Stacey Witalec:  Give us a quick snapshot of where we are, how we got here, and what we might have to look forward to moving forward.

Senator Jay Costa:  Well, what we have now is the governor has signed a budget that said approximately a 30.3 billion dollar budget that provides for a level of funding that, quite frankly, was not within the framework, was outside the framework that we have discussed for several months.  And the governor has taken his authority to line item veto many of the lines.  And that’s exactly what he’s done.  He line item vetoed to 50 percent, or a little under 50 percent, of the funding for our school districts.  For example, our K-12 line items.  As well as line items associated with corrections and a whole host of other line items.  And then the community and economic development.  So where we stand right now is at a budget that’s about 23.3 or 23.4 billion dollars that will be driven out to our school districts, that will be driven out to our human service agencies and the like to allow them to sort of have the revenue they need to be able to continue to provide for those operations and services that they provide.

At this point where we are is that we’ve got to come back and we have to address the revenue shortfall, which is anticipated to be about 500 million dollars.  In addition to having to address what are called our state-related schools, our universities, Pitt, Penn State, Lincoln and Temple.  The House has not passed those non-preferreds.  They need to make their way to the governor’s desk.  But more importantly, there’s no revenue to sustain them.  So we’re forced to come back and have a conversation about how we grow some revenues here in Pennsylvania to be able to at least, at a minimum, take care of this budget that we’ve got before us, but in hopes that we’ll be able to continue our conversations in terms of trying to get back to the 30.8 billion dollar structural framework that we had in place.

Stacey Witalec:  We’ll get back to the conversation about growing revenues in a minute.  But let’s talk a little bit about what was in that framework.  You referenced investing in jobs, growing jobs, investing in education and providing for human services.  Those are all things that you see evidence of in the district when we invest in them properly.  What happens when we don’t?

Senator Jay Costa:  Well, when we don’t, what we do is we manage decline.  And that’s what we’ve been doing the last four years.  And this budget continues to be able to do that.  The Republican-passed budget.  We have been fighting for the last four years, and most particularly this year, with Governor Wolf to make investments in education to the point where we had, on the table, historic investments in education.  Almost 500 million dollars and dollars going into education, K-12, higher ed., pre-K, special education, Head Start programs.  All those combined would have been about 500 more additional dollars to educate our kids.  When we make investments in education, the results prove that we made the wise investment.  When we don’t make those investments in education, our scores determine what our kids are going to be able to do.  And that’s a path we don’t want to go down because we have gone down it the past four years.

Human service programming.  We are in the process of trying to restore human service cuts that have taken place over the past four years.  We have extracted from the human service agencies and social service providers in Pennsylvania probably 315 million dollars in social service programs and services in the community.  These are not services that are at hospitals or at other places.  These are community services where folks are accessing services that they’re really critically important.  Mental health services, drug and alcohol services, homelessness programs.  All those type of programs.  We’re trying to make investments there, trying to get those dollars.  That’s what’s at stake here; not being able to do that.

And finally in job growth and economic development stuff.  You know, we’re trying to make investments there, as well.  This budget cuts those lines, cuts human service lines, and dramatically cuts education lines.  And it’s unfortunate that’s where we’re at.  So our goal is to come back to work with our colleagues in the Senate and in the House and figure out a way to be able to reinstitute those conversations.

Stacey Witalec:  Are conversations ongoing or where do you go from here?  I mean, we’ve heard people say we’re at a stalemate.  Where do we go?

Senator Jay Costa:  Well, we are at a stalemate at this particular point in time.  Where we go from here is we get folks together and we try to get reasonable minds to agree that we have to take certain steps forward.  We can’t keep our head in the sand with respect to the resources we have available to do what we want to do.  Folks wants us to make investments in education.  They want us to look to the Marcellus Shale community to be part of that solution.  They want us to look to making human service and economic development investments.  That’s what they sent us here to Harrisburg for.  More importantly, that’s what they sent Tom Wolf to Harrisburg to be here to do.  And we’re working with him to try to be able to do that.

We have to recognize that we have to do that with revenue.  And we have a structural deficit that we’re facing that could balloon to about 2.5 billion dollars next year.  That’s a concern for many of us.  And if we get on a path where we don’t do any revenues this year, if we manage decline this year, what we’re faced with in 2016-17’s budget are dramatic reductions in education spending, dramatic cuts in human services programs, dramatic cuts in a variety of other programs that meet the needs of people in Pennsylvania.  They don’t want us to come on that path because we’ve done that the last four years.  That’s why we have a new governor in place this year.  But the folks have also given us a divided government, and we have to work within that to get where we need to get to.

Stacey Witalec:  You’ve talked a lot in the past couple of weeks about the House just walking out, the House leaving work on the table and going home.  How do we avoid that from happening again?

Senator Jay Costa:  It was very frustrating when House Republicans, the day before Christmas Eve, picked up and went home and failed to face the votes that would have allowed us to have the budget framework implemented, as well as the revenue package to get that done.  They simply said the best way for us to deal with that to avoid that is go home.  And that’s disappointing.  They were elected to do a job.  They should have stayed here because I know that we would have had the votes to secure both the GA bill and the revenue, which would have also been in the Senate, as well.

That being said, we’ve got to bring those parties back to the table.  We’re portion to be able to do that.  I had a meeting earlier today with Senate Majority Leader Corman.  And we’re going to continue to push to try to get some folks back together as soon as possible.

Stacey Witalec:  In terms of revenues, a lot of folks want to talk about taxes.  And they’re worried, as well they should be, that taxes will increase given all of the rhetoric that has played out largely in social media.  You’ve talked a lot about there are other options.  We’re not necessarily just talking about an increase in sales tax or an increase in PIT.  You’ve said that there are other options.  What are those options?

Senator Jay Costa:  Well, there are a number of other options.  We’re not necessarily talking about an increase in the personal income tax or even the sales tax.  You know, there are other things that we can look to.  For example, I’m a believer that the best way to rein in our healthcare costs, particularly with respect to cigarette use, is imposing additional taxes on tobacco products.  That’s one area that we can look to.  Marcellus Shale extraction taxes, another area where we should be looking at.

We should also be looking at some other things around the edges.  Like, for example, the modernization for wine and spirits.  We believe the modernization can generate 200 million dollars in savings to us, which will replace the revenue that allows us the ability to be able to do that.  So there are a whole host of other things.  There’s a bank shares tax that hasn’t been changed.  There’s business filing fees that haven’t been changed in decades.  There’s something called vendor discounts.  There’s a whole host of things we can look at outside the realm of the PIT or sales tax to provide us the recurring revenue that we need to meet the structural deficit that we have going forward.

Stacey Witalec:  And just so folks are clear, these aren’t one-time revenue sources; these are sustainable revenue sources.  So these aren’t one-time gimmicks that we saw previous budgets put together with.

Senator Jay Costa:  Yeah, the previous budgets under the Corbett administration that were passed were a series of budgets that incorporated one-time gimmicks.  They took money out of piggybanks.  They took money from various programs and redirected it into the general fund.  They did a variety of different things.  They forestalled on payments.  Instead of making 12 payments a year, they would make 11 payments in one year for various programs and various services and kick the other payment into the next year.  And that creates a false impression that you’ve got a balanced budget.  You don’t have a balanced budget; you have structural holes in your budget that need to be resolved.  And that’s what we have as we go forward here.  That’s why we’re in a position we are today.

Going back to February of this year, I think all parties agreed—or February, March, maybe a little bit later than that, all parties agreed that this year’s ’15-’16 structural deficit was about 1.3 and 2016-17 was 2.3 if we did nothing given the cost drivers and cost to carry numbers.  Those are significant holes that need to be filled.  And you can’t cut your wages.  We tried to do that the last four years and we went from seventh in job growth to 48th.  We went with tremendous scores.  We were a leader among states in education to a state that’s now lagging behind so many other states around us.  So when you don’t make those investments, it’s basically managing decline, as I like to say.  And that’s not where we want to be. We want to make investments.

Stacey Witalec:  Last thing on the budget subject, if you wanted people to know one thing about Senate Democrats and their involvement and their push for the budget to be complete and to be complete for Pennsylvanians, not just a finished product, but what Pennsylvania families need, what would you say?

Senator Jay Costa:  I would say to folks that Senate Democrats are committed to making investments.  Making investments in education and our kids.  Whether they be early learning or kids building a foundation for their education experience, whether it’s K-12, whether it’s higher ed., and whether it’s areas of, for example, our senior services and things of that nature.  Whether it’s job growth or whether it’s in other areas of economic development.  Those are the things that we have been working on promoting to try to put into Pennsylvania.  We’ve walked away from that the last four years.  We need to reinvest.  Senate Democrats are committed to working with our colleagues on both sides of the aisle and both chambers to be able to bring that to closure.  That’s what we had on the table.  That’s what we had the opportunity to do, historic investments in education.  Unfortunately, one party walked away.  And now we’ve got to get back to the table.  So Senate Democrats are going to pursue that avenue as we go forward.