talk briefly about what is included in this budget? Sure. A budget address is normally a time to lay out the proposals you have to move the state forward. But overarching this whole process are two real contrasting visions for Pennsylvania. One is a budget that actually balances, that we actually pay for the things we want to invest in. Another is where we play games and say we're actually raising the money but we're not. And that route is very quickly going to lead us down to, down a bad road, of higher property taxes of schools that close down, classrooms that just explode in terms of size, laid off educators. The other, the one that I'm proposing is that we actually be honest with our budgeting. And I'm the messenger here. I'm just saying, our budgets have not been balanced. And it's not just me. The rating agencies, standard and poor, Fitch, Moody's, the independent fiscal office says that we're looking at a huge budget deficit if we don't do anything different than what we've been doing. Because all the things we've done to move things down, kick the can down the road so to speak, comes due in this fiscal year. So today I basically laid out those two contrast, that contrast. We can go down the road we've been going down in which case we're hitting the train wreck within the next 12 months. And that means higher property taxes. It means closed schools, all the bad things that I talked about. Or we can actually agree for the first time in years that we're going to fund the budget that we propose. Which is, by the way, what the Constitution says we should do. In which case then we can invest in things we have to invest in. That's the choice we have. Higher property taxes, poor, less schooling, fewer human services. Or do at the state level what we should do, have a responsible budget that we actually pay for. And that's the contrast that I laid out today. And as a reminder for those who are just joining us, Governor Wolf is holding a town hall right now, answering questions submitted by Pennsylvanians to his Facebook page about his 2016-2017 budget proposal. And we received a lot of questions and we're going to try to get to as many as we can. And we're going to start off with John. He's from West Inola. And John says, we as citizens of this great commonwealth have come to expect certain things from the legislature and governor. Exactly what do we need to do to get the budget passed on time as we not only need but deserve? That's a great question, John. I've been asking that same question myself. I think there are two things. First of all, we've got to agree that we're going to get an honest budget. Not a sham budget. Not one that just says I'm going to pay my June payment in July. So therefore, this fiscal year that ends in June, I've actually had fewer expenditures. Well, you know, and I know you can't do that in your household. You can't do that in your business. So we've got to have an honest budget that actually funds the things we want to invest in. I think then second, we need to get, in this particular case, I've worked really hard over the last year to get a budget that was approved, agreed to by Republicans and Democrats in the Senate and the House. We had that. The first part of that was the general appropriations part, which is the biggest part of the budget. That passed the Senate 43 to 7. It even passed the House. There are a number of votes you have to take, and it didn't get to that final vote. So on a procedural issue, it didn't actually make it to my desk, but it passed. And so my suggestion would be if you want this, tell the Republican leaders in the House to actually get it done. That's what's holding this up. We do have a democracy. We do have divided government. We need to acknowledge that. I do. This calls for compromise. I have compromised, but we need an honest budget that actually gets us what we agreed to across the finish line. Okay. We're going to move on to property taxes. This is Joe. Joe says that you were quoted in the Reading Eagle saying, relying on property taxes to fund something as fundamental as public education is not a good system. He wants to know, is there a better way to fund education by passing Senate Bill 76? Yes. Senate Bill 76 basically eliminates the property tax. And in a lot of ways, there's a lot of appeal there. My goal, though, is to say, I'd like to have a 50-50 split. The biggest property tax bill you get comes from the school district in just about every municipality. So if we could actually have the state, and this would be, I think, a less of a lift than passing Senate Bill 76, if we could get the state just to take 50% of the share for public education, and we're 45th in the country right now in terms of the state's percentage of funding public education, if we went up to just the middle of the pack in terms of the United States, we would have a huge reduction in the property tax. And I think that's what we ought to be aiming for. I think there ought to be some local control, and I think having a property tax allows us to put one more type of tax in the local arsenal of taxes, but the state has to stop abdicating its responsibility at the state level and say, we will be a real partner in funding public education, and that will do a whole lot to reduce property taxes. Moving on, this question comes from Linda from Satterton. She asks, how do we get an unmovable legislature to a position of compromise? She says that anyone who follows the politics of Harrisburg knows that you made concessions and had a deal with a Republican leadership. Linda, thank you for that very kind note. I agree. We need to move some recalcitrant legislators, really, some of the leadership in the houses. I mean, if you want to really be focused, because we had a bipartisan deal. But I think it was historic. It gave certainly historic funding to education. And we actually had that deal pass in the house on the appropriation side, and it didn't make it because the House Republican leaders decided not to push forward with it. That was surprising to me. I think it was surprising to a lot of people. And I think the way we get over this with the array of legislators we have in office right now is to urge the Republican leaders in the House to move forward in something they should have done before the holidays and did not. Okay, we're going to move on to school funding. And Brian wants to know, can the Governor guarantee that any additional school funding will go directly to benefit the children and not teacher pensions or healthcare costs? Yeah, the idea is to make sure that any funding from the state really goes to the educational enterprise. And to that end, and I think we could do better than we've done, but to that end I've tried to improve on what we have in the past. And when I made my proposal in March of 2015, which is still not past, was a $400 million increase in basic education. And I wrote to every superintendent and said, I want to know how you're going to invest that money in the classroom to make sure that it doesn't go into something extraneous to the educational enterprise. And got letters back from almost all the school districts detailing where that money was going to go, and it was going to go into the classroom. So I think accountability is really important. We need to make sure that the funding that our taxpayers provide for our schools is being, those funds are being wisely invested. And I think our taxpayers have to have confidence that they're being wisely invested. So the question is really, really good. We want to make sure, and I want to make sure, and I agree that we ought to make sure that that money is being wisely spent. I can't say that I have the perfect answer for that, but I understand that that is a responsibility that we all have here at the state, and I will do my best to take up that responsibility. Okay. So this one's a pretty short but simple question. William wants to know what is actually going to be taxed and why? In my proposal and the 16-17 tax proposal, it really depends again on the decision made here in Harrisburg as to which path we want to take. If we want to take the path of fully funding our own budgets here, then my proposal is that we do that with the personal income tax, which is, I think, I'm looking to go from 3.07% to 3.4%, about a 33 basis point increase, which would make us still I think the third lowest personal income tax in the United States. That would basically take us most of the way toward eliminating the gap. There are a few other things that would include a cigarette tax and a shale tax that would have some money in 2016-17, about $200 million, but those are the big ones in my proposal. And on the heels more. Or by the way, let me just say, if we don't do that, then the alternative, if we don't do this at the state level, then what you're looking at is huge increases in local taxes, mostly property taxes. So I'm proposing that we do it at the state level, but if I don't prevail, it's going to be local taxes and mostly property tax increases. Another budget question, Victor from Philadelphia wants to know what have been the most significant logistical and political barriers to an effective budget development process that you've seen? Well, I think there's fundamental disagreement, which in a democracy is right, we have divided government so strangely enough, not all the Republicans agree with my priorities on education. And I get that, and that's what a democracy is, we're supposed to argue about that. The part that puzzles me in this budget process is the lack of a willingness on the part of too many people to get their arms around the math. Two plus two does equal four, and we have to have a budget that balances. That's according to the Constitution. We all took an oath to swear allegiance to that Constitution to uphold and defend it. And the problem with the process right now is that, I don't know, I'm not a psychologist, but it seems like denial. Some cognitive dissonance that people think we have a balanced budget, but we have the standard and pours, Fitch, Moody's, the rating agency say, no, we actually don't. And they've downgraded our debt as a result. You have the independent fiscal office saying, you don't actually have a balanced budget. Your revenues and your expenditures, they don't equal. And so the one time fixes you've put in here, the patchwork that you've put into this budget, while it looks good maybe on paper because you've made certain assumptions, if you actually dig into it, not too deeply, it doesn't really add up. So we just need people who will get their arms around the math, I think. I'll be happy to debate the priorities all day long, but I don't think we should have to debate the math. We've got to get that right. Okay. So Brandon from Ephrata, he talked a little bit on Facebook and I'm paraphrasing here about education funding. He wants to know, how do you intend to fix the current pension bubble issue that is arguably one of the main root causes of too much state spending? Yeah, it's a good point with all the baby boomers retiring, there is a big demand on our pension system so that we've had huge increases over the last number of decades on pensions. Not at all helped by changes to the system back in the late 90s, early 2000s. In 2010 that was changed with Act 120 and a bipartisan agreement to actually rein in the pension system and employees moving forward have a very different pension system than the ones who were employed before that. But you still have a lot of baby boomers in the old system who are retiring and who have claims on this pension system. So it's a big deal and it was exacerbated that problem by the fact that for many years our government did not actually fully fund on an actuarial basis the pension system. So we now have this big hole and my budget in 1617 proposes to pay the bill and that's a $500 million increase just in 2016-17. Now the good news is this is the last year where you're going to see that type of increase from now on and it should level out. By the time you get to 2035 and I'm saying this right now just as a pretty whoever the governor is in the legislature in 2035 they will take full credit for the huge drop. Right now if we have the current returns that we estimate there will be about a $4 billion annual drop in expenses, expenditures. So whoever is in charge at that point will take full credit for that but really it's the baby boom generation moving through the system and that's what's really going to take care of it. I think I agreed with the Republican Senate on pension reform and that would affect employees moving forward but it really wouldn't reduce the expense. What's really going to reduce it is time. So we're going to talk a little bit about agriculture funding. Amy wants to know as the state looks at the threat of the avian in flu why would you cut the budget for testing and research? Yeah that's a great question. I support agricultural funding. I support doing what the state needs to do to address and try to fend off the challenge of the avian flu. But here's the problem. We don't have the money. As long as the legislature wants to continue to play games with the budget there's no money there. I mean I'd like to fund a lot of things but we can't honestly because we don't have the money. We're already borrowing money just to keep the lights on. So there are programs, a lot of programs including these, the agricultural funding. I mean agriculture is our biggest industry by some accounts. I was a Peace Corps volunteer. I was an agricultural extension worker for two years in India. So I have a visceral appreciation for agriculture. I understand what it means for Pennsylvania's economy and I understand that we need to invest in it. That and a number of other things we need to invest in. We need a budget that actually owns up to that and honestly addresses this and other problems by making sure that we have a budget that is fully funded and fairly funded. Okay and Josh wants to know what are your thoughts on the privatization of the wine and spirit stores? Well I actually proposed a compromise for the budget but ultimately was willing to go along with the compromise that came out of the Senate and the House for making the liquor system, bringing it into the 21st century. When I ran for office I ran on I think and I agree with people who criticize the system for not being convenient. We need to improve customer convenience. We need to improve pricing. We need to do things, a number of things to make that system better. And I approve of those things and I agree with those things and again we have a democracy here and I have to work with Republicans in the House and the Senate to work through that but I agreed with the Republicans in the Senate and the House as to what they wanted to see in their reform proposal I agreed that I would sign that had it gotten to my desk. It never made it to my desk but I'll keep trying. Alright so we're going to switch gears a little bit. We're going to talk about transportation funding. Tabitha wants to know where is the gas tax money going and how do you justify maintaining a level budget for transportation in the light of the horrific shape of Pennsylvania's infrastructure? Yeah that's a great question and thanks for asking that. I think the level funding you're talking about is the general government operations. That's the salaries for the people in the Department of Transportation. The money from the gas tax that was passed actually back in 2013 before I got here actually provided money for the roads and the bridges and that money is being invested I think we're looking at two billion dollars in the next year or so to do that we've already invested a good deal of money. So we are investing that money directly into taking that money for making our roads and bridges better. The budget items that she's looking at actually my attempt to try to make sure that the people managing that process that we're as streamlined and efficient as we can possibly be. And now we're going to talk a little bit about state universities. Matthew wants to know what will you do to stop the raise in higher education costs that have increased at rates that far outstrip the inflation rate? Yeah again a fully funded budget. I think higher education is really really important. As I said in my budget speech a really important thing for a limited government like ours in a free market economy like ours we shouldn't do a lot of things but one of the things we should do is invest heavily in education so that before kindergarten through basic education through higher education Pennsylvania's citizens have access to affordable and relevant education at all levels throughout their lives and so we need to do that. The answer is we need a fair we need a responsible budget that actually has the money in to allow us to do that. Okay and Tanya on a different note says a governor Wolf as a 4-H leader and a dairy farmer I am asking please reconsider not cutting funds from agricultural related programs. Yeah Tanya right? Tanya. I couldn't agree more. I mean agriculture is huge and it's a big part of Pennsylvania's economy, big part of Pennsylvania's life, families it's just a major it's a centerpiece of Pennsylvania and what we need in order to avoid cutting that and any other good programs that are out there again responsible budget where we actually have the funds we don't have the money because the budgets that I've been given so far don't have the funds we have a choice to face here and it's not just agriculture it's education it's human services whatever your sweet spot is we're not going to be able to afford those things if we don't have budgets that have revenues that are adequate to those expenditures so I couldn't agree more with the things that we ought to be investing with Tanya and others those are really important not just good programs I think objectively they really make a difference for Pennsylvania we need to have the funds we need to have the revenues to cover the expenditures and the investments we want to make in programs like that. Okay and this is going to be our last question because we are running short on time this is from Wendy and Wendy says Governor Wolf my husband and I have worked hard for many years to have a home that we love instead of getting easier as the years go it's getting harder we're in our fifties but we have to work more than we ever have before our property taxes are climbing so high that I don't know how much longer we can keep up with them. It's tragic it is absolutely tragic and and she's there there are many many stories like this in Pennsylvania it's why I am a I continue to be a strong supporter of property tax relief but I also continue to be in that vein a big supporter of the states taking on a bigger share of funding for public education that is the biggest chunk of the property tax increases that people around the state have felt and I would I don't know the specific cases with Wendy but I would imagine that if she looked at her tax bill the property tax she's paying the biggest chunk of that is the school tax. The reason property tax payers in Pennsylvania pay so much in property taxes is because the state is paying so little. We are 45th in the United States in terms of the state percentage of funding for K through 12 public education. If we were at 50% that would be would be billions billions of dollars of cuts in property taxes. So I I agree with we need to to get away from an education system that relies so heavily on the property tax and relieve property taxes property owners of that burden by making the state pay its fair share and the way we do that is making sure the state has the resources it needs to invest public education. OK, all right well governor we've covered a lot of ground today and unfortunately like I said we are out of time or running close to being out of time but to close up could you sum a little bit one final time why this budget comes as such a crucial time for Pennsylvanians. Yeah, there are a lot of reasons why every governor will say every budget's a crucial one but this one actually is 1617 the fiscal year that starts July 1st and goes till June 30th of 2017. We're facing a train wreck. Standard and poor's, Fitch's, Moody's, the independent fiscal office, our budget office, whoever you want to talk to says we have about a two billion dollar deficit, a gap between what we raise and what we propose to expend and in 2016-17 most of what we're proposing to spend actually is stuff that we've inherited from the past or formulas that that just exist. For example, I already mentioned 500 million dollars is basically what we owe in pensions and if you put it off you're just you're going to have to pay it down the road so 500 but there are a lot of things like that 800 million dollars in human services most of which most of which are just based on formulas or based on things that we didn't pay for in the past and now the bills come due. So we are facing a train wreck now you know maybe in the past you could get by with some one-time fixes and some patches and some band-aids but we're now at a point where if we don't address this problem honestly and responsibly one of two things is going to happen well if we don't address it responsibly surely what's going to happen is we're going to have big increases in local taxes mostly property taxes we're going to see human services and education they're only two places you can cut in the general fund at the state level education and human services they're both going to get just devastated and we're going to have you know teachers laid off and increased size of classrooms or we can we can actually do the responsible thing at the state level and fund education or do our share of the funding for education at the state level have the revenues we need to balance our budget and make sure that we don't have a two billion dollar hole if we do that I think we have a bright future if we don't we're we're going down the drain and I think we need to stand up for that because if we don't do it now there won't be a tomorrow now's the time to do it because now is when the bills are coming to all right well governor will thank you so much for taking the time to sit down with us today we know it's been a very busy day for you and thank you so much for watching our budget day Facebook Town Hall to learn more about governor Wolf's budget proposal don't forget to follow him on Facebook and Twitter thanks Ashley thank you very much