[ applause ] thank you. gentlemen, you might as well just stand and continue standing, because i want to recognize two other men that you see standing there in uniform right now. for several years we have seen courage on display as members of our national guard among other service members from pennsylvania served overseas in the war on terror. i want to tell you about the two gentlemen back there. recently, they were each presented with a heart, and now it may be close to valentine's day, but that is not the reason. it is out of love for their country and what it means. specialist ryan patrell from la zern county was injured fighting in afghanistan, and sergeant cuellar from delaware county earned his purple heart while serving in iraq. we are grateful for their

service and more grateful to have the winners of the purple heart back home in pennsylvania. welcome home, men. thank you. [ applause ] 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. and i again want to thank them. so we end it last year with the counts of great courage. we began this year on a note of sadness. joe paterno, our legendary coach and ambassador for pennsylvania in the world of sports died. his commitment to penn state and to the future 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 order of joe paterno. please rise.

thank you. thank you. last year when i stood before you, i spoke of a grave dilemma, and the state had a structural deficit of more than $4 billion and a public ledger demanded restraint. our needs as a commonwealth demanded action. we accomplished much of real consequence. 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. as 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 kree yayer or the creators g a marketplace who would be forced to pay for damages that were not rightfully theirs. i asked you last year to send me tort reform, and i said i would sign it. you sent it, i signed it, thank you. [ applause ] early today, we passed legislation creating new keystone opportunity zones. kozs they are called.

they offer assistance and incentives to businesses, and they have the potential to bring thousands of jobs to pennsylvania. this sends a strong message that pennsylvania is open for business, and i thank you very much. [ applause ] and i would note that i have had to amend what you have already in your hands at this point. after long negotiations, we are close to reaching a consensus on how to address the impacts of the moarcellus shale, and i wath watched the senate pass the marcellus shale legislation. i thank you. i thank you. i urge the members of the house to take this bill up, and rethis as quickly as possible, and pass this legislation. thank you very much. [ applause ]

by keeping taxes in check and spending under control, we continued to replace jobs lost in the recession. those jobs weren't created by any 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 towards changing the culture of tax and spend. together, we can make the 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 6%. we reduced the state automobile fleet by more than 1,200 cars and the agencies that fall under the supervision of the governor, and we have eliminated per diem expense accounts and 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 that mean? last year alone, the personal income tax increase necessary to close that $4.2 billion gap would have cost to 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, and in two years, two-income family of -- broken, inefficient and in need of reform. for a family coming out of recession, that is inexcusable burden to impose. understanding rer to reform means a simple truth,

and understanding that when you make less you spend less. it is a difference of 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 riverable cha-- ri channel. thf is this is a project that links our economy to the world. [ applause ] representative, i appreciate that and i will give you a couple more chances. 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 and anywhere that is 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. our estimate suggested 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 is 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 have worked with the 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, it looks like we succeeded.

[ applause ] but let us not stop there. let us not stop there. let us keep the pressure on washington. to help us complete the entire channel. let us not think that we have the entire amount at this point. we must keep the pressure up. democrat, republicans, here in this house together the know that this port has to wibe completed for the entire state of pennsylvania. [ applause ] and thanks to an innovative partnership, the giant shipbuilder is currently constructing two tankers, and because of that, exxon mobile has ordered two of a new generation of super tankers, and that is shipyard that will be

booming for years to come. more than 1,000 jobs have been saved there. thousands more will be spun off as those tankers take shape and set sail. our energy-producing fields continue to generate jobs. it is somewhat overlooked side effect that benefits all pennsylvanians, in every corner of the state is the estimated 40% average job 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 that we can make to the company behind the project is pennsylvania's embrace of a free market. 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 the governor's action team came to the aid of general electric which employed 500 people at the loco motive plant, and we made it possible for g.e. to expand and hire hundreds more at the new location in nearby mercer county. business, business creates jobs where it feels welcome. citizens live best where they are employed and don't live in the constant fear that what they

e earn will be taxed away. this approach works. our unemployment rate dropped by a full percentage point from the end of 2010 to this very moment, and as this year began it was nearly a full percentage point below the national average. our private sector workforce grew by 79,000 jobs. in short, we continue to grow the kind of -- 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 asleep. 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 the 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 catalog 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 cost cans. that means that we must continue the course bravely chartered by this assembly in the year just

passed. i'm submitting to you a budget proposal that is at once lean and demanding. in the coming weeks we will sit down the work out the final details as we map out the course. but this map does come with boundaries. we will not spend more than we have. we will not -- [ applause ] we will not raise taxes. [ applause ] 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, and every dollar spent by government is one dollar less in the sector that creates real prosperity. i'm bringing before you a budget built on the decisions of last year.

it is a budget that proposes more this 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 taxpayer should have in a variety of endeavors. i e lolook forward to working w all of you and framing these priorities into be a solid, responsible spending plan. one of the major innovations that i proposed this year is the use of bloc grants. bloc grants we found in the basic education and welfare budgets. together, these two departments account for more than 70% of our spending. when we include corrections and debt service, it is 90%. so with less to spend than we

like, we need to give more flexibility at the level that the money will be spent, the county and the school districts. 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 has passed. our costs are really 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 the present and future budgets are three problems bigger than a single budget. they are our 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 system. as expenses rise along with the 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. [ applause ] lastly is also critical that we address the transportation issues. this is not a budget item. [ applause ] 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 couple of decades, and it will not be solved over night, but whatever solution we enact will be a last one. i have spent significant time considering this issue with my transportation team, and developed some workable solutions, i believe. however these solutions will only be possible with your input. your assistance and your support.

i look forward to working with you in the near future on these. as we wrote this budget, we looked first at what state government is really meant to do. the government maintains funding for career and technical education. it is a very solid reason. it matches good jobs with trabed people. the widening gulf inincome helps us to realize that we need to pair the resources. and we should pay a vast a debt to the service members coming back overseas. they are coming home after serving us and the least we owe them is the training to land to a good job. [ applause ]

maintaining our commitment to the technical professions and the practical trades keeps a bargain with today and builds for tomorrow. as our energy sector expands, and the 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 that pennsylvania hands are working the machinery of industry. the demands of the mixed economy where free enterprise exists along encouragement teaches 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 ribbon cutting, the better the chances are of growing jobs. so i am breinging before you a robust market and vital economy and we call it jobs first p.a. and comprises four programs, pennsylvania, inc., and the comprehensive job matching system, keystone works and the target of industry service 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 the idea and the 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 quickly as possible. the targeted industry certificate program provides increased grants for college and trade school can students who are training for high demand occupations. in short, we are targeting our workforce towards the jobs. the goal was simple. if there is 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 to phase out of the capital stock and franchise tax. the department of community and economic development, we are at work finalizing a program that 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 of helping a job creator set up shop or to expand an existing one. this is the time to invest in the future and these programs can get us there. one of the core functions is to provide for education at several levels starting with the youngest. we have less money than i would like, so we must adapt. earlier, i mentioned our proposal to use bloc 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 into a single bloc grant. right now, education spending is

bound up in the thicket of outdated and time consuming regulations and mandates. the rationale here is clear, the districts know how to better send the resources than bureaucrats in harrisburg. we leave the education funding at the current level. there are no cuts. [ applause ] you see, there seems to have been some confusion, and even deception about what we did and did not do with the basic education funding formula last year. some insist that we cut basic ed

and this urban legend was spread by those who had the most to gain from the taxpayers expense. this is the case. when president obama handed the states billions of spending, the state's share was reduced in the basic education funding formula and in the place, they put the stimulus funds almost $1 billion worth, and those funds were one-time-only earmarks by the president. the last thing that they were intended for was to pay continuing yearly operating costs such as salaries. this term that everybody kept hearing was that the stimulus funds were for shovel-ready projects. instead, by accounting slig ini of hand, somebody buried our problems under cash and perhaps they misunderstood shovel ready. that money is gone. it is not coming back. what we did in my administration

and the men and the women of the general assembly was to replace the state's share of money, and in fact, more than $5.3 billion, last year's budget was the largest amount the state's taxpayers have ever put into basic education funding formula. the largest until this year. so, i want the -- [ applause ] so i want the various special interests out there to understand this clearly, if we are going to debate education funding, let's use real numbers. [ applause ] >> what harrisburg can do for education is to set standards both for the schools and our government. 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 the moment when we need to open the discussion about how best to finance higher education in this state. it is clear, we need to have a thorough public and candid conversation about how best to deal with the spiraling costs and our own obligations. recently, one elected official laid out an ultimatum.

he said, let me put the colleges and the universities on notice. if you can't stop tuition from going up, the funding that you get from taxpayers will go down. higher education can't be a luxury. it's an economic imperative that every family in america should be able to afford. those were the words of president obama, and his state of the union address last month. while i disagree with his prescription which is to pas much of the costs on to the states, i think that he is right that we need to confront the problem. i think that we need to talk about this honestly, and without rancor and dramatics. in order to get that discussion started, i am creating a panel of postsecondary education to study our is systsystem is and recommendations on how the universities can best serve the students and the citizens of this new century.

i have appointed rob wonderling to this panel, you recall him as a successful businessman who heads the chamber of commerce. i have asked rob and his group to report back. as we sort through the must haves to the nice to haves, and core functions, public safety is a central core obligation. citizens of the commonwealth must be protected. if question have no other job, maintaining civil order is it. without safety, there can be no society. my budget provides budgeting for a new cadet class to begin this summer of 100 state troopers. [ applause ]

>> we have also streamlined public safety and bringing office of homeland security into fold of state security. this past summer's floods have shown us what a well organized state emergency system is quite literally a matter of life and death. the budget also contains matching funds to continue the recovery from the summer's past floods. in holding to the theme of reform, this is the first time, the first time in ten years that it does not require an increase in the corrections budget. [ applause ] our justice reinvestment panel has delivered justice for victims and correction for offenders while stemming the cost of imprisonment. our commitment to the pennsylvania's needest poses a special challenge.