 Hi everybody, can you hear me all right? Appreciate you're coming out. I this this press conference is extraordinary. I am not trying to do anything other than Show you what I believe to be the truth in terms of the mathematics of this budget and before we get to what I have to do on Wednesday, what I want to do to to prepare and present the House of Representatives with my revenue plan, I want to show you why I have acted the way I have and stood up for what I think is the right thing in in Pennsylvania in this budget and overarching everything of course are differences of opinion in terms of what we ought to do in terms of funding priorities but overarching all of that is the mathematical requirement that we balance this budget and The premise that my premise that we have not been doing that and it's a bipartisan thing I'm not trying to assign blame to anybody. I know this is a partisan place but I am here to say that this is a problem that every Pennsylvania has 12.7 million of us are Faced with a problem and that is if we don't balance our budget after years of not doing it in a bipartisan way We are going to have serious problems this year and even bigger problems next year And that's what I want to talk about today My assumptions and where I'm coming from on balancing the budget. So now I'm going to try to move this forward And I'm not sure how to do this Up here here There we go, okay now at first glance this is the 1415 budget right at first glance it looks like we ended up in a good place We have a 274 million dollar ending balance And that's that's on paper however The 2014 15 budget relied on over two billion dollars of one time and unsustainable sources And that sounds like something a partisan would say right, but it's not The problem is these funds that I'm calling one time and unsustainable actually don't recur in 2015-16 And I have some quotes here as to to where we come up with the smoke and mirrors budgeting But just to break down that two billion dollars for last year in that budget one time revenues $199 million now one time revenues includes $417 million in extraordinary lapses 75.3 million dollars in the balancing incentive program that's increased federal revenues The increased of the use of Department of Health age rebates That's 18 million and then as sheets 389 million now just as use that as an example you're familiar with the sheets You know those things that the treasure throws out in the newspapers every once in a while to say you ought to come and claim money that the state Ours you because you know you had a savings account some time ago that you didn't do anything with it sort of lapses to the state Well that never actually It's always yours in Pennsylvania law But we had a rule that after five years After five years that bank had to give it to the Treasury and it would sit in the Treasury as cash Wasn't necessarily ours. We have still owed it to each of us, but it was in the Treasury Well, they changed that from five years to three years Well when you do that what was five years in that bank now three years all of a sudden you have this big mass of money That gets one time transferred to the Treasury still not our money But it's cash that's in hand and that was one of the things that was used That's the kind of thing that makes up that two billion dollars again one-time revenues rating special funds like the lottery One-time cost shifts As an example of that is the managed care organizations 394 million dollars we decided to pay a month late He's a month late. That's no big deal But an extra month that's some they have to come up with with the revenues to finance somehow finance that 394 million dollars But we meanwhile are off the hook for 394 million dollars just this one year because it just Puts it off for a year, but all those things added up to two billion dollars last year and again I have the quotes. It's just not me. This is the rating agencies you the reporters have been acknowledging us so if you did a Budget that was not smoke and mirrors you'd start with the idea of a Cost to carry something that said okay Here's what we actually spent last year and this is what they mandated in terms of all these smoke and mirrors pushing Kicking the can down the road. So what do we actually have to to raise this year to spend what we have to spend before? Tom Wolf puts anything in for education or act 89 puts anything in for roads and bridges. Well, here's here's what we are We have human services 886 million dollars again start with the total spending that we did last year 29.153 million note billion Then you have mandated increases human services 886 million now You know part of that Is 400 million that was shifted from last year to this year So that 886 million is 400 million higher than it should be because we use that one-time shift of the managed care organizations For example, we still owe it, but we put to this year payment that we should have made last year So we basically doubled up this year And unless we do more smoke and mirrors and kick that can down the road one more time We owe it this year. So it's now not 400 million, but 886 million Pension 715 million we did a smoke and mirrors thing there Also, we took about what 200 and some million dollars out of the the tobacco settlement fund You know, we just took it out. I don't know what why we did that I mean, there's no good financial reason to do it except to say it made the 2014 15 budget a little less as part of that two billion dollars of shifts, but it makes the 2015 16 budget even even higher debt service well, that's what you owe You know, you you make your interest payments That's what you have to do and and the amount of money you have borrowed We had to borrow some extra money last year just to keep the lights on you'll recall So there's 53 million there corrections That is even with no increase in the prison population. You're gonna have to pay prison guards So that's 203 million dollars and then the other category some miscellaneous things 23 million dollars That adds up to 31 billion 33 million dollars if I added nothing in my budget if I wanted to fund nothing in education We didn't want to do anything with anything to increase We would have because of this build-up this compounding of one-year fixes and shifts 31 billion 33 million dollars. This is what we have to spend. It's just mandate now the 15 16 Republican budget again This is the one 1192 is the number you'll recall The IFO revenue estimate that's the independent fiscal office. They their estimate was for 15 16 would be about 29 755 million dollars The total mandated expenditures remember 31 billion 33 million that's where that number comes from that leads to what I'm calling just for 15 16 a structural budget deficit of 1 billion 278 million dollars almost 1.3 billion dollars You're wondering why I'm complaining That's a 1.3 billion dollar structural budget deficit just in 2015 16. I haven't even gotten to 16 17 yet But in that to balance the budget to get to that 1.3 billion and add a little bit for some extra spending that they wanted to put Into 1192 it basically came up with 1.5 billion dollars of one-time stuff It's not honest. What did they come out one-time revenues of five hundred and twenty million dollars? They came up with one-time cost shifts of five hundred and sixty four almost four million dollars and questionable savings of $424 million now what you might ask are in those things okay the one-time revenues There was a budget surplus carried over from 2014 15 of what we said 274 million. They say 300 million dollars well You know, I think There really wasn't a budget surplus, but okay. They said there was the liquor system revenue I've been in business all my life. You don't sell a business and I've been in businesses that you sell You don't sell a business in one week or one month unless you have some crony who's standing there to to take over that business And so you're upfront money the money that you're going to get from doing this and I proposed as you remember a compromise that was extraordinary for a Democrat to propose We would get a lot of money, but we wouldn't get much and if anything in year one it takes some time to do this So I'm not sure where that comes from the one-time cost shifts Authority rentals and sinking fund. That's called plan con They were just going to put off about 300 million dollars that we owe the state owes to school districts for buildings That have sometimes cases actually been built. They just weren't going to pay it Guess you can do that, but that's 300 million that isn't going to be in the 2015 16 expenditure We just decided we're not going to pay it Have you ever done that to your landlord? Mark He was my tenant If you actually do something like that, you're going to end up having to pay it and Usually your landlord is going to give you some kind of grief for for putting it off Well, this is what we're doing because we can child welfare payments. You've heard how human service agencies are Complaining legitimately about the pain and hardship that this budget impasse has caused in the Republican budget They were going to take a hundred and seventy two million dollars of child welfare payments and just put off payment taking the last quarter for 2014 15 or 15 16 in their budget and putting it off till the 16 17 year again That's 170 million dollars. You don't have to pay it's going to be in next year's budget They just took it out of this year's budget. So voila. I mean amazing magic. It's not in the 15 16 budget It's not an expenditure. We make which is true, but we have to pay it the year after that School employees social security same thing 80 7 million dollars put that off Don't pay this years on time let it drift into the next fiscal year into the 16 17 fiscal year So as far as the 15 16 budgets concern It's not an expenditure and then you have questionable savings Costs and revenue adjustments of 237 million and the failure to fund manage a managed care program of $187 million. I got to say I wish I could explain where they came from. I don't understand it So that last 424 million just is savings that just comes out of thin air So if you did an honest budget for 16 17 and said okay What are the real cost drivers for yet about what we had in 1192? You'd actually have to start with the things that were shifted from 14 15 to 16 17 and Acknowledge that that 1.5 million dollars actually had to be paid so the human services It's 654 million dollars again. That's before you I add anything Before anybody says I want to do something different pensions 458 million you have to put that in The debt service is now 78 million That's just what it is corrections 166 million a million dollars and others 147 that's 1.5 billion dollars That means the mandated spending before I put anything in for anything I want or anybody else wants who supports me. It's 30 is 32 billion 536 million dollars So the 2016 17 budget With revenues of 30 billion 247 and mandated expenditures again with what I just said back here 32 billion 536 Leads to a structural budget deficit in the 16 17 budget assuming that you know we Do what what was proposed in 1192 of 2.2 almost 2.3 billion dollars And that's assuming that the budget for 15 16 this is the six. I'm sorry This is 16 17 budget assuming that the 15 16 budget was was actually balanced We'd have a 2.3 billion dollars That's making the biggest assumption that 1.5 billion dollars in the 15 16 budget was balanced Which it is not we'd still have a 2.3 billion dollar deficit with If we were looking ahead that's that's where we are so Let's take some you know pensions one of the things that I think The other side has talked about is how we have to take pension seriously I agree with that and I proposed a pension reform But there's neither there's no mine actually does anything in year one or two 15 16 or 16 17 There's if you just took Senate bill s1 as it was originally proposed it would only Take care of about 2% 44 million dollars would reduce expenditures in year one of the The budget so it really doesn't doesn't do a whole lot So here's the here's my point and and this is why I've been such a stickler about this The math just doesn't work and I think all of us Pennsylvania all of us in this room We have to understand that set partisanship aside. I'm not assigning blame here I'm just saying this is where we are if we don't do anything if we don't figure out how to make the uncomfortable choice of Having revenues that are real of being honest in our budget We're gonna have next year to come up with somewhere between two and three and a half billion dollars of cuts That means most of that has to come out of human services or education I mean you can go into these of the departments but there's just not enough money outside of Department of Human Services and education to find billions of dollars and You're gonna have to make cuts the likes of which we have not made for a long time ten years In fact when it comes to education You're gonna have increased property taxes the same thing is gonna happen here that happened back in 2011 When a billion dollars was cut from education K through 12 and we're gonna have additional credit downgrades because the Credit agencies are gonna say well, you're still using smoke and mirrors So that 83 basis point premium you're now paying on your debt because you're not a triple-a rated state It's gonna go up even higher and so is our debt because we're gonna have to borrow money to fund our deficit So that's the problem Doing nothing now is gonna result in a huge cut for education. I think that probably is the Is a key element here and if people didn't like what they saw four or five years ago They're gonna hate next year Because we simply have come to the end of the line using these one-time fixes funds are empty We've used smoke and mirrors enough and the compounding effect of expenditure increases is just getting higher and higher each year the increases get higher and higher because We have put off Spending in the year. We should have spent it to the to the next year and those bills are come and do Just an education though if we if we really cut what we're gonna have to cut next year if we don't find the revenues this year a Billion dollars that's going to take education funding to the lowest level since 2005 2006 that's a 10 year you have to go back 10 years to get to the the level of those cuts so that's my story and And that's why I'm taking this budget cycle. So seriously We have got to get it right this year and it's not a matter of electives sort of saying, you know, geez You're you're a tax and spend person. No, I'm a business person. I'm a person who actually wants to make my ends meet I want to have a balanced budget and we could argue all the time and we should this is what a democracy is And I'm all for that debating what we should spend money on and how much we should raise But I don't think it's a partisan thing to Want to say insist on a discipline that says we have to be honest about our budgeting The math has to actually work two plus two does equal four in the real world It has to equal four here in budgeting in Harrisburg and we can't keep doing what we've been doing and again It's a bipartisan thing. I'm not blaming any one group, but you know, it's one thing to say We're not raising taxes And we're gonna cut expenditures, but then we need to do it honestly This is the way we've been doing it is not at all honest and we've got to stop it That's what my intransigence has been about. It's not about ideology. It's about math