necessarily blame them. until we make wholesale changes to the system doing so is in their best interests. the problem is it's not in south carolina's best interests. so i will not support more revenue for our roads and bridges until we restructure the department of transportation. simply shipping more money into the current bureaucracy would be like blasting water through a leaky hose. some of it would reach the right destination, but too much of it would end up in a mess on the ground. i won't do it. that said, deficient roads and highways are an economic issue. that's why we supported a billion dollars in new road funds last year, which was the biggest infrastructure investment in a generation. it's why we proposed in our executive budget dedicating an additional 61 million in auto sales tax funds entirely to roads. but we know that's not enough.

we still have very substantial infrastructure revenue needs that have to be addressed. we have studied every option. some have advocated raising the state gas tax. yes, we do have the third lowest gas tax in america. gas prices are now down to their lowest level since 2009. non-south carolinans who visit our state would pay a portion of the tax and we would boost the are revenue stream that's dedicated to improving our roads and highways. but there are also major problems with it. we have not gotten to where we are as a state with our strengthening and growing economy by raising taxes. quite the opposite. if all we do is increase taxes whether it's the gas tax or some other tax, we will hurt our citizens, we will discourage job creators and we will dampen our economy. as i've said many times, i will veto any straight-up increase in

the gas tax. that's just not going to happen while i'm governor. it's the wrong thing for south carolina. so here's the deal. let's do three things at once that will be a win-win-win for south carolina. let's cut our state income tax from 7% to 5% over the next decade. that's a nearly 30% reduction in state income taxes. nationally it will take us from 38th in income tax competitiveness to 13th. regionally, it will put our rate back below those of north carolina and georgia. it will be a massive draw for jobs and investment to our state. and it will put more money in the pockets of every south carolinan, letting them keep more of what they earn. it will help work, savings and

investment. everything we need to make our people stronger and more prosperous. next, let's change the way we spend our infrastructure dollars and get rid of the elected transportation system so the condition of south carolina's roads is is no longer driven by sort short-cited short-sighted regionism and patriotism. let's stop raising the gas tax over the next few years and devote it entirely to our roads. that will keep the gas tax both below georgia and north carolina, and we'll do it without hurting our economy. because when coupled with the 30% income tax cut, it still represents one of the largest tax cuts in south carolina history. now, i hope everyone listened carefully to what i said. this is a three-part package deal. in order to get my signature on

any gas tax increase we need to restructure the d.o.t., and we need to cut our state income tax by 2%. if we do all of those things, we will have better roads and a stronger economic engine for our people. that is a win-win. [applause] >> i'd like to personally say thank you to speaker jay lucas for his leadership and his commitment to working with us on this and many other issues going forward. and i'd like to thank chairman brian white representative gary simeral and other dedicated members of the house transportation committee who have worked for months to find a solution to our crumbling road system. we can all agree that our state's department of transportation must be reformed in order to bring more jobs to south carolina. and i look forward to working

with both the house and the senate to solve this very real problem this year. between august of 2013 and this past november i spent my days and nights traveling south carolina and talking with our people. campaigns are a lot of things, but above all they're an opportunity. an opportunity to hear from our citizens who act as our state's conscience. an opportunity to look backwards at where we were and what we've accomplished. and an opportunity to share a vision for where we want to go. i've heard it said that the election results have given me a mandate. i thought long and hard about what that might mean. webster's dictionary defines the word "mandate" as quote, a command or authorization to act in a particular way on a public issue given by the electorate to its representatives. the way the word has been used

since november suggests to me that many think i have been given the authorization to act. effectively given permission to push through the agenda i desire. that is not how i see it. i never saw the election as a referendum on me but on all of us on the direction we have taken south carolina over the last four years. likewise, i don't view the results as anything but a command, a command by the people of our state to continue along the path we have traveled together since i first took the oath of office as their governor. that pact has been one of complete submitment as a representative of our state where every act we take is one that allows us to do business, expand and hire more people. it has been one where we jump at every opportunity to restructure our archaic government so as to

better serve our citizens. it has been one where we open our borders to new businesses and kept them shut to unions. it is one where we have kept south carolinans able to be open to the government they deserve. it has been one where bickering branches of government became a thing of the past. it has been one where we place the education of our children above our parochial and political self-interest. and it has been one where we put south carolina back on the map for all the right reasons. that's the path i believe in. it's the path that people of south carolina overwhelmingly embraced 10 weeks ago. and it's the path i will continue to follow, for if we do, there is no telling the heights to which we can take the state we all love. thank you, god bless you and may he continue to bless the great state of south carolina.

[applause] and now west virginia governor earl ray tomlinblin gives his fifth state of the state address. this is a little over 40 minutes. [applause] >> thank you. please be seated. >> mr. speaker, mr. president, members of the legislature, members of the board of public

works, justices of the supreme court of appeals, members of congress, distinguished guests of my fellow west virginians. 40 years ago on a night much like tonight, i joined my fellow legislators in this beautiful chamber as a young man and a recent college graduate just elected to the house of delegates. i wondered what on earth i had got myself into. armed with little more than a fresh perspective and a passion to make my home state the best it could be i was eager to take on the challenges i knew we faced as a state. on my first trip down the hall to the supply room to pick up my pens and papers and folders, i was stopped by the house clerk who wanted to know who the supplies were for. and i said well, they're for me. and he responded, well, who are you? and i said well, i'm the new

delegate from logan county. and he went, oh. so i was not a page. i just want to make that clear. but i imagine my motions and my expectations were not unlike our state's and our nation's youngest lawmaker sarah blair who finds herself -- [applause] >> -- who finds herself in this chamber as a member of the majority working with the governor of the opposite party just as i did 40 years ago. now, as many of you know, that governor was r.j. moore, jr. [applause] >> tonight our thoughts and prayers continue to be with

senator capto and her family has they mourn his passing. as governor moore once welcomed me tonight i welcomed delegate blair and all the new faces in this chamber. i am confident we all share the same goal, that goal being putting west virginia first and making it the greatest place it can be. serving our state and her people comes with great responsibility. we must work together not as democrats or republicans, but as west virginians, united for the common good. this is west virginia, not washington, and we work together to meet the challenges we face as a state. [applause] >> through the years, i'm proud of the great progress we have made together.

we've improved our business climate, launched meaningful reforms to our education system addressed our long-term liabilities and cut taxes from working families and small businesses. just two weeks ago, we eliminated our state's business franchise tax not only encouraging employers to continue to investigate in our state, but eliminating extra paperwork that made it more difficult to do business here. eliminating the business franchise tax is just one of the recent steps we have taken to responsibly reduce taxes for employers. these steps continue to encourage investments in west virginia jobs. as i speak to the newest members of this legislature, and i know that we got more than a few of those -- several of you out there -- i'm sure that you're aware this is not the only or

the last, hurleddle we face to improve our state's business product. nearly four decades ago our state was in danger of having the heat turned off in the governor's mansion because we couldn't pay our bills. we owed billions of dollars in unfunded liabilities. our residents waited months to receive their tax refunds and doctors weren't being paid for treating patients covered by pdia. while we can agree there are challenges that still lay ahead, the state of our state is much different, much better than before. we have one of the strongest rainy day funds in the country. we are credited with being one of the most fiscally responsible states in the nation. our bond ratings were recently reaffirmed a move that saves taxpayers hundreds of millions of dollars when building schools, roads and making

long-term investments to improve our infrastructure. we accomplish these things together. we reformed our workers' compensation system so businesses operating here pay more reasonable insurance rates and hard-working west virginians receive the benefits they deserve in a timely manner. this year, businesses in west virginia saw a reduction in workers' compensation premium for the 10th straight year a total of more than $280 million in savings since 2005. [applause] >> we have worked together to make tough decisions and next year we will pay off the remaining debt from the old workers' comp fund. we have come too far and worked

too hard to go back on the commitments that we made several years ago. we accomplish these things together. in the early 2000s, doctors were threatening to leave the state because of slow payments and unreasonable medical malpractice insurance premiums. we reformed our legal system and created the west virginia mutual insurance company which serves as a model for states across the country, providing physicians with good coverage at reasonable rates. we accomplish these things together. and just three years ago, we rolled up our sleeves to tackle our state's debt while other states were only talking about eliminating debt related to other post-employment benefits we took bold action. we were the only state in the country to address the concerns of local officials who were terrified of bankruptcy and we found a way to pay it down in a

fiscally responsible manner. because of these steps, our state's $5 billion oped debt will be paid off without any tax increases. [applause] >> ladies and gentlemen, we accomplished this together. responsible actions like workers' compensation reform medical malpractice reform and gradual reductions in business and consumer taxes help west virginia employers protect our residents and are critical to our continued economic growth. we've worked together to make significant changes to improve our state's legal system. and i resent those who are irresponsible and label us as a judicial hell hole.

labels drugged up do not help our potential investors and strengthen our economy. [applause] >> there is always more work to be done, and together we can make considerable responsible and legal reforms to our system. we've worked hard to create an environment that allows us to compete for new and expanding businesses. projects like diamond electric which recently relocated its north america headquarters to putnam county. american woodmar which have made a $30 million expansion in chaffey and wayne county, making tens of millions of dollars for our state employing many west virginians. the proposed

multi-billion-dollar county is added to this impressive list. this winter i traveled to brazil to review their continued progress and chart our next steps moving forward. this type of project will serve as an anchor for new value-added industries and chemical hubs that will be part of a manufacturing renaissance in america. company officials are pleased with the progress they have made over the past year, and the tremendous welcome they received from the number of west virginians who have touched this project in one way or another. our resubmission allowed us to demonstrate our firm commitment to bring this facility to the mountain state. and tonight i am more confident than ever that this will usher in an era of unprecedented growth for our entire region.

[applause] >> in 2011, we were the first state to pass comprehensive legislation regulating the drilling of marcella shale. since then we have taken significant steps to ensure that we remain at the center of the marcella shale boom. companies have invested billions of dollars in our state to support the processing and transportation of natural gas and the number of opportunities to develop these rich deposits. this past october, southwestern energy invested more than $5 billion in west virginia and southwestern pennsylvania to acquire marcellus and shell properties. this investment is one of the largest of its kind, not only in our state but across the country. tonight i would like to welcome

home west virginia native and the new general manager of southwestern energy's west virginia operations, derrick cutwright and senior vice president of southwestern division paul riger. derrick and paul please stand so we may recognize you. [applause] >> tens of thousands of our residents are already benefiting from these developments, and i'm committed to ensuring our state continues to capitalize on this abundant natural resource and the opportunities it brings. with this in mind, i've directed the department of revenue to launch a comprehensive review of our state's public lands to identify opportunities so west virginia can take advantage of this industry revolution. we have the potential to secure

hundreds of millions of dollars in bonus and royalty payments moneys that could be invested to improve our state parks, support tourism initiatives across the state and finance a number of other worldly endeavors to strengthen job creation. for generations west virginia has been one of our nation's leading energy states. as we continue to explore opportunities, to diversify our state's energy portfolio, we must ensure the safety of hard-working west virginians at drilling sites, production facilities and pipelines across the state. that's why i'm requesting a study to determine how we can best protect our workers in natural gas operations. we must ensure our workers have proper training and skills to do their jobs in the most effective way possible and return home safely at night.

[applause] >> work force safety must be the expectations for businesses operated in west virginia not an afterthought. economic investments, as well as those we are making to improve our infrastructure, are important to all of us, but they come at a cost. our state's highways and bridges are critical to our continued economic growth. this year the division of highways spent an additional $48 million on resurfacing projects and bridge work compared to what was spent in 2013. we are making progress but we must find ways to do more. with the help of legislation we pass together, our division of highways is now able to use more innovative financing options to build and maintain our roads and

bridges. and tonight, i've directed the division of highways to include the completion of u.s. 35 as part of its six-year plan. [applause] >> in recent years inaction at the federal level has put construction at a standstill and new highway projects have been difficult to complete. i will continue to work with our congressional delegation to identify a stable federal funding source for our much-needed road improvements. when highway funding is hard to come by eliminating more than $85 million in dedicated revenues to maintain our state's highways is irresponsible. this year 84% of all tolls collected on the west virginia

turnpike were collected from out of state drivers and commercial vehicles. instead of eliminating tolls, we need to work together to identify alternative ways to minimize the impact on our residents who travel the turnpike each and every day. we have created a business environment where companies are encouraged to innovate expand and create new jobs. companies across the country and around the world are noticing the changes that we have made. when i became governor four years ago i made a promise that i would go anywhere and sit down with anyone to bring jobs to the mountain state. when investors knock on the door of our state's development office we ask how can we help you? these strong personal relationships are critical for our state and our economy. when companies invested here have unmet needs, we take

action. and we must do the same thing for our small business owners who already call our state home. west virginians make great projects, and we need to make sure entrepreneurs like sweetco continues to succeed. soon after sweetco's second son was born they were told he would have low muscle weakness and tone common to down's syndrome. isabella wanted to find a solution. she took a scrap of cloth and sand from her boys' sandbox and created a tiny pair of weights to put on isaac's wrists and ankles to help him develop muscle strength. when isaac's physical therapist saw them, she encouraged

isabella to consider making them for other children with similar drawbacks. she launched mighty tikes as part of the expo in new york city. tonight we celebrate the spirit of the swingko family. isaac, isabella please stand so we can celebrate your family's achievement. [applause] >> we must encourage the same innovation we ask of all those investing in our state and allow entrepreneurs to put their skills to work without the burden of unnecessary state

restrictions. that's why tonight i am proposing legislation to give our craft brewers increased opportunities to succeed as part of our state's growing craft beer industry. together we can continue to show those across the country, around the world and here at home that west virginia is the right place to make an investment and the mountain state is a great place to do business. our continued economic growth and the enormous potential that lies ahead places even more urgency on developing a skilled work force. recent studies show west virginia will generate 30,000 new jobs each year through 2018 and nearly 60% of these jobs will require at least a two-year degree. these are good-paying jobs in the manufacturing construction and natural gas industries as well as health care and education. since 2007 west virginia's

community and technical colleges have developed 133 new programs specifically tailored toward work force development and training. many of these partnerships, like the apple action petroleum training center, were created to strengthen our state's growing manufacturing, chemical and natural gas sectors. this center a joint partnership between pierpont and west virginia community college is only the sixth of its kind in the whole country. it brings together representatives and the academic community to equip west virginians with the skills they need to be part of these growing industries. recent investors have identified a critical need for instrumentation technology programs to support new and growing industries across the state. blue ridge and bridge valley community and technical colleges

answer their call with specialized programs supported by private sector companies eager to hire west virginia workers. companies like toyota ngk and dow chemical recognize the progress we have made and are working with us to train west virginians' work force for the jobs of today and tomorrow. the number of students now earning certificate degrees and two-year associate degrees has increased by 57%, and that's an accomplishment we can all be proud of. [applause] >> preparing our future work force doesn't start with our community and technical colleges. across the state we are working with middle school and high

school students to share with them their choices after graduation. in the last months, i traveled the state to meet the students and introduce a new education initiative. it's called my state, my life. and it's designed to inspire and encourage our students to embrace their bright future here in the mountain state. the west virginia of today is not the same place it was decades ago. we are ushering in an era of change that will provide our students with opportunities for a great life here at home. in classrooms from hancock to lidell, wayne to berkeley counties, there are thousands of young, bright minds with untapped potential. there are endless possibilities for our students to succeed, and it doesn't matter which training or career path they choose as long as they choose one. as we work to develop these programs, we understand we must expand our vision to prepare

more than just the future interest of our work force. we must also support existing workers, especially our state's hard-working coal miners. i know times are tough, but let it be clear i will never stop fighting against federal regulations that harm our state's energy industry and devastate our miners their families and our communities. [applause] >> last month we found comments related to the epa's pollution emission guidelines and urged the epa to consider its proposed plans. federal bureaucrats must understand the impact these new rules will have on families and communities here and across the country. we must work together to develop reasonable achievable goals that balance the environmental

protection we all support with economic growth which we must maintain. while we remain hopeful the epa will consider the effects of -- the regulations are already having on our economy, we provide the training to coal miners they need to explore a different career path if that's a choice they wish to make. bridge valley new river and other technical community colleges all offer programs to retrain hard-working families and other families with the skills they need to succeed. these accelerated training programs are based on fundamental skills that are valuable no matter what high-demand field miners may choose, even if they are able to find reemployment underground. no matter how west virginians have been affected by the downturn in our state's energy

sector retraining and job assistance are available. over the past four years work force west virginia has invested more than $48 million in state and federal funds to retrain displaced workers and their families. today we continue to prepare these workers for jobs in high-demand field across the state like nursing education, welding and related industries. as west virginia's military men and women return from serving around the world we stand together to welcome them home with open arms. we are proud of our state's legacy of serving our country, and we must continue to honor our veterans every chance we get. these men and women aren't just dedicated members of our military, they're also important members of our communities. when they return home, we owe it

to them to provide the training they need to succeed. in 2009, my friend and one of our silver star recipients james mccormick, came up with an idea to help veterans find transitional job training and meaningful work here at home. last year the legislature passed a bipartisan bill to establish the veterans of warriors to agriculture program which helps our state's veterans provide fresh produce for our families and develop small working farms across the state. james has dedicated his time and talents to helping our veterans return to civilian life and transition to careers as farmers and livestock managers. james, please stand so that we may thank you for your service and for your hard work on behalf of the state's federal change of

employment. [applause] >> as a former teacher a father and the husband of a college president who is sitting right over there, i understand the importance of a good education. as governor i recognize improving educational programs and increasing opportunities for our kids and our teachers is fundamental to our state's continued growth and economic success. over the past several years we've made changes in our classrooms to put our kids on the right track to a bright future. from touring edgewood elementary

school on charleston's west side to celebrating the newly renovated harpers ferry middle school in the eastern panhandle i've had the opportunity to see firsthand changes we're making to help our students succeed. we are laying the groundwork to support our communities and develop future leaders and innovators of the next generation. as we compete in today's global economy, we must start with our middle school and high school students by providing them with the high-tech skills they need. in 2013 business and industry in west virginia identified a critical need for workers with strong technical, computer and mechanical skills. that's why this year i've set aside funding to establish a stem network to review current stem-related education initiatives and refine and expand local programs to better serve our students.

as we increase and improve stem education opportunities, there will be a need for more certified chemistry, robotics and advanced math teachers in our classrooms. we must ensure our students are being taught by great teachers including those who may not have a traditional education degree. this year i will introduce legislation to expand opportunities for skilled west virginians who have a passion for teaching but may not have a teaching background. we need to find ways to streamline the process and encourage those who have a passion to teach so that they can share their knowledge with our kids. we must give local school systems better flexibility to train and hire subject matter experts to phil longfill fill long-term vacancies in critical subject areas.

[applause] >> each year our teachers gather at schools and classrooms across the state with a shared vision: to inspire our students and encourage a lifetime of learning. tonight i am honored to introduce our 2015 toyota high-marked blue cross/blue shield teacher of the year, gail adams. inspiration to come from a place least expected -- i like this line -- sometimes it comes from teaching a jazzercize class. has it been a while since you heard that one shelly? while leading each class gail laughed as she corrected the grammar of the song lyrics that played. and after months of joking about becoming an english teacher she finally felt the spark and awakened a passion for teaching. she followed her heart enrolled in college asknd four years later

earned her teaching degree. today she is not only teaching her students at william barkley high school but she answered the call. gail's students are also learning about banking about a college education, and finally a rewarding career. she makes things work makes things better and makes teaching and learning special. ladies and gentlemen, please join me in welcoming our 2015 teacher of the year, gail adams. gail? [applause]

>> we are fortunate to have businesses that understand the value of good education here in west virginia. at this time i would also like to recognize two individuals who deserve our thanks for their continued support on the teacher of the year program. mr. fred early, president of highmark blue cross and blue shield, and willy marshall president of toyota manufacturing of west virginia. please stand so we may thank you for your continued commitment to our state's teachers. [applause] >> a strong work force is a drug-free work force. substance abuse is a heart-breaking problem facing families across west virginia

each and every day. with the help of the governor's council on substance abuse we've taken bold action to stop the production of meth and increase practiced standards for pain clinics to ensure our residents are using prescription drugs responsibly. over the past two years we have worked together to draft legislation and improve new rules to regulate pain management clinics across the state. since july the department of health and human resources has inspected seven pain clinics. three of those have been ordered to close and denied licensesure for these new residents. our families must have treatment, but not at the cost of irresponsible treatment actions. i am proud of the actions we have taken to curb this epidemic, but we must do more. as we continue our efforts to address the use of prescription

medications, we must also be prepared to impasse the ability of street drugs. today heroin use is on the rise, and we must stop this lethal drug from ruining the lives of our citizens. this session i will introduce legislation to help our state's emergency responders and families facing drug abuse save the lives of those who abuse heroin. maloxone is critical to countering the effects of heroin overdose. by expanding access to this life-saving drug, we can give those suffering from substance abuse the opportunity to seek help, overcome their addiction and return to their families, workplaces and communities. [applause]

>> the communities we live in are more than just places where we put down our roots, start new businesses or watch our children grow. they are places we call home and they must be places where we feel safe. in may we announced a significant step toward reducing prison overcrowding and drug abuse. since then we have invested nearly $2.5 million in community-based substance abuse treatment and recovery services across the state. tonight i am pleased to announce the investment of an additional $660,000 to expand treatment options across the state, including new, intensive outpatient services in the northern and eastern panhandles. [applause] >> in 2013 we worked together to embrace the justice

reinvestment act and developed a research-based plan to rehabilitate those in our justice system. these reforms maximize our correction dollars and lower the financial burden on our overextended prison systems filed protecting our state's finances. through our landmark readjustment efforts, we have learned that those programs do work. most of our efforts have focused on addressing our adult correction system, but we also must do everything we can to meet the needs of our youth. we must do more to keep our kids out of the courtroom and in the classroom. [applause] >> between 1997 and 2011 west virginia saw the largest percentage increase in youth confinements of any state in the country.

this june with bipartisan support from every level of our three branches of government, we embark on a comprehensive review of our juvenile justice system. this task force includes law enforcement, prosecutors public defenders, face-to-face representatives and west virginia families looked at evidence-based programs and looked at the best practices that made the most sense for west virginia. we must take action to create a smarter, more effective system for our children. tonight i'm announcing legislation to reform our state's juvenile justice system. it will establish truancy division specialists in all 50 counties and increase a basis to help our kids get back on track. [applause]

>> it will also increase the number of youth reporting centers across the state to produce better outcomes for our children and their families by getting them the help they need. at a cost of $4.5 million, this legislation is projected to reduce the number of dhhr residential placements and division of juvenile services commitments by at least 45% over the next five years and will save taxpayers $59 million. [applause] >> we are also strengthening the west virginia national guard's incredibly successful mountaineer challenge academy. since the academy was established in 1993 nearly 3,000 teens have graduated and gone on to be productive influences in their communities. this december, 131 cadets

graduated from the academy. of the new graduates, 57% are pursuing their degrees with the help of promised scholarships 26% are receiving training at one of our state's vocational schools, 24% have chosen military careers and the rest have successfully completed training programs to enter our work force. that's a pretty good record i think. [applause] >> the challenge academy is making a difference in lives of at-risk kids across the state. tonight we welcome two graduates whose experiences will inspire other young west virginians to follow their lead. after graduating from the academy in 1999, michael harrisman joined the united states army. after serving his country as a

cot bam combat engineer and bomb technician, michael returned home to serve as a law enforcement officer. in 2013 he returned to the academy, this time as a squad leader mentoring new cadets. just this past month ron bass stood with his fellow cadets as a new graduate and member of the third academy class. ron chose to join the national guard and continue his education. michael and ron, please stand so we may congratulate you on your achievements. please stand. [applause]

>> as we expand opportunities for our kids to succeed, child welfare reform is critical to keeping our children safe at home. with this in mind, i directed the department of health and human resources to work together with work force west virginia to help parents find stable employment to support their families. we can make a difference in the lives of our state's children, and together we can accomplish these life-changing and meaningful reforms. this legislative session, i challenge those of us gathered in this chamber and west virginians all across the state to come together. we've set aside our political differences and stand united as west virginians for the greater good. tonight i'm proud to welcome two

west virginia law enforcement heroes who personify what it means to put the welfare of others above themselves. two lieutenant jeremy dove, corporal mike harbaugh and patrolman nicolas sands responded to what seemed to be a routine traffic stop. as they approached the stopped vehicle, lieutenant dove, and patrolman sands were shot in the line of duty. across the state dedicated officers like knew ten land dove and patrolman sands answer the call to protect and serve. putting the safety and well-being of their fellow west virginians first. this week lieutenant dove, corporal harbaugh, and patrolman sands put on their uniforms, and returned to work. lieutenant dove and patrolman sands, please stand so we may thank you for your service and thank you for the commitment you have to west virginia.

[ applause ] [ applause ]

just as these brothers in blue have taught us, we are all part of something much bigger. among the mountains we call home, we are charting a new path. one built on collaboration and mutual respect, and one that places our state and her people first. i'm proud of the work we've done, i'm proud of the progress we've made and i'm confident that we can continue to move west virginia forward together. tonight we are more than just democrats and republicans, we are, and will forever be, west virginians. so thank you, god bless you, god bless your families and god bless the state that we call home. thank you. [ applause ]

now we hear from georgia governor nathan deal in his fifth state of the state address. he outlines his agenda for the upcoming year, which includes efforts to rescue failing schools, and investments in the state's infrastructure. this is a little over 30 minutes. lieutenant governor cagle, speaker rollston, president pro tem shaffer, speaker pro tem jones, members of the general assembly, constitutional officers, members of the consulate corps and my fellow georgians, today marks the fifth year that i have reported to you, the people's representatives, on the state of our state.

this is our annual checkup exam on the body politic where we measure our vitals, celebrate our areas of good health and seek cures for the things that ail us. and each succeeding year we've seen the green shoots of our economy grow a little taller. each year we've seen more georgians return to work or get their job for the first time. each year we've seen hundreds of more businesses open or relocate here. each year steady revenue growth has allowed us to slowly mend the ravages wrought by the great recession. now our economy is seeing positive growth with thousands of new jobs added every month. we're seeing the telltale signs of cranes and bulldozers hunting on newly-cleared land. we're seeing home values recover

and georgia families begin to rebuild their savings. and georgia has been named the number one place in the nation in which to do business by several major rating agencies and has repeated that designation by one of them already. in short, i'm here to report to you that the state of our state is strong and growing stronger every day. [ applause ] but for every milestone we reach, for every victory we attain, for every improvement we achieve, new challenges await. certainly, there are those who focus only on the negative, zeroed in on areas where we should do better.

they downplay any progress as not good enough. to them i say, celebrating our progress puts our challenges in perspective and reminds us that together we can achieve greatness. our shortcomings don't go unacknowledged, they are simply what we're going to address next. when focused only on the negative, the job before us can seem overwhelming. those feelings are not new to our generation. atop president kennedy's desk sat a fisherman's prayer which says this, oh, god, thy sea is so great, and my boat is so small. when confronting the challenges of 10 million people challenges that can appear insurmountable, it's easy to feel that the tools that we have

been given aren't up to the task. when it comes to our constituents' needs in education, health care, transportation and public safety, the sea seems so great, and our boat so small. we may have ten million challenges, but remember, we also have ten million oars. in the turbulent waters of the recession and recovery, we have rowed steadily forward. the synchronized beat of unified oars has set the rhythm for our economy. georgians have spoken clearly that the conservative principles which have guided our decisions, the very ones that have brought us out of the recession, must continue to guide our future growth. these include keeping our government small, prioritizing and balancing our budget and emphasizing a strong business

climate. state government cannot address the legitimate needs of our citizens, however, without adequate revenue. last year we based our budget on an anticipated revenue growth of 3.4%. that was in keeping with our pattern of conservative budgeting. so when fiscal year 2014 ended, our actual revenue was 4.8%. that differential between what we spent and what we collected is deposited into our rain think day fund. every budget cycle since i have been governor we have added to that fund so that it has increased by some 643% since i took office. [ applause ]

annual revenue growth coupled with conservative spending and a growing rainy day fund are positive evidence that georgia is better today than it was this time last year. since i took office, over 319,000 new private sector jobs have been created in georgia with nearly 93,000 of those coming in the past 12 months. the announcement last week that mercedes benz usa is moving its north american headquarters to georgia is further evidence that our state will continue to be a leader in job creation. [ applause ] but with job creation comes population growth. georgia is now the eighth most populace state in the nation, moving from the number ten position in just four short

years. you know, people don't move to a state unless it provides them with opportunities. the mercedes-benz slogan is "the best or nothing." the company that accepts nothing but the best chose georgia. [ applause ] i'll take that. and in the near future, porsche north america open their headquarters near the atlanta airport. but let's not forget our first major automotive manufacturer in modern times, kia, which employs some 3,000 georgians and whose supplier base continues to expand in our state. kia's example told the world that we have the quality work force and the business environment needed to thrive in the automotive industry.

finish kia officials remind me often that their west point, georgia, plant produces the highest quality vehicle in their worldwide chain. [ applause ] furthermore, home prices are up in the past year and up significantly since 2011, an example of the resurgence of this sector and the confidence in the market. construction, manufacturing and other key georgia industries continue to rebound. and as georgians experience growth in their incomes, this leaves more money for the types of things our fellow citizens want to be doing rather than just the essentials. virtually every reliable indicator points to one thing; a growing economy. and to those of you who have

been paying attention, you will notice that the unemployment rate, the prodigal son of indicators, is even falling back in line. [ applause ] for those who were too long unemployed or underemployed, for their relatives who watched them struggle to get hired and for the georgians who understand that a working economy is an economy in which people work, we are making a difference. the ocean of need is vast, but it's shrinking, and we will continue to close the distance between where we are and where we wish to be. still, need does exist. over 19000 students dropped out between grades nine and twelve

over the past school year. that is far too many. neither georgia nor these young people, can afford the disparaging effects that typically result from someone leaving high school prematurely. this is why, over the next few years, we intend to take a comprehensive look at how we can make k-12 education more accessible, and more effective. a child that does not graduate from high school is that much less prepared for the workforce. that much less prepared for college. and that much more prepared for a life behind bars. i'm establishing an education reform commission to study a number of questions regarding our education system. such as increasing access to georgia's world-class early learning programs. recruiting and retaining high-quality teachers in our

classrooms. and expanding school options for georgia's families. this group which will be composed of legislators, educators, and a variety of other stakeholders, will recommend potential improvements to me by august the 1st of this year. i fully anticipate this process to be as successful as the one involved in our justice reforms, after which it is modeled. in addition a sub set of this group will examine the most appropriate ways to modernize our qbe funding formula from the 1980s. this model is older than every student in our classrooms, and some of their parents. just as most of us would not dress our children in parachute pants and jelly shoes, and would not teach them about computers on a commodore 64, neither

should we educate them under a 1980s funding formula. [ applause ] our students are now using ipads and androids. why tie them to a desk when technology can take them to the moon and back? this undertaking will require detail work. my vision is to create a formula driven by student need that provides local schools and district leaders with real control and flexibility. it is our hope that funding changes based on the commission's recommendations will go into effect as early as the 2016-2017 school year. while we must certainly address the outdated funding formula, education still remains a top priority in our budgets.

this year's budget coupled with my proposal for next year's budget represents an infusion of over $1 billion additional dollars for k-12 education. [ applause ] working together, we have devoted the largest percentage of the state budget to k-12 education of any governor and general assembly in the last 50 years. [ applause ] now the focus is on turning those dollars into academic progress. i look forward to working with all of you, as we accomplish

that goal. however, no matter how well we fund education,, the fact of the matter is that far too many students are trapped in a failing georgia school. roughly 23% of schools have received either a "d" or an "f," which constitutes a failing grade, for the past three consecutive years. when the system fails our children have little chance of succeeding. new options can enrich lives, brighten futures and rekindle hope. three years ago the legislators here called for, and the voters of this state overwhelmingly approved, the charter school amendment. i have good news. it's making a positive difference. this year i am asking you to continue the trend of restoring hope and opportunity to areas of our state that could use a helping hand. i am proposing a constitutional

amendment to establish an opportunity school district which would authorize the state to step in and help rejuvenate failing public schools and rescue children languishing in them. this model has already been successfully used in other states. my office has been in contact with a student from new orleans, who tells us that he could not read until he was 12 years old. now because of the recovery school district in new orleans troy simon is going to bard college in new york, where he intends to earn a degree in american literature. his life is changed. there's perhaps no sweeter irony than a young man who could not read at all may one day teach others to read and read well. let's -- [ applause ]

let's stop making excuses. if we want to break the cycle of poverty let's educate those children so that they have the skills to escape poverty. if we want to interrupt -- [ applause ] if we want to interrupt the cycle of dysfunctional families, let's educate the children of those homes so that their families of the future we will return to normalcy. if we want our young people to have hope, let's give them the greatest beacon of hope we can confer on them. a quality education that leads to a good job, a stable family and the stairway to the future. [ applause ] there will be those who we will argue that the problem of failing schools can be solved by

spending more money. they ignore the fact that many of our failing schools already spend far more money per child than the state average. the problem is not money. more money, without fundamental changes in the delivery system, will not alter the results. it will only make the state and local taxpayers greater enables of chronic failure. [ applause ] if we take this step, more students will be able to gain employment, go to college when they graduate, more employers will be satisfied with our state workforce, and more of their colleagues might just decide to locate in georgia.

above all, students and parents will relinquish the burden of having nowhere to go to get a proper education, something no family should have to experience in the first place. now, liberals cannot defend leaving a child trapped in a failing school that sentences them to a life of poverty. conservatives like me cannot argue that each child in georgia already has the same opportunity to succeed and compete on his or her own merits. we have a moral duty to help these children who cannot help themselves. [ applause ] the sea is great, and the boat is small. but the boat must not have first and second class seating.

[ applause ] i am calling upon you to do your part in this session to get this referendum on the ballot so that georgians can assure a child's hope of success are not determined by his or her zip code. our places of learning should be places where a child learns triumph, not defeat. we have experienced triumphs in our criminal justice system where we have tamed some rough seas, working with those of you and here and those throughout our state, we have enhanced safety and nurtured second chances. we have combined taxpayer savings with personal salvation. in return our reforms are closing that revolving door that has led too many georgians back into our prison system.

crime may not pay, but stopping it does. [ applause ] i have already shared with you just last month and in the inaugural address the promising results of some of our efforts. my budget this year will reflect our commitment to these important reforms. the next step we are taking to improve our delivery of justice will further make georgia a leader in this area. on many occasions, one troubled family or neighborhood will deal with a multiple agencies from pardon and parole to defact to the department of juvenile justice to the department of corrections. under current policy these agencies often do not coordinate effectively on these cases. this fails to bring a holistic

approach to the needs at hand and it doesn't deliver services efficiently. for this reason, i am proposing to create the department of community supervision to eliminate redundancy and enhance communication between these related groups. this new agency we will pull from the relevant existing portions of corrections, juvenile justice, and pardons and parole while the division of family and children services will not contribute to the agency itself we will be including the defact's director on the board of community supervision to facilitate the transfer of appropriate information. recently we have seen tremendous growth in the number of child welfare investigations, due, in part, to our 24-hour call center. this is why we will continue to fund additional resources to meet this unfortunate need

including support for 278 additional caseworkers. in addition the child welfare reform counsel which i created in 2014 has has released its review on the division of family and children services. to to address some of the recommendations i am proposing in my budget this year that we fund several upgrades which we will include a mentor program for supervisors providing for greater career and salary growth for personnel, promoting the safety and resources available to caseworkers and enhancing recruitment and training of foster parents. by caring for our caseworkers and are foster parents we can better care for our children in need. [ applause ] i am happy to say that the council will continue its work

into the upcoming year. one of one of our most vulnerable populations is our children who are suffering from seizures. last year i set in motion trials at our state medical school to test the possibility of using cannabis oil to treat severe seizures of these young people in a safe and nonintoxicating way. those trials involving georgia children have already been begun. and will continue to expand. this year i hope to sign legislation to decriminalize can abyss oil in georgia so families who need it and obtain it legally will not be prosecuted for possessing it. [ applause ] let me be clear, i do not support the legalization of marijuana for recreational purposes. we are focused narrowly on oil

that contains fractional amounts of thc, the chemical in marijuana that intoxicates the user. we we want to find the pathway to bring our children home from colorado without becoming colorado. [ applause ] we still face the significant and more complicated issue of access. that is why in addition to decriminalization i am proposing is that he committed to research a proper role for the state of georgia in the ongoing debates about the types of medical conditions that can benefit from this product and how we can best address this in a logical and controlled manner. i know for many families time is of the essence. i want us to answer the question

of access as quickly as possibly can while going through the to the proper steps to ensure safety and compliance with federal laws. there is broad agreement that we must do something, and we can do something. let us also agree that we must do it right. [ applause ] even a small boat conquering the sea must dock every once in a while. we must, therefore, it sure our network of bridges, roads, and other vital infrastructure are well-maintained and the increasing transportation needs of our population are met. let me present to you our options. since since only three regions in the state invested in plan

"a," a regional 1% sales tax for designated infrastructure projects, we acted to implement plan "b," which includes reprioritizing funding, and a focus on the most essential projects that would target our most congested areas. for example, we are constructing new capacity express lanes along long stretches of i 75 and 575. we are also extending the managed lines on i-85. over the next four years we will open to traffic more than $1.1 billion worth of new, reliable, interstate lanes in metro atlanta. the largest interstate expansion since the 1980s. [ applause ]

we are making further progress in the form of our i-285 georgia 400 interchange, which will ease congestion for hundreds of thousands of travelers every day. but let us not forget those things we've already accomplished, including the removal of the tolls on georgia 400, the opening of the i-85 georgia 400 connector ramps, which many in our state are already using. and, of course we continue to construct the jimmy deloach parkway extension, the fall line free way and other road improvements connecting our south georgia cities. at the same time another important project of the projects lacked funding that are necessary to proceed. let's bris us to our next option. plan "c." a transportation plan to which this general assembly and i can agree that would address the ongoing needs of maintenance and repair as well as freight

corridor and other transportation improvements. i believe this is something that can, and should be accomplished. a need does exist. the excise tax, which is a per gallon, flat fee has remained the same since 1971. that's 44 years. in that time, the fuel efficiency for the average vehicle has almost doubled. which means that the amount of excise tax collected for each mile driven has roughly been cut in half. and the federal government has mandated new standards that would again double the miles per gallon for the average vehicle over the next ten years. meaning that the amount of excise tax collected for every mile traveled will continue to shrink every year. and that doesn't even count for inflation.

in 2014 dollars we collected approximately 17% less in state motor fuel funds per capita for transportation than we did a quarter of a century ago. in part because of greater fuel efficiency. at the same time we now have millions of more people traveling on our roads. according to industry experts, simply maintaining what we currently have to our roadways requires a minimum of hundreds of of millions of dollars in new revenue each year. some industry experts even suggest it's more than a billion dollars a year. over the years we have added more highway to monitor, patrol, and repair. in addition our state has seen significantly more freight on our roadways. with more and more goods and raw materials entering through the port of savannah.

we're already the second busiest container port on the east coast. and we're getting busier. it is estimated that truck traffic out of the port will increase by 50% in less than 10 years. we have to be ready to meet that need. without this proposed plan "c," a new strategy for transportation investment, we will be forced to go to plan "d." which is to do nothing. if that is our plan then our roads will simply slip into disrepair. the safety of our citizens will be jeopardized. and our economy will be stagnated by increased congestion. for me that is unacceptable. we are currently operating at a rate that requires over 50 years to resurface every state road in georgia.

so, if your road is paved when you graduate from high school, by the time it is paved again you will be eligible for social security. we must increase the percentage of roads being resurfaced annually. with only current funding levels new capital projects will have to wait as we tend to our existing transportation network. if we do nothing, we would continue to have to depend on the federal government whose transportation funds are also dwindling. if we should choose not to maintain and improve our infrastructure economic development would stall, companies would be unable to conduct business efficiently, commuters would waste more time and gas sitting in traffic, and no one would be satisfied. for those of you who believe, as i do that there are certain

powers left to the states and to their citizens, a principle set forth in our nation's tenth amendment, here is one way we can put our beliefs into practice. if we become less dependent on federal revenue for our transportation projects in georgia, we will avoid some of the regulations and the extra costs associated with federal involvement. we will get more for our money on new roads, and it will be one of the best signals that the state of georgia is willing to spend our money to solve our problems. [ applause ] four years ago we decided our state needed to develop its own reservoirs. to be less dependent on federal water resources. maybe it is time we apply that

same logic to transportation. we must improve and maintain our roads and bridges. we must provide congestion relief. and we must prepare for more fright and more businesses. we can debate how much it will cost to do something. but let us not forget how much it will cost to do nothing. i do not believe that we georgians will choose to do nothing. we know the problems. let's now resolve to agree on the solutions. that is the outlook we must embrace as we tackle all of the challenges that i have discussed with you today. the sea is indeed vast, but our 10 million oars row onward. let us as the leaders of this state, demonstrate that we can

row together in a sequence so that our boat will move steadily forward on a charted course of progress with a shoreline of promise and prosperity on the horizon. i pray for wisdom for all of us as we carry out the public's trust, so that we can give georgians a state that is even better tomorrow than it is today. may god bless you, and may god continue to bless our great state of georgia. [ applause ] the political landscape has changed with the 114th congress. not only are there 43 new republicans and 15 new democrats in the house, and 12 new republicans and 1 new democrat in the senate, there's also 108 women in congress, including the first african-american republican in the house.

and the first woman veteran in the senate. keep track of the members of congress using congressional chronicle on c-span.org. the congressional chronicle page has lots of useful information there, including voting results and statistics about each session of congress. new congress best access. on c-span, c-span2, c-span radio, and c-span.org. coming up next on c-span3 an outlook from the congressional budget office on the future of the economy. then german chancellor angela merkel talks about the state of the european economy. afterwards we go live to the bipartisan policy center with senator tom tillous of north carolina. and later we'll go live to the house rules committee as they consider a bill to repeal the health care law. last week congressional budget office director douglas elmendorf held a press conference to release the cbo's

budget projections through 2025. he discusses a number of topics including the 2015 deficit increased government spending and the rising number of older americans. this is a little over an hour. >> hello. i'm doug elmendorf, the director of the congressional budget office. cbo has just released its outlook for the budget and the economy overed next ten years. i will summarize the report briefly, and then my colleagues and i will be happy to take your questions. the federal budget deficit which has fallen sharply during the past few years is projected to hold steady relative to the size of the economy, through 2018.

beyond that point however, the gap between spending and revenue is projected to grow. further increasing federal debt relative to the size of the economy. which is already historically high. those projections are based on the assumption that current laws governing taxes and spending will generally remain the same. and they are built upon our economic forecast. according to that forecast, the economy will expand at a solid pace in 2015, and for the next few years, to the point that the gap between the nation's output and its potential or maximum sustainable output will be essentially eliminated by the end of 2017. as a result the unemployment rate will fall a little further and more people will be encouraged to enter or stay in the labor force. beyond 2017 we project inflation adjusted gross domestic product, or real gdp, will grow at a rate that is notably less than the average growth during the 1980s and 1990s. let me address the budget

outlook first, and then turn to the economic outlook. we estimate that the deficit for fiscal year 2015 will amount to $468 billion. slightly less than the deficit for 2014. at 2.6% of gdp, this year's deficit is projected to be the smallest relative to the nation's output since 2007. but close to the 2.7% that deficits have averaged over the past 50 years. although the deficits in our baseline projections remain roughly stable as a percentage of gdp through 2018, they rise after that. the deficit in 2025 is projected to be 1.1 trillion dollars. or 4.0% of gdp. and two of the deficits over the 2016 to 2025 period are projected to total 7.6 trillion dollars. we expect that federal debt held by the public will amount to 74%

of gdp at the end of this fiscal year. more than twice what it was at the end of 2007. and higher than any year since 19 50. by 2025 in our baseline projections, federal debt rises to nearly 79% of gdp. when cbo last issued long-term budget projections in the summer we projected that under current law, debt would exceed 100% of gdp 25 years from now and would continue in an upward trajectory thereafter. that trend could not be sustained. such a large and growing federal debt would have serious negative consequences. including increasing federal spending for interest payments restraining economic growth in the long-term giving policymakers less flexibility to respond to unexpected economic events, and eventually heightening the risk of a fiscal crisis. why will deficits and debt increase relative to gdp under

current law? in our projections, outweighs rise from a little more than 20% of gdp this year which is about what federal spending has averaged over the past 50 years to a little more than 22% in 2025. four key factors underlie that increase. the retirement of the baby boom generation. the expansion of federal subsidies for health insurance. increasing health care costs per beneficiary. and rising interest rates on federal debt. consequently under current law spending would grow faster than the economy for social security for the major health care programs, including medicare, medicaid, and subsidies offered through insurance exchanges. and for net interest costs. in sharp contrast a mandatory spending other than that for social security and health care as well as both defense and nondefense discretionary spending would shrink relative to the size of the economy.

by 2019, outlays in those three latter categories taken together would fall below the percentage of gdp they were between 1998, and 2001. when such spending was the lowest since at least 1940. the earliest year for which comparable data had been reported. revenues are projected to rise significantly by 2016. buoyed by the expiration of several provisions that reduced tax liabilities, and by the ongoing economic expansion. in our projections, based on current law, revenues equal about 18.5% of gdp in 2016 and remain between 18% and 18.5% throughout the coming decade. revenues at that level would represent a greater share of the economy than their 50-year average of about 17.5% of gdp. but would still be less than outlays by growing amounts over the course of the decade.

revenues from individual income taxes are expected to rise relative to gdp. mostly because people's income will move into higher tax brackets, as income gains outpace inflation to which those brackets are indexed. but those increases are expected to be offset by reductions relative to gdp, and revenues from the corporate income tax and other sources. turning from the budget to the economy, we anticipate the economic activity will expand to the solid pace in 2015, and the next few years, reducing the amount of underused resources, or slack in the economy. in our estimation, increases in consumer spending, business investment, and residential investment, will drive the economic expansion this year and over the next few years. the growth in those categories of spending will derive mainly from increases in hourly compensation, from rising wealth, from the recent decline in crude oil prices, and from a

step-up in the rate of household formation. as measured by the change from the fourth quarter of the previous year real gdp will grow by about 3% in 2015 and 2016 and by 2.5% in 2017, we expect. the difference between actual gdp and our estimate of potential gdp, which is a measured slack for the whole economy, was about 2% of potential gdp at the end of 2014. during the next few years we expect actual gdp will rise more rapidly than its potential gradually eliminating that slack. for the labor market in particular, we anticipate that slack will dissipate by the end of 2017. by our projections increased hiring will reduce the unemployment rate from 5.7% in the fourth quarter of last year, to 5.3% in the fourth quarter of 2017. which is close to the expected natural rate of unemployment. that is the rate arising from all sources except fluctuation

in the overall demand for goods and services. that increased hiring will also encourage more people to enter or stay in the labor force, boosting the labor force participation rate which is the percentage of people who are working or actively looking for work. our projections beyond the next few years are not based on estimates of cyclical developments in the economy. the agency does not attempt to predict economic fluctuations that far into the future. instead those projections are based on estimates of underlying factors that affect the economy's productive capacity. for 2020, through 2025 we project that real gdp will grow by an average of 2.2% per year. a rate that matches the agency's estimate of the potential growth of the economy in those years. potential output is expected to grow much more slowly than it did during the 1980s and 1990s, primarily because the labor force is anticipated to expand more slowly than it did then. growth in the potential labor

force will be held down by the ongoing retirement of the baby boomers, by a relatively stable labor force participation rate among working-age women after sharp increases from the 1960s to the mid 1990s. and by federal tax and spending policies set in current law. the elimination of slack in the economy will eventually remove the downward pressure on the rate of inflation and on interest rates that existed in the past several years. by our estimates, the rate of inflation as measured by the price index for personal consume consumption expenditures will move up gradually to the goal of 2% hitting that mark in the end of 2017 and beyond. interest rates on treasury securities, which have been exceptionally low since the recession, will rise considerably in the next few years, we expect. but remain lower than they were on average in previous decades. between 2020 and 2025, the projected interest rates on three-month treasury bills and

ten year treasury notes are 3.4% and 4.6% respectively. thank you. we're happy to take your questions. please start by identifying yourself. and publication you work for. that should be easy. yes. >> william hoffman [ inaudible ] projections include the use of dynamics [ inaudible ] >> so our baseline economic projections and our baseline budget projections are consistent with each other in that the budget projections are what we think will happen to the federal budget given the economic outcomes we predict and the economic outcomes we predict are those that we expect would happen given the baseline budget projections. so the baseline projections are always dynamic, i think in the sense in which you mean that word, in that the budget and the economic effects are calculate ed projected together.

>> if i may i guess i'm using the term ss -- in that area recently. >> well, the people in congress generally focused on our cost estimates, not on the baseline projections, for cost estimates there has been a very long-standing custom that cost estimates by cbo or the revenue estimates by the staff of the joint committee on taxation have not included the effects of the proposals on overall macro economic conditions and the feedback from those macro economic changes to the federal budget. however we and jct is produced estimates of the economic fits of large proposals, periodically over time, and reported those to the congress, for example nearly every year we do an analysis of the president's budget that starts with an estimate of the effects of a specific spending revenue provisions, without allowing the

macro economic conditions to change. but then we go back and do an economic analysis of the president's budget, including the feed back to the budget itself. we have done that every year for essentially a dozen years. we also do that analysis when we do different paths for federal debt in the long-term budget outlook. we did it for the comprehensive immigration legislation, considered in the senate a few years ago. and our colleagues at jct have done it for a number of pieces of tax legislation including for example chairman camp's tax reform proposal last year. so we and jct are accustomed to doing analyses of the economic effects of major pieces of legislation. what is different in the rule that the house has adopted is that the budgetary feedback of those economic changes would be included in the official cost estimate, rather than being presented as supplementary information which is the way it

has been done some cases in the past. and we are prepared to do what the house rule asks us to do. >> two things. one, you had some verbiage in there about interest costs, and there's often concern that those will skyrocket. give us a rundown of where you see, where treasuries for its debt but also a little bit about wage growth. how much of that slowly -- wage growth is basically for people for lack of a better term, being still worried about losing their job and not being able to get a new job, because they see people out of work for so long. >> the first question about interest payments, as you know interest rates on treasury debt have been extraordinarily low for the past several years.

as a consequence of that even though federal debt is historically high relative to the size of the economy, interest payments by the government have been quite low. so interest payments this year, 2015, we project will be $227 billion. that's just 1.3% of gdp. well below what interest payments were, say 25 years ago. but, over the coming decade we expect the interest rates will move up considerably. and as treasury needs to finance new deficits and rolls over the existing debt then the interest rate that it pays on average on the outstanding debt will rise. with debt as high as it is and with the rise in interest rates, interest payments rise considerably so in nominal dollars the interest payments we think this year will be $227 billion we think will be $827 billion in 2025. that will be 3% of gdp, rather

than the 1.3% that they will be this year. as for wage growth, compensation growth since the recession has been a good deal lower than it was before the recession. and although some measures of compensation growth pick up a little bit last year they still remain well below what we saw before the recession. and we think that is a direct consequence of the slack in the labor market. when employers are trying to attract workers if there are a lot of people looking for jobs then the employers don't have to offer as high pay as they would if the labor market were tighter. so we think that as the labor market has tightened, and we think will continue to tighten over the next few years we think that will put more pressure on employers to raise compensation. and we think that compensation growth will pick up. now, the share of national

income going to labor has fallen quite a bit over the last few decades, and we think it will rebound, but not to the level that it was 15, 20, 25, 30 years ago. >> a permanent structural change of the shared -- >> we think there is a permanent structural changes. but knowing how important those will be in the future is, of course, very hard. so certain technological changes, globalization, are the forces that people look to a lot. but there are probably others that have been at work, as well. and how important those factors will be in the future is very hard for us to know. the labor share of income tends to fall during the initial recovery from recessions. so, i think we have a good basis for expecting it will come back

some from where it is now. but how far back it will come is hard to know when we have done is to project that it comes back partway toward its average of the previous two decades. >> two-part question on dynamic scoring. number one, do you have a view on whether the house rule on dynamic scoring is a good idea? and number two will there be a greater level of uncertainty to a dynamic score under this house rule compared to -- house rule? >> we don't have a position about whether the house rule is a good idea or not. we think it's natural for the members of the congress to be interested in the macro economic consequences of major pieces of legislation. and that's why cbo has for many years built models to estimate those macro economic consequences.

and we have in the past few years devoted a great deal of effort to improving those models to getting feedback from outside experts, revisiting the key assumptions, and then to writing a collection of papers that spell out how we do analysis of the macro economic effects of changes in fiscal policy. i think there's really at this point a set of eight papers that go through the key aspects of that model. one of which was about a dozen years old but the other seven of which i think we've written in the past three or four years. so we've always understood the importance of that kind of analysis to the congress. and we're doing our best to provide the best estimate that we can. but it's really up to the congress to decide how it wants to use that information. and if it wants that information to come in a supplementary form not in the official cost estimates, as it has in the past, then we are happy to do that. and if the congress wants that extra set of estimates to be

included in the official cost estimates, as the house rule now requires for certain legislation, then we are happy to do that. it's up to the congress to decide the form in which it wants to receive our analysis. as for uncertainty, the macro economic effects of legislation are often quite uncertain. it is also true that the nonmacro economic effects of legislation can be quite uncertain. and i think it's always important for readers of our work to understand that there is a great deal of uncertainty surrounding the numbers and we give point estimates because of budget process basically requires point estimates. things have to add up. allocations are given to committees. certain amounts of money are appropriated. so we try to work in that world. but we understand and we hope that our readers understand that there's always a great deal of uncertainty. in some cases the macro economic effects of legislation will be

more uncertain than the effects we estimate holding the microeconomic conditions fixed. but i think that won't always be the case. it really depends on the legislation we're analyzing. as a general matter legislation that makes small changes in programs or in the tax road speaking for jct, small changes of the sort that have been done before analysts have a reasonable basis for making fairly accurate projections. but for major changes in policies, or a comprehensive reform of the tax code or of our immigration policies of our health insurance system, then there's always a great deal of uncertainty that accompanies the estimate we provide for that as well. and i think that's just a general feature that people need to understand and that we need to continue to convey as clearly as we can. for a number of our macro economic analyses we have provided ranges of the macro economic effects in addition to

a central estimate to try to convey very clearly the uncertainty that those estimates have. robert? >> talked a little bit -- >> robert from >> changes in major health care programs since cbos update in august. >> yes so there are a few components in the major health care programs i think we're discussing. for the coverage provisions of the affordable care act and to be clear, what we mean by that, it changed a lot of features of spending programs and tax codes. we'll be talking about that, one being the provisions that expanded health insurance coverage like the expansion of medicaid and offering of subsidies and related provisions. others mostly involving large changes to the medicare program

and to the tax code. the provisions i'll focus on now are the ones involving expansion in health insurance. for the those provision we have made significant downward revision to the estimated cost over the next decade and downward revision of about $100 billion. it's 7%. less than we expected last year. and the cost of those insurance coverage provisions between 2015 and 2019, which was the last five years, which we made estimates in 2010 for those five year, 2015 to 2019, could now revise down the cost of insurance cost provisions by about 20%. and that's been through a collection of revisions. multiple times a year over the past five years. the number of factors that underlie that set of revisions,

probably most important one is a slow slowing in growth of health insurance premiums. but there are others as well including for example, the supreme court decision and improvements in our modeling. as you know robert, we have revised don our projections for medicaid and medicare spending. there's a further downward revision in medicaid and there are a number of factors that have fed into that. there are apart from economic changes, for medicare there have not been significant changes relative to last one apart from some things that relate to economic forecast. in terms of technical revisions, they're not due to legislation, but are focused on developments

in the programs and our interpretation of them. for that reason, medicare projection this time. but all told since 2010, because of these technical factors, this assessment of what's going on in health care program we have marked down our projection of federal medicare spending medicaid spending and preemmiums in the insurance exchanges by about 15% each for say 2020. so, some of that is things that have happened already and some is our projection of slower growth, so, we've got a little further in that direction this time in our projection of hemt insurance subsidies and cost of the aca expansion and in medicaid. no further this time really in medicare. robert. >> "washington post." you have figures on the decline and discretionary spending

domestic and defense and a shared gdp. figures in the adjusted for inflation and population change. say before the catch or something like that. >> we don't have a continuous series. i think there are some spots in the text where we talk about certain components relative to four or five years ago, adjusting for inflation. i don't remember all those numbers offhand. and they are spot references. i don't think we've reported anything that's adjusted for population growth. i'm happy to hem and hawe for a moment while i thumb through this, bob, and see what we can tell you about that. so for example, between 2010 and 2014, we on page 79 between 2010 and 2014, funding

for defense declined by 15% in nominal terms or nearly 21% in constant 2010 dollars. excluding the funding for overseas contingency operations defense funding fell to roughly 6% in nominal terms or 12% in real terms over that period. also between 2010 and 2014, i'm on the same page funding for nondiscretionary programs declined by 4.5% or 11% in constant 2010 dollars. yes. >> i was wondering if you could talk about what prompted the downward revision on the potential output for the u.s. economy. >> yes, so we revised down our estimate of potential output by about 1%.

from what we had in our august economic forecast. and the primary source of that revision was reassessment of productivity growth in the nonfarm business sector. we had previously thought that the slow growth of actual productivity, the slow observed growth in productivity over the past several years was mostly due to a shortfall in growth relative to the potential level of productivity. and we've anticipated that actual productivity would rebound to its potential level over the coming years. and for some time, that seemed like a reasonable expectation because productivity often falls short of its potential level when the economy is weak. when demand for products is weaker, firms don't push the

workforces as hard as they do when demand is stronger, so, it is reasonable in our view to have a potential total factor productivity in the nonfarm business sector above the growth we were observing, but as the economy has strengthened over the past few year, one woul expect that actual growth to not been falling further away from our production or potential, but it was given the potential growth we had. that didn't seem the to us to be the best forecast in the economy that was strengthening, so we lowered our production of potential total factor and productivity growth. so, it's st still above actual growth. some rebound in productivity over the next few rears but not as large. this is a very this problem that we face in trying to understand how much of what's happened to productivity over

the past several years is due to the business cycle and how much is due to underlying factors. it's hard and it becomes harder as the length of time during this weak conditions last longer. so there are people who observe that productivity growth seems to slow a few years before the recession. that was a pretty short period. we had a very deep recession and a slow rebound of output so it's hard to know how much of what's been going on over these past half dozen years is is because of the economy has been weak and will go away as the economy recovers further and how much is a part of the underlying structural conditions that we face. and on this particular variable product we think that the persistent slow growth in the face of an improving economy suggests that more of that is

due to structural problems rather than to the cyclical issues and because of that we have marked down our expectation for growth going forward. >> i have a technical question. on page 98 you talk about the erosion offor corporate tax. over 2.5% -- in the right hand column. but it says a final factor that partially sets in effect of the others talked about pushing corporate tax revenue up, is that you expect the average tax rate on domestic plofts will be closer to historic average. what is the domestic economic process and how is it different from the corporate profits? how does it off set? >> i think the way to think about our projection of corporate tax receipts is to start with an economic projection of how much profits we think we earn by corporations in this country.

because the profits in this country are taxed much more than overseas, so in focus and presenting our results on domestic profits of these companies and then the question is well, what share of those profits were paid in tax and one can tell us by looking up just the stat torre numbers because the tax that's paid depends on the deductions and so on that companies will make and how it will affect their tax burden. we were trying to explain here, different cross currents. part of what's going on is that the effective tax rate on domestic profit, which is to say the total amount of money the treasury has collected has pressed as a ratio to domestic profits that fell during the recession the last few years in a way we can't explain. and part of the reason we can't explain is because of the last few years, the total amounts, the