The Governor said the faltering national economy, the unresolved health care crisis and the commonwealth’s crumbling infrastructure pose significant challenges that can be overcome with the strategic use of resources.

“This budget proposes the actions necessary to protect our progress and support initiatives we need to address the long-term challenges Pennsylvanians must successfully meet to build prosperous communities we can pass on to our children,” Governor Rendell said.

In his address to a joint session of the legislature, Governor Rendell said that before budget deliberations begin, taxpayers deserve immediate action on programs to help weather any economic downturn, including:

· The immediate approval of tax rebates of up to $400 for 475,000 lower-income taxpayers;
· Putting Pennsylvanians to work on more than $1.5 billion worth of shovel-ready projects with prompt enactment of $750 million in new capital spending (the Redevelopment Assistance Capital Program, or RACP);
· The enactment of the Energy Independence Strategy to put $850 million to work employing Pennsylvanians in a promising economic sector and to help companies and citizens lower their energy bills;
· The approval of his sustainable plan to provide health care coverage to more than 760,000 adults without insurance; and
· The prompt passage of The Jonas Salk Legacy Fund to build the commonwealth’s capacity for health sciences research.

“Pennsylvania’s economy has become strong in the past five years,” Governor Rendell said. “Now is the time for proactive initiatives to protect the progress we have made so we can maintain and build on those economic gains and stave off national economic forces that threaten our stability.”

PROTECTING OUR PROGRESS

In addition to providing an immediate economic stimulus rebate to working families, funding shovel-ready development projects, boosting energy independence and investing in biomedical research, Governor Rendell’s Protecting Our Progress plan calls for:

· Investing $270 million to rebuild Pennsylvania’s infrastructure by employing workers to build and repair bridges, rail freight lines, small airports, high-hazard dams and flood-related projects;
· Reducing the interest rate on commonwealth loans offered to businesses through the Department of Community and Economic Development’s Small Business First, machinery and equipment loan, and industrial development programs;
· Increasing the job creation tax credit from $1,000 to $3,000 per employee;
· Extending the Business In Our Sites program by $100 million to enable more shovel-ready site development projects to proceed; and
· Extending the Keystone Opportunity Zone program to encourage the development of underutilized land and buildings.

“My Protecting Our Progress plan represents a comprehensive effort to ensure that our economy remains stable, even if the U.S. economy continues to worsen,” the Governor said. “This plan includes new proposals and some that have been debated for months. The economic future of millions of residents demands that we act now if we are to protect the gains we’ve made together in the past five years.”

REBUILDING PENNSYLVANIA

Rebuilding Pennsylvania’s infrastructure is a critical component of Governor Rendell’s Protecting Our Progress plan because it puts people to work building and repairing long-term assets that will keep the commonwealth competitive for decades to come.

“During the past five years, we have tripled annual spending for bridge repair,” Governor Rendell said. “Yet we now have more structurally deficient bridges because they are being added to the list faster than we can fix them, even with historic investments. We must do more to ensure the safety of travelers and protect our businesses.”

The 2008-09 budget proposes to add $200 million a year in new capital funding for bridge repair for each of the next 10 years. The Governor also proposes directing a larger portion of the current bridge funding to address the most critical bridges. In all, a record $15.5 billion will be targeted to bridge repairs over the next 10 years, financed with existing resources.

Bridges and roads are only a portion of the state’s infrastructure repair needs. This budget includes funding to begin addressing unsafe dams and improve economically critical aviation and rail freight facilities.

This budget provides $12 million in capital funds to repair 17 state-owned, high-hazard dams. A total of $37 million in capital funds will be directed to remediating state-owned dams over the next three years. In addition, a total of $6.6 million will fund a new grant program to help local governments repair 21 locally owned high-hazard dams over the next two years.

Flood-prevention measures will be funded by more than $100 million through 2010 to make flood-prone communities safe. The measure will be partly funded by a surcharge on property insurance premiums for structures located in flood plains.

The budget includes more than $45 million to invest in rail freight and aviation facilities that will enable companies to locate and expand operations in the commonwealth.

“Pennsylvania needs to continue investing in existing and new rail freight and aviation projects that keep businesses competitive,” Governor Rendell said.

Recognizing that every state and local government in the country is facing similar challenges to build and repair its infrastructure, last month Governor Rendell invited California Governor Arnold Schwarzenegger and New York Mayor Michael R. Bloomberg to join him in creating and co-chairing a non-partisan coalition for federal infrastructure investment — Building America’s Future.

PRESCRIPTION FOR PENNSYLVANIA

The Governor urged prompt action to provide the needed access to health care coverage for 767,000 uninsured adults while still helping physicians, especially high-risk specialists, to pay for their medical malpractice insurance by enacting his revised “Cover All Pennsylvanians” proposal. He said that both purposes can be accomplished by using surpluses in the Health Care Provider Retention Account, which helps to support the Mcare abatement program. This program helps to reduce health care providers’ out-of-pocket costs for medical malpractice insurance.

“We can provide affordable health care coverage for the thousands of hard-working people who lack regular access to comprehensive health care by using available surpluses and combining them with other CAP funding sources I have previously proposed,” said Governor Rendell. “Best of all, we can do this while continuing to provide state-funded abatements that help physicians, especially specialists, and midwives afford their medical malpractice premiums, which keeps health care providers practicing in Pennsylvania so people can continue to have access to health care.”

Because of the improvement in the medical malpractice climate in Pennsylvania, Mcare claims filings and annual payouts have decreased dramatically over the past five years, thereby creating reserves in the Health Care Provider Retention Account, which are not needed to support the Mcare abatement. The account currently has a $400 million balance.

“This is a sustainable plan,” the Governor said. “Even with very conservative assumptions, there is enough money to fund health coverage and provide health care providers with the help they need to pay their malpractice premiums for at least a decade.”

INVESTING IN OUR STUDENTS, PREPARING FOR THE FUTURE

“The cornerstone of Pennsylvania’s economic development strategy is preparing students for competitive, high-skill jobs in the knowledge-based economy,” Governor Rendell said. “School districts have made significant progress raising student achievement in all subjects and grade levels and for every group of students, but we have more work to do.”

Governor Rendell’s budget addresses the decades-old challenge of providing adequate funding by introducing a new school funding formula designed to raise student achievement. The formula is based on the General Assembly’s “Costing-Out Report,” which provides the first-ever Pennsylvania-specific school funding target based on what research says it costs to fund a quality education.

The legislature’s study reinforces the importance of having a school funding formula that bases resource decisions on what research shows it takes to provide a quality education. Governor Rendell’s 2008-09 basic education subsidy includes an increase of $291.3 million, or nearly 6 percent, that demonstrates the commonwealth’s commitment to providing adequate resources using a real funding formula.

The proposed 2008-09 General Fund budget is $28.3 billion, an increase of 4.2 percent over 2007-08. It reduces spending by 2.1 percent in all areas of the budget other than education, public welfare, corrections and probation & parole, while improving many vital state-supported services.

The commonwealth is leading by example in these challenging economic times by cutting the cost of running the government by and continuing to find new ways to deliver services more efficiently. Through management and productivity initiatives, this year the Rendell administration has saved $1.2 billion in the cost of operating government. These savings will continue to be realized annually.

The Rendell administration is committed to creating a first-rate public education system, protecting our most vulnerable citizens and continuing economic investment to support our communities and businesses. To find out more about Governor Rendell's initiatives and to sign up for his weekly newsletter, visit the Governor's homepage.