HARRISBURG, Pa., Feb. 8 -- Following is the prepared text of Gov. Ed Rendell's 2006 executive budget address:

 

Good morning.  Thank you very much.  Mr. Speaker, Madame President, Members of the 189th Legislature, distinguished guests, my Fellow Pennsylvanians.

 

Today marks the fourth year I have been privileged to present my proposed budget to this distinguished chamber.  But there is something significantly different about this year – as we meet here today the flag of the Pittsburgh Steelers flies over the Capitol in honor of the remarkable achievement of that great team, its owners, the Rooney Family, and its coach, Bill Cowher.  All Pennsylvanians are proud of the Steelers and their breathtaking journey to the Super Bowl Championship.

 

It is remarkable how much we have accomplished together.  In three short years, we have tackled extraordinarily difficult issues, problems that in some cases were generations in the making: providing thousands more senior citizens with prescription drug coverage, reforming our system of public education, re-energizing our economy and growing thousands of new jobs, controlling the spiraling cost of health care services to our most vulnerable citizens, cleaning up and preserving the environment and reducing the cost of state government while improving efficiency and effectiveness.

 

We could not have made such progress without the wit, wisdom and guidance that Bob Thompson offered so generously to all of us, to the citizens of his district, and to this Commonwealth.  We have truly lost a great Pennsylvanian.  But I know that Senator Thompson’s dream for a better Commonwealth will live on in the work that we do here together. 

 

There has been spirited debate and yes, even the occasional difference of opinion between us, both of which come with the difficult policy choices we made together to bring about real change to our Commonwealth.  I am very proud of the fact that despite our differences and honest disagreements, we all take very seriously our duty to enact the very best budget we can for Pennsylvania. 

 

And yet I am reminded again today that our task – the job of governing in a free society – pales in comparison to the life and death decisions that confront our fellow Pennsylvanians who are serving our country overseas – particularly those servicewomen and men stationed in Iraq and Afghanistan.  The Pennsylvania National Guard is one of the largest and most widely deployed in the nation.  More than 15,000 Keystone Guard members have joined thousands of Pennsylvanians from all military branches in fighting the global war on terror.  Tragically, since the beginning of the war 117 Pennsylvanians have died in Iraq and Afghanistan.  Once again, our Commonwealth’s sons and daughters have fought valiantly and heroically in the defense of our freedom.

 

So let us begin today by paying homage to those who have so courageously responded to the national call to service.  I know that I speak for all of us in extending our heartfelt prayers and deepest sympathies to the families of our fallen heroes, and I ask you now to join me in a moment of silent tribute to those whose memories we honor today.

 

Closer to home, the tremendous work of the Pennsylvania National Guard has made a difference all along the Gulf Coast, where since September more than 2,800 Guard members helped rebuild communities devastated by Hurricane Katrina.   Last September, Ms. Colleen Winkler, from Kenner, Louisiana, wrote to me and said: “I am writing to thank you for sending your National Guard to my hometown of Jefferson Parish, Louisiana.  Your men have demonstrated the highest standards of compassion, kindness, hard work and of course pride for their home in Pennsylvania.  Men such as your National Guardsmen represent the BEST in America, and I am so proud and so happy to have met them.”

 

At home or abroad, let us keep these brave Pennsylvanians in our thoughts in the difficult days that lie ahead for them, and pray that they all return home safe and sound.  In the coming weeks, let us demonstrate our support and gratitude for our Guard and military heroes by taking the following actions:

 

First, the General Assembly should swiftly pass the eleven bills that remain of the Support our Troops package I proposed last Memorial Day.

 

Second, I ask that you approve the increase I have proposed in this budget for the care provided in our veterans homes.

 

And third, I hope that all of you will with join me on September 10th in State College, when more than 15,000 of our guard and their families will attend a welcome home celebration for those who served in Afghanistan and Iraq.  Just imagine the message you will send to our soldiers and airmen by officially holding a session day in State College to pass a resolution to recognize and thank them for their bravery.  I will be there – I urge you to make Sunday September 10th an official day of work in honor of the contribution these Pennsylvanians have made to this Commonwealth and this nation.

 

We have made great strides together, but we do have unfinished business.  First, of course, is dealing with property taxes.  This challenge has defied easy answers for more than 30 years in Pennsylvania.  I both appreciate and respect the depth of thought, length of debate and creativity of ideas that have come forth in both chambers in support of greater property tax reductions than those we will provide with gaming funds.  But first we should all remember that when we expanded gaming in July of 2004, we entered into a compact with the citizens – a compact that guaranteed that every homeowner would get property tax relief and that the tax dollars generated by gaming would help fund it.  I have called you into a Special Session to ensure that we meet the principles of that compact.  As I said when I did so, our citizens are losing their patience and the signs of their discontent are growing stronger.  I ask you to pass a property tax relief bill that I can sign before the end of this month so that Pennsylvanians will know, once and for all, that property tax relief is certain.  Both the House and the Senate have given these matters exhaustive attention – now is the time to act.

 

Second, the minimum wage must be increased in Pennsylvania and it must be increased now.  The economic support for an increase is undeniable.  The public will and demand for an increase is overwhelming.  And the political willingness for an increase is bi-partisan.  I ask you to also pass this month a minimum wage increase to $7.15 an hour effective January 2007 to show our support for the 423,000 hard working people who are struggling to make ends meet in our great Commonwealth.

 

I also ask the Senate to confirm my nominee for the Pennsylvania Supreme Court, Judge Cynthia Baldwin.  I believe that Judge Baldwin has demonstrated that she has the judicial temperament, the experience and the intellect to serve this Commonwealth with distinction. 

 

The great American poet Robert Frost once wrote: “Two roads diverged in a wood, and I, I took the one less traveled …– and that has made all the difference.”

 

Three years ago, we faced a fundamental choice.  Politically speaking, on each of these issues the easier – more traveled – road would have been to conduct business as usual: to find a series of easy, one-time fixes to patch our budget holes until they became someone else’s problem; to keep the old education funding scheme in place; to ignore our stagnating economy; and to avoid the tough decisions that would accompany any real effort to bring property tax reform to Pennsylvania.

 

To your credit, and in the interest of serving families across the Commonwealth, we chose the road “less traveled.”  We chose a path of fundamental reform.  At long last, we have charted a course for real progress in Pennsylvania – and we have achieved progress that cannot be denied.  Each and every member of both chambers should be proud that we have more jobs in Pennsylvania now than at any other time in the history of this Commonwealth.  Every legislator should take credit for the fact that we have moved from 46th in the nation in job creation to 15th.  This means that since I took office, we have helped to create more than 120,000 additional jobs in Pennsylvania. 

 

Our work together has paid great dividends, and we are becoming a leader among states.  Today I propose to continue this momentum by giving you a budget that is built on three platforms.

 

First, at a time when many state governments are talking about ways to cut services to our most vulnerable citizens, we will enhance the Commonwealth’s ability to care for Pennsylvanians in need – our children first and foremost, our senior citizens, and those who need a helping hand.

 

Second, we will propose a series of major new investments that will make Pennsylvania more competitive than ever before.  These proposals include an unprecedented series of strategic investments in medical research, world trade opportunities and exciting new programs to build a stronger work force for tomorrow in our public school classrooms of today.

 

Finally, and perhaps most importantly, we can achieve the goals set forth in this budget without any increase in taxes.  Let me say that again: the budget I propose today includes critical new investments and services for citizens across the Commonwealth, all with no tax increases.  We can afford these investments because we are reaping additional revenue from our expanding economy, while at the same time continuing to drive down the cost of delivering government services and reducing the size of government itself.

 

When I campaigned for governor I said that I would cut $1 billion in waste out of the state government.  Most insiders told me that was impossible and most outsiders just didn’t believe me.  I am pleased to tell you today that by the end of this calendar year, we will be spending $1 billion less to deliver government services without cutting those services, and on top of that, we are delivering those government services in a far more effective and efficient manner.  We have achieved these operating budget cost savings by cutting waste, improving efficiency and eliminating more than 4,000 positions from the Commonwealth complement – without any layoffs.

 

Finally, and perhaps most significantly in terms of its impact on state government expenditures by virtue of its sheer size, with your wise input and action last year, the Department of Public Welfare continues its groundbreaking initiative to reduce the cost of delivering critically needed social services in Pennsylvania.  This hard work began last year with a comprehensive solution to stabilize the skyrocketing cost of health care and social services – costs that rise even as the federal government continues to reduce its support for these services nationwide.  This solution made it possible to keep the social safety net in place for thousands of Pennsylvanians in need, and as I said earlier, this year we will actually enhance services while other states continue to cut them.  Our work together has paid off – the Department has realized more than $370 million in annual savings.

 

When I stood before you three years ago the state budget was far from stable.  Our deficit stood at over $1 billion and was projected to exceed $2 billion and our across the board fiscal discipline had been shelved.  Over the last three years, tough negotiations with vendors, common sense changes that right-sized our operations, and business like approaches to purchases and delivery of services, have put our budget on firm footing and given us a solid foundation for further investment.

 

So today I am announcing investments that will continue to move this state forward.  They will put the Commonwealth on the cutting edge of health care, education and economic development improvements.  They will make Pennsylvania more competitive and a better place to live and work, and they are specifically geared to focus on the progress of our young people as we prepare them to take their place in the 21st century economy.

 

Sadly, Coretta Scott King passed away last week.  We will all miss her inspired work to help us realize the dream for America that Dr. Martin Luther King, Jr. asked us to imagine.  Dr. King once said, “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”  When it comes to protecting the most vulnerable among us, this sage advice should guide how we, who lead relatively comfortable and easy lives, respond to the budgetary challenges of the continuing brutal trend by the federal government to reduce its support for programs to help the needy.  We have continued to use the right measuring stick.  A ruler that is marked to ensure we do not diminish – and where possible we try to improve – the quality of life for those who face struggles most of us cannot even imagine.  We have chosen to continue to be their lifeline against the rising tide of poverty, illness and disease.

 

Last year, my budget proposal provided the funding necessary to add 10,000 children to our great CHIP program.  Today, we are moving to the next level.  We will offer the hard working parents of this state the opportunity to buy affordable health insurance for their children – so that every child in this state will be covered. 

 

Pennsylvania already has one of the lowest rates of uninsured children in the nation.  But each one of the 130,000 children who do not have insurance coverage is one child too many.  Our program “Cover All Kids” will expand CHIP and give parents the ability to take children to the doctor, to get prescriptions filled and to tend to their ongoing medical needs.  Parents whose income would otherwise preclude them from eligibility for CHIP will be able to purchase CHIP coverage for their children at an affordable price, and others in higher income brackets will be able to purchase CHIP coverage at the same cost that the Commonwealth pays – in other words, at a substantial savings from what it would cost if they had to purchase coverage on their own.

 

How we care for our children speaks volumes about our society.  I cannot imagine the anguish that tens of thousands of parents who cannot afford health insurance for their children must face on a daily basis.  The failure to provide health insurance for every child forces parents to make impossible choices.  “Cover all Kids” is affordable to the Commonwealth and affordable to working parents.  It is the right thing to do for our families, for their children, and for our collective future.

 

This year again, due to the historic agreement we reached with the Blues, I am proposing an expansion of the Adult Basic insurance program to bring critically needed insurance coverage to an additional 8,500 low-income working adults.  I am also pleased that this budget provides additional resources for those with disabilities or mental retardation, and for those suffering with HIV/AIDs.  We are increasing childcare resources so that more single parents can go to work and stay off of welfare, and we are funding for the first time preventative screenings for breast and cervical cancer for women under 50 who lack insurance.

 

We are also devoting substantial resources to supporting our senior citizens across the Commonwealth.  Thanks to the work of Senators Bob Mellow and Pat Vance, and Representative Todd Eachus, and due to the dramatic increase in productivity of the Pennsylvania Lottery, today close to 90,000 more seniors have prescription drug coverage – a 40% increase in the number of enrollees in just two years.

 

But at a stage in life when things are supposed to get a little easier, Pennsylvania seniors now must cope with the often mystifying complications of the new federal prescription drug program.  As you all know, we moved swiftly when the problems with the Medicare Part D program became evident last month to ensure that no eligible Pennsylvania senior was without prescription medication.

 

Today I am proposing that we expand that commitment to our seniors thru enacting the PACE Plus program.  PACE Plus will save our seniors thousands of dollars a year in prescription drug costs, and ensure that PACE beneficiaries keep the same level of coverage they have enjoyed for nearly 22 years.  We all know that the new federal drug program puts the onus of paying for annual drug purchases that exceed $2,250 and that are less than $5,100 on our senior citizens.  This gap in coverage is the now infamous “doughnut hole.”  Under PACE Plus, no low-income senior will have to make the choice of whether to stay warm or stay well – PACE Plus will close the doughnut hole and cover the gap in federal coverage for them.  With PACE Plus, Pennsylvania will continue to be the national leader with respect to prescription coverage for seniors.  Our PACE Plus package is by far the most generous and comprehensive supplement to the federal program in the nation.

 

And best of all, due to the good work of the Departments of Public Welfare and Aging we will be able to add 120,000 seniors to the PACE program, bringing the number of seniors we help to 430,000 – almost double the 220,000 who were enrolled in PACE the day I took the oath of office as Governor.

 

Just as history will judge us as a society by the way we treat our most vulnerable citizens, we can also measure our confidence and hope for the future by the degree to which we are willing to invest in that future.

 

In 1947, a 33-year-old physician named Jonas Salk, who had spent the bulk of his young career working on ways to prevent the spread of influenza, accepted an appointment at the University of Pittsburgh Medical School.  At Pitt, young Dr. Salk devoted his life to the research of polio, a disease whose deadly and crippling effects were so catastrophic that families all over America barely spoke its name out loud.

 

In 1955, after years of research, Dr. Salk created a vaccine to stop the spread of this dreaded disease, and the nation rightly called him a miracle worker.  Throughout his life, Dr. Salk sought cures for the most pervasive illnesses.  Today, Jonas Salk is rightfully remembered as an American hero, and I am especially proud today to announce the creation of the Jonas Salk Legacy Fund, which, through using our tobacco settlement funds in a new way, will put one billion dollars to work funding medical research in the next two years.

 

This unprecedented commitment to the cause of scientific research in Pennsylvania will solidify our leadership position in the field of biosciences – right up there with our major U.S. competitors New Jersey and California.  Already 84,000 Pennsylvanians are employed in our research companies and institutions.  Investments made by the Salk Legacy Fund will boost the number of these well paying and rewarding jobs and will swiftly expand the medical research conducted in this state.

 

The Salk Legacy Fund will catapult Pennsylvania to the top of the class in scientific research.  It will enable Pennsylvania to attract the very best research talent in America and to build topflight research facilities.  This investment could enable the next Jonas Salk to find the cure for Alzheimer’s disease, multiple sclerosis, or diabetes.  But we will also use these funds to foster a greatly expanded level of growth in the business of science as well.

 

Investing in cutting edge medical research facilities is something Representative Dan Frankel has championed for years and something that we are already doing in Pennsylvania, and doing very well.  At the University of Pittsburgh, our Keystone Innovation Starter Kit will help a world-renowned biophysics professor to build a whole new course of study at Pitt – one that we expect will leverage additional grant funding from the National Science Foundation and the National Institutes of Health.  Similarly, at Franklin & Marshall College, our economic stimulus programs are making it possible to build a $40 million Life Sciences Research Center in downtown Lancaster.

 

The University of Pennsylvania School of Medicine is working on building its research capacity in high-throughput cell-based screening of protein compounds, a true cutting edge area of medical research.  I’m not going to even try to convince you that I know what that is, but it’s more than just a conversation-stopper at academic cocktail parties.  This type of research has tremendous importance in the private sector as a source of development of a whole range of new products.  And that means that in the process of supporting great new science, we are also supporting great new business opportunities in Pennsylvania.

 

The Salk Legacy Fund will leverage the power of future Tobacco Settlement Fund proceeds to enable Pennsylvania to become a world leader in the field of scientific research today.  Best of all, we will not need to divert one penny of taxpayer funds to make this happen.

 

When we talk about Pennsylvania becoming a world leader in any field, it is worth remembering that in many respects, we already play on a world stage.  More than $18 billion worth of goods, primarily manufactured goods, were exported from Pennsylvania last year alone.  If Pennsylvania were a nation, separate and apart from the United States, we would be the 17th largest economy in the world – ahead of Saudi Arabia and Switzerland.  Thinking of it another way, our gross state output last year was larger than the economies of South Africa, New Zealand, Malaysia and Ecuador combined.

 

Ours is a large and diverse economy, and today there is tremendous opportunity for Pennsylvania businesses to significantly expand their markets, if our businesses learn to expand to markets around the world.

 

Many of our companies want to enter the global marketplace, but lack either the capacity or the expertise to do so.  If we can support their efforts to reach these markets, we can dramatically increase our share of international trade, attract new foreign investment to Pennsylvania, and build upon the tremendous global network already developing in our colleges and universities.

 

As part of my commitment to make strategic investments in Pennsylvania’s future, I am announcing today the creation of World Trade PA, an initiative specifically designed to help more Pennsylvania companies enter the global marketplace.

 

First, World Trade PA will increase access to information.  Small and medium-size firms with export potential do not have the surplus cash to hire a consultant or lawyer to help them figure out how to get their product to the right market or to handle the logistics of international exporting.  The World Trade PA Operations Center will create web-based tools to help Pennsylvania companies make market decisions and navigate global trading systems.  This “virtual” center will be available 24 hours a day to help Pennsylvania companies identify opportunities, develop successful business plans, and learn the details of international tariffs, customs, shipping and security so they can move their products out to the marketplace.

 

Second, we will strategically increase Pennsylvania’s presence around the world by adding trade representatives in the countries with the largest and fastest growing economies, including China, India, Korea, and the Middle East, and by reducing our presence where there is less opportunity for Pennsylvania firms.

 

Third, working with local business organizations, we will launch an intensive outreach campaign aimed at small and medium-sized businesses, to encourage their entrance into the global marketplace.

 

Finally, World Trade PA will make the most of the advantages we have in attracting foreign students to Pennsylvania colleges and universities.  These students – more than 22,000 of them – represent a tremendous network of potential business relationships both now and in the future.  So we will create a global “business alumni” network to match these Pennsylvania alumni from all over the world with business opportunities here in the Commonwealth.

 

But no investment in the research and business opportunities of the future can be successful over the long haul unless we ensure that we invest in the education of our children to prepare them to take their place in the increasingly competitive global economy.

 

Of all the investments that we are announcing today, I am proudest of those that we will make to enhance the academic achievement of Pennsylvania’s students.  And these initiatives, again, are the product of the choice that we made together three years ago to dramatically increase education funding in Pennsylvania.  Our funding for early childhood, elementary and secondary education has increased by nearly $1.2 billion since 2002.  And our students are already demonstrating a great return on this investment: by every measure, student achievement is dramatically on the rise.  Fifth graders meeting state standards are up from 53 percent to 69 percent since 2002.  And national test results released late last year found that Pennsylvania is one of only seven states in the nation to make significant progress in both reading and math.  The impacts of the investments we have made together are indisputable.

 

For the first time in Pennsylvania history, full-day kindergarten is available to more than half the eligible students statewide, more than 7,500 children are in state-funded pre-k programs and 20,000 high school students are earning college credits before graduation.

 

This budget takes our work to improve what happens in schools to the next level with a new range of investments designed to encourage the development of the next generation of scientists, inventors, and great thinkers right here at home.

 

To achieve this goal, this budget proposes an increase in K-12 education funding of $517 million.

 

To put these proposed investments in context, let me share with you some very important facts.  This year, every public school district will need to make state mandated contribution to the PSERS retirement fund that is 42% higher than the contribution they had to make last year.  Over $100 million of the proposed K-12 increase helps the districts meet this cost increase – an increase that is completely out of a school district’s control.  This is an ominous trend:  In the near future, the state budget and local taxpayers will be expected to increase school funding annually simply to meet growing pension obligations.  This could impair our ability to fund the cost of educating our students.  We must work together to address the growing pension obligations of our school districts.

 

This increase also meets a critical goal that I know I share with many members of this legislature.  While more money doesn’t necessarily mean better schools, under-funded schools cannot, I repeat, cannot, do what research says must be done to boost student achievement. 

 

Last year, there were 153 school districts where residents were already taxed to the hilt and yet per student spending was lower than what is known as the “Foundation Level.”  That’s the minimum funding level, according to research, required to enhance achievement.  This budget lifts 132 of these districts above that level.  As a result, these districts will begin to have a stable and sound funding base – now they will be able to do the job we need them to do. 

 

I know you share my goal of guaranteeing that every child gets a quality education, regardless of their zip code.  We are moving in the right direction by putting the funds in place to achieve that goal; now we must focus on helping districts realize the desired outcome from this investment.

 

To that end, this budget puts more funds where research says we should be investing.  Today our students compete for college admittance and jobs against students graduating from school systems in China, India, the former Eastern Bloc and Japan.  These nations have invested billions in retooling their public education systems so their graduates get the best jobs in the new economy.  Consider these two troubling facts:

 

1) In a recent test given to gauge mathematical understanding, U.S. students finished 27th behind China, where 59% of the students demonstrated competency.  Only 32% of U.S. students could master the test.

2) At the same time, across America companies are beginning to confront the fact that they are likely to lose 40-50% of their workforce due to retirement in the next ten years.  CEOs across the country are warning that America is not preparing high school and college graduates fast enough to take the place of those likely to retire.

 

We face a national challenge, but we cannot wait for a national solution.  Pennsylvania must take action; I am proposing today a three part agenda to respond to the educational competitiveness challenges we face.

 

First, we want to do statewide what 48 school districts, charters and private schools in the southwest part of the state have done.  With financial and technical support from the Bayer Corporation, these districts have fashioned a science curriculum that enabled their students to out-score almost every school in the United States, and to perform as well or better than schools in every nation in the world.  Vince Valicenti, who is part of the Asset team doing this great work, is with us today.  Vince please stand so we can applaud your groundbreaking work with our students. 

 

Using this proven program as a model, we propose investing $10 million to upgrade the science curriculum in elementary schools throughout the Commonwealth.  This new program is called “Science: It’s Elementary,” and the goal is to replicate this proven model in 150 public elementary schools.

 

But we won’t stop there.  At the high school level, we are announcing the “Classrooms for the Future” initiative, a commitment to invest $200 million so that by 2009 every public high school classroom used to teach the four core subjects will have an Internet-equipped laptop computer on every student desk, as well as multi-media technology at the teacher desk.  What’s more, we will invest in professional development for Pennsylvania teachers and school leaders to teach them how to use the new technology that will boost the skills and knowledge of our students. 

 

I would love to say that this idea is one that will put Pennsylvania in front of other states and that when we were developing this program we thought we would be at the forefront of the nation.  But other states are already blazing the trail.  Governor Reil of Connecticut proposed a similar effort last year and Governors Romney of Massachusetts and Rounds of South Dakota are also intending to make similar investments this year.  Pennsylvania can take our high schools to the next level, but only if we act now to begin the broad deployment of these technologies.

 

But we should not do this just to lead the nation.  Teacher Rich Hollein from the Quaker Valley School District in Allegheny County, which has taken the lead in making technology available to its students, tells us of the impact of computers on every desktop of his high school.  “I believe it makes students more accountable for what they learn in order to move to a higher level,” he said.  The visionary Superintendent of the Quaker Valley School District is here with us today.  Dr. Jerry Longo – thank you for showing us how to build “Classrooms for the Future.”

 

No one can seriously dispute that our high schools need to be transformed to teach in ways that use technology – our teachers stand before the “technology generation” and rely on blackboards and at best two year old text books, while their students’ brains and approach to the world are hardwired to technology.  Over the next three years we can leapfrog from 19th century classrooms to 21st century high schools – a jump that is long overdue.

 

Each year more than 26,000 students in Pennsylvania graduate from our colleges and universities with degrees in math, science, engineering, or computer-related disciplines.  In fact, Pennsylvania ranks fourth in the nation for the number of graduates in these cutting edge fields of study.  But we need to produce even more of these graduates.  I want to help our parents and our students bring down the cost of going to college in these cutting edge fields.  To that end, my proposed budget increases funding to our New Economy Technology Scholarship Program from $3,000 a year to at least $4,000 a year for students who choose these fields and agree to stay and work in Pennsylvania after graduation.

 

In order to get more students to choose to study in the fields of tomorrow we must train our high school counselors to help those students make the right course and college decisions today.  This budget includes funds to help high schools upgrade their college and career counseling programs.  And I propose to double the funding for the Project 720 high school reform initiative, which should permit at least 100 public high schools to retool their curricula to ensure that every student graduates prepared to succeed in today’s world.

 

These are the types of investments that will help our students compete in the world economy.  But we won’t stop there.  This budget also adds $50 million to the tremendously successful Education Accountability Block Grant that was so ably designed in partnership with Majority Leader Sam Smith.  Already, the Accountability Block Grant has helped us enroll 30,000 more children in full-day kindergarten; helped reduce class size in the elementary grades; provided funds to permit 39,000 more students to receive tutoring; and helped schools pay for thousands of hours of additional teacher training.

 

Just as we demand greater performance from our students, we must also insist on greater accountability from Pennsylvania’s educators to insure that performance.  This budget includes $2 million to reward principals and superintendents who meet ambitious targets for boosting student skills in reading and math.

 

Let me pause here and introduce to you Sharen Finzimer, the principal of Edmonds Elementary School in Philadelphia.  Principal Finszimer has outperformed every principal in this state.  Over the last two years the students in her school went from only a 29% proficiency rate in math to 92% and in reading she took her students from 58% proficient to 79% at grade level.  Of course the teachers at her school helped her achieve this great success.  But she is the captain of that ship and the captain sets the tone and the pace of progress.  Consistent with the Accountability Bill that I will once again ask this legislature to pass, I believe that the captains of our schools – principals and superintendents – must accept responsibility for their results.  They should be rewarded when those gains are significant and held accountable when the results do not demonstrate progress.

 

I also propose that this year we offer incentives for teachers who are working to meet the standards of teacher excellence.  This budget provides the funds to help 500 of our teachers earn the coveted National Board certification.

 

Another area of focus this year is our public libraries.  They are critical assets that supplement the learning in our school systems.  Therefore, this budget proposes to increase funding for public libraries by more than $14 million, bringing our state library subsidy to an all-time high.  And building on last year’s successful reform of our Community College funding system, this budget boosts their operating funding by 4%, and also adds $4 million to support $40 million for Community College capital expansion programs.

 

The entire cost of “Classrooms for the Future” and capital funds for Community Colleges cannot be met in one year’s budget alone.  But I believe that there are other resources we could tap, such as the extraordinary earnings of our Pennsylvania Higher Education Assistance Authority that could be designated by the PHEAA board to augment the investments made in this budget.  These resources would enable all of our high schools to transform in one year instead of three years or address the urgent capital backlog in our Community Colleges across the state.

 

Of course, we face capital needs beyond education, and I am pleased that our economic rebound gives us the resources to respond to many of those needs.  The most urgent is the repair of our roads and bridges.   Since 2003, we have improved more than 18,000 miles of highways – enough to take us to India and back.  This budget paves the way for us to tackle even more urgent needs by adding an additional $130 million for road and bridge repairs.  These funds are on top of the $500 million PennDOT has targeted for bridge improvements in 2006, a figure that is nearly double the $259 million spent on bridge repair in 2002.  This year, we will spend nearly $5.1 billion on safety, maintenance and construction of highways and bridges – a full billion dollars more than the Commonwealth spent in 2002.

 

Across this state, communities face extreme and heart wrenching problems that range from wanton gun violence to the ravages of methamphetamine addiction.  To help these communities, this budget adds 90 more troopers to our State Police – bringing the overall State Police complement to an all time high.  This expansion affords the Commonwealth the opportunity to enhance traditional state police functions.  The new troopers will increase our ability to respond to the needs of citizens throughout rural Pennsylvania who rely on the state police for emergency and police functions.  And, once we finish the transition of getting trained law enforcement officers out from behind desks and on patrols, our citizens will be even safer.  These actions will also allow us to deploy small specialized teams to help stem the rise in gun violence.  There is more we must do to make our cities safe and I look forward to working with Senator Anthony Williams and Representative Dwight Evans and others to respond to the difficult challenges we face.

 

The budget that I have just outlined dramatically expands our ability to care for Pennsylvanians in need, and it directs major new sources of state funding for strategic investments to make Pennsylvania – especially our students – more competitive in the global economy.  We are expanding our research-based economy, and preparing our young people to thrive in that economy through a whole range of state investments in public education.

 

And we will do it all without raising taxes in Pennsylvania.  In fact this budget cuts taxes in ways that are targeted to increase the impact of all investments I’ve just described.

 

This budget accelerates the phase out of the Capital Stock and Franchise Tax, a tax that eats into the profits of our manufacturers – a sector that so critically needs to keep profits to invest in equipment upgrades and new hires.  This budget also increases our tax credit for research and development by more than 30% to encourage small and medium sized research companies to expand their operations in Pennsylvania.

 

While we cannot completely uncap NOLs – that would require us to forgo over $200 million annually in revenue – I do believe that we need to move toward enabling companies to write off losses associated with doing research and getting new products to market.  Therefore this budget begins to uncap NOLs by raising our annual cap on losses from $2 million to $3 million.  Should future revenues permit us to continue to uncap these losses, it is my intention to propose each year additional increases in the NOL cap until the limit is completely removed.

 

It is my belief that a fairer business tax system will increase Pennsylvania’s competitiveness.  Sound budget practice dictates that we only continue to raise the NOL cap when we can afford to do so.  The best way to make that happen, and to go further by lowering our Corporate Net Income tax rate to 7.9% and adopting a single sales factor, is to revise our tax structure so that the Commonwealth receives business tax payments from more of the 73% of corporations that currently do not pay any Corporate Net Income tax.  This can be achieved if this body closes tax loopholes as recommended by the bi-partisan Business Tax Reform Commission.

 

Pennsylvania’s economy is on the move.  The trends are real and strong: jobs are up, unemployment is down.  Through Job Ready PA, we finally began making substantial investments in our current workforce.  One thousand workers got the training they needed to keep their jobs.  Our 45 Industry Partnerships involve 450 employers in cutting edge training efforts that will ensure their new hires have the skills that these companies need for success.  And I am especially proud that our new support for our Career and Technical Education programs has begun to improve the quality of education for 15,000 of our students.

 

The economy is better today than at any time this decade and our revenue picture is looking bright.  With the help of the Economic Stimulus Program that I proposed and that this body improved and enacted three years ago and our aggressive work to market the business incentives that were in place when I took office, our families, our businesses, and our state budget are beginning to feel the impacts of this hard work.

 

Let me share just one example of the impact of these efforts.  Olympus America, the U.S. subsidiary of Olympus Corporation based in Tokyo, makes high-tech photo imaging technology for consumer use and medical research.  Last year, this company moved its U.S. headquarters from Long Island to the Lehigh Valley, which will bring a total of 750 new good paying jobs to Lehigh County.  Our tool chest of business attraction resources – which I should tell you is considered by many second to none – combined with rapid road improvements, made it possible for Olympus to make the move to Pennsylvania.  Mark Gumz, the President of Olympus America is with us today and I know he won’t mind if I share a quote of his with you.  He said, “In considering the right headquarters location for Olympus in America, we had several criteria.  These included the ability to attract and retain top talent, access to a strong labor pool, proximity to other consumer product, healthcare and life science companies as well as colleges and universities, and various 'quality of life' factors.  However, without the expanded incentives of the Keystone Opportunity Zone program we would not be relocating to Pennsylvania."  Mark, will you please stand and be recognized for the confidence you’ve shown in us by your move to the Commonwealth of Pennsylvania.

 

And I could share with you over 600 examples of companies that over the last three years have either changed their mind about closing, decided to stay instead of leave, expanded operations, or moved to Pennsylvania as a result of the Economic Stimulus and the other business attraction efforts that we have developed together.

 

Three years ago, Pennsylvania was at a crossroads.  We faced difficult problems that required meaningful reform of our education system, our economy, our tax system, and even the way state government conducted business on behalf of our fellow citizens.

 

Together we sped up the work of cleaning up our rivers and streams and preserving our farmland by the passage of Growing Greener II.  We laid the foundation for Pennsylvania to take the lead in America’s clean coal and alternative fuels economy by your passage of the Alternative Energy Portfolio Standard.  We christened the Pennsylvania Wilds and celebrated Route Six and in this budget we provide the resources to respond to the increasing demand from tourists and Pennsylvanians who want to visit our state parks.

 

Pennsylvania has a newfound sense of momentum and hope.  By any measure, we have been busy bringing the future to Pennsylvania.  But make no mistake, what I propose in this budget occurs in a context of federal cuts and actions that make it increasingly difficult to meet the needs of our citizens.

 

This budget takes into account enormous federal cuts totaling nearly one billion dollars.  Of these cuts, $150 million are due to changes in federal formulas for Medical Assistance and the phase out of Intergovernmental Transfer Funds.  And for the first time in the history of this Commonwealth, the budget must include close to $350 million to pay the federal government for the federal Medicare Part D program.  Think about it, Washington has the audacity to charge us for a major new initiative that they enacted, into which we had no input, and which they will manage.  The federal government is balancing its budget by shifting its costs onto state budgets.  But Budget Secretary Mike Masch and I are determined to ensure that these irresponsible federal budget actions do not deter us from doing what needs to be done to move this state forward.

 

What I have proposed today is bold and far-reaching.  It is necessary and vital for our future.  And the good news is that it is affordable.  The expenditures outlined in the budget I propose today increase our spending by 3.8% compared to our current year budget.  In fact, in the aggregate, all department costs other than those for welfare, education and debt service are actually decreased in this budget by 2.5% when compared to last year.

 

As Governor, I have pushed hard for the changes we sought in our economy, our public schools, and even state government itself.  I believe that when it comes to building a better Pennsylvania, there is no time to waste.  We are competing against other states and countries around the globe that want the very same levels of investment, jobs and opportunity that we seek as well.

 

The road we have chosen to take over these past three years – the road of hard work and investment in our future – has made a real difference.  It’s a road we share as Pennsylvanians first and elected officials second.  It’s a road that will have bumps to navigate and some hills for us to climb – but because we are all Pennsylvanians we will climb them together.  But no matter the conditions, keep in mind that it is the road we must travel together:  the road to a New Pennsylvania.  We’ve achieved a great deal of progress already, but as Robert Frost’s words remind us, “we have miles to go before we sleep, miles to go before we sleep.”

 

Thank you.