 Good afternoon Today I am sad to report House Republicans again Failed to deliver on a budget agreement Over the last several months. I have been flexible I have been patient as they have repeatedly failed to agree amongst themselves on to how they're going to approach the budget House Republicans continue to prolong and delay the debate over the means to pay for the programs they themselves Voted to pass overwhelmingly in June They have worked tirelessly to block a severance tax at the expense of finishing the budget process months ago in February I proposed a budget that balanced and it balanced by implementing more than two billion dollars in cuts in Savings in efficiencies and relying on a severance tax in closing loopholes I proposed this budget to begin a conversation on what I thought was a common ground. I was optimistic Despite the historically divided government big conservative and very conserved big and very conservative Republican majorities and a Democratic governor We were making real progress. I thought we had made strides on many issues over the last year and a half Working together. We legalized medical marijuana. We legalized We legalized medical marijuana. We instituted meaningful liquor reform for the first time since prohibition We invested in education at all levels at historic levels We have a fair funding formula some sort of measures to combat heroin opioid epidemic in Pennsylvania Pension reform that had been at the top of the Republican leader to do list for decades Yet I a Democratic governor with Republican majorities in both houses in the both house and the Senate brought it across the finish line But despite these efforts despite these indications of our ability to work together One thing has become abundantly clear too many Republicans in the legislature are more focused on the 2018 elections than on helping Pennsylvania succeed. They'd rather see me fail than Pennsylvania succeed they'd rather protect special interests They'd rather protect lobbyists and campaign donors than do the right thing. I'm not going to play their games anymore So I'm drawing a line in a sand Yesterday just yesterday. They said they could not pass their own House Republican proposal to lift the exemption on commercial storage Now their proposal to tax hotels has too failed The fairest and simplest solution to this challenge would have been and still is to replace these taxes with a severance tax It would produce the same amount and It's widely supported. This is the thing that severance tax is widely supported throughout the Commonwealth and among bipartisan Legislators and that was evidenced just a few months ago by the responsible action taken by the Senate It's common sense Pennsylvania is the only major gas producing state in the nation without a severance tax The house could still put this in and we could still have a vote this week to get this done Doing this would bring together a budget with ideas from all caucuses and from the administration The House Republicans had every opportunity to put a balanced budget on my desk and they have continuously failed So in the absence of a compromise revenue plan getting to my desk I'm taking action on my own to manage our state's finances I'm going to take immediate steps to address the deficit first I'm going to initiate plans to securitize the cash payments from our state's liquor system That's going to raise 1.25 billion dollars to pay off nearly all of our prior year deficit and Significantly reduce the need for additional temporary borrowing to pay our bills The liquor control board sent 210 million dollars into the general fund last year Far in excess of the annual amount necessary to make payments on this loan This would be structured similarly to the Republicans plan using tobacco settlement funds Additionally, I will take steps to do best of my ability to manage the compliment and Continue to find ways to streamline government services that do not harm Pennsylvania's and in fact make Pennsylvania's services to Pennsylvania's better. I will also look for other assets in the state to monetize Doing all this will put the Commonwealth in the best position possible to protect funding for schools For senior programs for hospitals along with investments in our roads and bridges Again things that we all voted for back in June. This is not the outcome. I wanted let's be clear The House Republican foot dragging has led to one credit downgrade already and warnings of more That means the Republicans in the house by virtue of their inaction and this is really important have handed every single Pennsylvania taxpayer a tax increase All so special interests don't to have to pay their fair share It means that every entity within the Commonwealth that has the Commonwealth's backing will have to pay higher interest rates That affects school districts. It affects townships. It affects cities. It affects boroughs It affects counties as well as the Commonwealth Now we'll all have to pay more just to get the same This is not just irresponsible. It's hypocritical The very folks who have proclaimed themselves the protectors of the taxpayers hard-earned money Have blithely reached into the pockets of those same taxpayers I've had enough of the games in February I presented a balanced budget with no broad-based taxes and more than two billion dollars in cuts savings and efficiencies It funded schools it funded senior programs and hospitals it held our commitment to create jobs But in the time since my budget speech house Republicans have again proven themselves incapable of completing their constitutional duty And so I'm going to manage the finances of the Commonwealth until the house sees fit to do what it's supposed to do I will make sure we protect education. I will make sure we protect our seniors I will continue to do what we need to do to combat the opioid epidemic And I will continue to do everything I can to create good-paying jobs and attract good businesses to the Commonwealth Again, this is not the way government is supposed to work But I have to make sure that Pennsylvanians are not hurt And so I'm going to have to act to protect investments that we all made earlier this year in Pennsylvania Any questions? Yes? Managing the compliment. What does that mean? Are you going to lay people off? If no just by attrition just for example There are 1600 fewer People working in the executive branch now than there were back in December just through attrition the turnover is that great? So I will continue to work with agency executives agency heads to manage the compliment so that we're actually doing what we can to streamline government. Yes Yeah We're We haven't negotiated yet But just as an example over a 20-year period amortization with 4% interest it would be about 85 to 87 million dollars a year We last year we got 210 million dollars so 85 is less than 210 million dollars and we could capitalize the first-year payment So if you want details on how that would work again We haven't negotiated it yet and we'll have to see the price will vary as to whether it's callable non-callable all kinds of things But just as a general thing. Yeah First of all the the tobacco settlement fund securitization, I mean, it's it's something that that we could do I have a problem with that because there are programs that that Tobacco settlement fund actually funds and that would be You know we'd have a problem sustaining that if we did that so this seems to be something that that is not going to Have the impact that securitizing the tobacco settlement fund would have Yeah, I'm fine with I'm Fine with with what I'm saying is that I'm tired of waiting. It's over three months and I've been getting working with them negotiating with them and We have agreements with with four of the five parties here We've gotten to the point where we've actually said, you know I called meetings over the weekend of the leaders of the Senate and the House and We're all saying, you know, what is it that you want to do and and they can't even get the vote so far for the things They've said they have called now. This is the third time They said we can't get the votes for proposals that that we're making This does not for clothes on anything that they wanted. I'm just saying I'm tired of waiting It's been waited over three months and and I'm not giving up on this process I'm just saying Pennsylvanians need some certainty in this process We can't keep waiting for for a proposal that may come out of the Republicans in the house that they seem so far to be unable to deliver Any time any time any time any time they want to do this I'm not doing breaks on anything I'm managing with what I have to the best of my ability if we actually had recurring revenue If we actually get recurring revenue like a severance tax for example That's gonna make it easier to do the things that we need to do to do that But in the absence of that I am going to have to manage I can't sit here and just wait for something that over a three-month period has yet to appear despite Promises yeah That's right. Well, that's a good point I have been managing this but I've been managing it with the expectation that the Republicans in the house would deliver on the promises They made again the Senate Republic is delivered on the promises. They made And I was expecting the same thing from people with whom Shaking hands and looking them in the eye and getting promises But I just can't do that anymore So I'm gonna I'm gonna manage this and and there will be some some things that are gonna be harder to do in the Absence of that recurring revenue. I can't tell you exactly what those things are But the basic things that we committed ourselves to back in June protecting education at all levels protecting seniors Protecting jobs and trying to create more jobs and and doing what we need to do to keep Pennsylvania in the forefront of the opioid epidemic Inviting that epidemic. I'm going to continue to do everything in my power to address those those issues Maybe you had a question Or What spending freezes are you talking about I'm I'm hoping to do what I need to do to make sure that schools get what they need the human service organizations get what they need That we go forward with what we agreed to do in in the budget back in in June again I'm gonna see a lot of that depends on how revenues come in The general assembly has authorized spending of money And I am now by default the one who has to manage whatever revenues come in with what we have in place To make sure that we end up with a balanced budget and what I'm saying here is I am committed to doing that How much that that impinges on when some some of the things in that that appropriations budget? I don't know yet But it would be a lot better if we had the budget revenue To pay for the budget that we agreed to in June. Yes I'm looking at everything I need to do to balance this budget and manage the taxpayers Fund here that's that's what I'm going to do and I did that in business. I'm going to do it here. Yeah I You're talking talk to the treasurer about this and whether your yes We didn't get into that conversation But but I gave him a heads up that I was coming out and doing this and he thought that was a good thing But he can speak for himself. Yes Yeah, let me because this is not this is not a discreet plan that is Separate and apart from what what I would do to manage this if I had The revenues that were enshrined in in my proposal in the Senate proposal in the different proposals that came from the Republican leadership in the house that they haven't gotten a vote for It just means that given Less that's going to come in I'm going to still try to to manage this process if at any point in time They come up with with a budget proposal that passes muster in the Senate That that I can I can sign on to yeah, I will I will Move to that because that's going to give me the the revenues that I need That I'd like to have to make sure that all these things are protected in the absence of that I'm going to do the best I can Yeah What we are part I think I think the the the problem is that that we know about $500,000,000 of recurring revenue Recurring revenue not one-time Transfers not something that says next year. We're gonna have to be back here talking about the same thing We need recurring revenue and and again, that's why I propose the severance tax That's recurring revenue that every other gas producing state in the United States has we don't have it here But recurring revenue would really Plug that hole again keep in mind of the three billion dollar deficit that we started this year with I plugged over two billion of that With savings and streamlining and again just the the the cut in the attrition in in the Compliment employees the number of employees 1600 fewer employees. That's worth about 150 to 200 million dollars each year That's recurring So I will continue to do do that kind of thing and I think that's but I still needed some recurring revenue the Senate I didn't agree that wasn't that's I mean that wasn't what I proposed but I could agree to it It was a compromise what came out of the Senate Back in in July The same kind of thing is is what what we need and it's not a matter of a couple dollars It's a matter of recurring real recurring revenue so that we can finally get our arms around this budget deficit This will close it Could you be more specific about the look in your eyes shake your hand promises. What were those promises and who broke them? Well, we had the first one was was on a severance tax. The second one was on the Exemption removal the exemption the elimination of the exemption for commercial storage That was a House Republican idea. Then we had one came out late last night I think actually was reported out of the rules committee on a hotel tax So then then we heard earlier today that they don't have the the votes for that No one billion two hundred and fifty million dollars But we need to raise we think we need that that's what would have been raised by the tobacco securitization, too Yes It's a 20 year amortization But again, we haven't negotiated this Charlie I'm just giving you an illustration of what at a 20 year period at 4% interest It was about 85 to 87 million dollars a year and we'd capitalized the first year The last question The liquor control board actually I don't have the ability to do that liquor control board does so I've spoken with Tim Holden the chairman Holden And and he didn't seem to think that would be a problem, so I'm making this Announcement the assumption that that he will do what he said he was going to do Well, that's that's a the state related Penn State University of Pittsburgh temple and Lincoln University That's called a non-preferred Appropriations that's sitting in the house of representatives that has not gotten to my desk I'm assuming that if it does get to my desk They will put the revenues in to pay for that 647 million dollar price tag that would cost to do this But again, if that comes to my desk without revenues, I'll try to figure out a way to do that But it makes it 647 million dollars harder to do Wait a minute Dennis Really As I said in my comments, I think it has everything to do with it I think a lot of people are playing politics here and They weren't last year and so we got a lot of things done the the from, you know Historic funding for education at all levels early childhood basic higher education to legalizing medical marijuana to pension reform that actually got A positive editorial reviews in the Wall Street Journal and the Washington Post when's the last time that ever happened We've we've addressed the opioid epidemic. I think in ways that most other states have not done So we've done a lot of things to get together And I think what's disappointing about this is for some reason that has stopped and I don't understand why it stopped Okay. Thank you very much