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FALL 2009

Dear Friends,

The Legislature approved astate budget on time and thegovernor signed it into law shortlythereafter. The House approveda bill that would significantly re-form Pennsylvania’s two major public pension systems. Thenatural gas exploration withinthe Marcellus Shale continuesto be a big issue, both locallyand across the Commonwealth.Additionally, there are a series of events going on in our district inthe weeks and months ahead.You can read about all of theseissues inside this update from theCapitol, which is my report to thecitizens of our community.In Harrisburg and in our district,I continue to focus my effortstoward promoting an economicclimate in Pennsylvania that pro-motes private sector growth andfamily-sustaining jobs. My goalis to make our Commonwealth a job-friendly place for employersto grow their businesses and hiremore workers.As a state legislator, I feel it’simportant to let you know what’sgoing on within our state govern-ment. However, I feel it’s equallyimportant to listen to your ideasand opinions. That’s why thisnewsletter includes a constituentsurvey. I hope you’ll take a fewminutes to fill it out.It continues to be an honor toserve as your state representa-tive. If you need any help withstate government programs or services, please feel free to con-tact me or my district office staff.Our contact information appearson the back of this newsletter.We are here to serve you.Sincerely,

Dave Reed

State Representative62nd Legislative District

Summer 2010

Reed Pleased Budget Completed;Disappointed with Some Details

While I was pleased that the House approved a state spending plan before theJune 30 deadline, I voted against the budget bill due to my concerns with specificswithin the overall agreement.I commend the legislative leaders and governor for working together to get abudget done within a reasonable timeframe. I think it’s important for the peopleof Pennsylvania to see that we can put our partisan differences aside and workto achieve common goals. No state budget is perfect and no one gets everythingthey want. In the end, this bill could have better reflected the priorities and needsof our Commonwealth.I am specifically concerned about the use of $2.75 billion in federal stimulus fundsto help balance this year’s state budget. Those dollars are set to expire next year,leaving a significant hole in the state’s revenues and creating a possible deficit of $4 billion to $5 billion for next year’s budget.That’s a real concern for those of us who are committed to protecting taxpayers.The best case scenario would be for the economy to rebound and state revenuesto increase. However, if that doesn’t happen, the governor and lawmakers willhave even more difficult choices next year.The $2.75 billion in stimulus funds includes $850 million that Congress has notyet approved. If Congress does not approve the funding, the governor will beforced to cut another $850 million from the budget as early as this fall.I also would have liked to see the budget reflect a realignment of state priorities.Specifically, there were significant funding cuts in agricultural programs, stateparks, public libraries and a funding level that will leave the State System of Higher Education behind.The State System of Higher Education (SSHE) will be flat funded at the same$500 million level of support it received this year. Funding for public libraries willbe cut by $5.5 million to $54.5 million. The Department of Agriculture will suffer anearly $5 million cut. Funding for state parks was reduced by nearly $4 million.I would have preferred to see commonsense welfare reforms implemented tosave money, which could have been reallocated to these other areas.While hundreds of millions of dollars in savings through the elimination of waste,fraud and abuse have been identified by several independent sources, none of those welfare reforms were included in the budget agreement.This was a missed opportunity to bring some cost-saving reforms to the state’swelfare system. Every dollar we save through reduced welfare fraud is another dollar we can use to protect our environment, invest in our libraries, educate our children and reduce the cost for our taxpayers.

School districts in our area will each receive a bump in funding this year, despite the dipin the economy and tough budgetary times in Harrisburg. These funding increases aresigniﬁcant, considering many other worthwhile state programs were cut or completely eliminated in this year’s state budget. However, the funding increases provided to local schools pale in comparison to the huge increase going to Philadelphia.

Apollo-Ridge $ 8,178,417 $ 8,437,0133.16%258,596$Blairsville-Saltsburg9,316,471$ 9,502,801$ 2.00%186,330$ Homer-Center5,365,450$ 5,472,759$ 2.00%107,309$ Indiana Area8,843,921$ 9,020,799$ 2.00%176,878$ Penns Manor7,202,685$ 7,346,739$ 2.00%144,054$ United8,693,641$ 8,867,514$ 2.00%173,873$

Philadelphia1,010,830,689$ 1,075,020,639$ 6.35%64,189,950$

DollarIncrease OverLast Year

Local School District Basic Education Funding

Last Year's BudgetSchool DistrictThis Year's BudgetPercent IncreaseOver Last Year

House Bill 67 (Printer’s Number 1599) –Cell Phone Ban Voted “Yes”

This legislation would prohibit the use of a hand-held cellphone while operating a motor vehicle.

House Bill 2497 (Printer’s Number 3916)– Public Pension Reform Voted “Yes”

As described in this newsletter, this legislation wouldre-amortize the current pension obligations while enactingsigniﬁcant reforms to the system to help ease the burdenon the taxpayers as well as stabilize the system.

House Bill 2279 (Printer’s Number 4032)– State Budget Voted “No”

This legislation represents the state General Fund budgetdescribed in this newsletter.

House Approves Public Pension Reforms

House Bill 2289 (Printer’s Number 4092)– Capital Budget Voted “No”

This bill authorizes spending on a variety of projectsacross the Commonwealth, including $10 million for a librarynamed after Sen. Arlen Specter on a Philadelphia collegecampus and another $10 million for a public policy center named after the late Congressman John P. Murtha.

House Bill 2290 (Printer’s Number 4090)– Raising State Debt Limit Voted “No”

This legislation increases the Commonwealth’s GeneralObligation borrowing authority by $600 million from $3.45billion to $4.05 billion for the Redevelopment AssistanceCapital Program. The total cost to repay the principal andinterest on this additional debt is estimated to be $962 mil-lion over the next 20 years.

IMPORTANT VOTES

The House recently approved a public pension reform bill that wouldfulfill the state’s obligations to current workers and retirees while takingsteps to reduce the long-term burden on Pennsylvania taxpayers.The reforms are aimed at two pension systems – one for public schoolsystem employees and the other for all remaining state employees.These pension systems are funded primarily through three sources:employee contributions, employer contributions and investment returns.The state makes the employer contribution for the state workers’ pen-sion system. The state and local school districts make the employer contribution for the public school teachers’ pension system.Due to a number of factors, including the recent turmoil in the stockmarket, the state and local school districts are facing a sharp in-crease in employer contributions to the pension funds in the nextfew years.The changes included in the House bill would “smooth out” thoseincreases while also implementing pension benefit reforms,resulting in short-term relief and long-term cost reductions for taxpayers.For current workers and retirees in the two pension systems,a promise made will be a promise kept. The House billwould not reduce pension benefits for these workers. Inactuality, the U.S. Constitution and the PennsylvaniaConstitution prohibit making changes to pensionsfor existing workers and retirees due to contrac-tual law.The House bill also would implement pensionreforms for future state workers and teachers. These reforms include increasing the amount of time a teacher or worker must be employed before they are entitled to certain pension benefits.It also increases the amount of time they must serve before they can retire.Finally, future employees must choose to pay higher sums of their salaries in order to qualify for the same pension benefits available to current pension system participants, or they can pay thesame percentage of their salary into the pension system, but receive smaller pension benefits.Together, these reforms stand to benefit taxpayers and protect current pension plan partici-pants.While the bill is not the final step in the long-term reform for our pension system, it doesrepresent a solid first step and a vast improvement over the status quo. It would providethe benefits promised to current teachers, workers and retirees, make significantchanges for employees hired in the future and reduce the burden on state and localtaxpayers.The bill is currently in the Senate Finance Committee for consideration.

Pension System Reforms

Reduced Multiplier –

A multiplier is apercentage rate used to determine pen-sion benefits. The higher the multiplier,the greater the pension benefits and theheavier the burden will be on taxpayersin a defined benefit plan. The multiplier rate for most new hires would be reducedfrom 2.5 percent to 2 percent, leading toreduced costs for taxpayers.

Increased Vesting Periods –

Thevesting period is the amount of time anemployee must contribute to their pensionbefore qualifying for guaranteed beneﬁts.The vesting period would be doubled fromﬁve years to 10 years for new hires.

Increased Retirement Ages –

Newstate workers and teachers will have towork longer before qualifying for full retire-ment beneﬁts.

DREED@PAHOUSEGOP.COM

Energy

Focus on

On April 7, I hosted a House Republican Policy Committeemeeting to hear from experts about water issues surround-ing natural gas drilling in the Marcellus Shale.Pennsylvanians need good jobs and clean drinking water.The goal of this meeting was to try to find ways to ensurewe have both. Folks shouldn’t be forced to choose betweenclean rivers and streams or a good-paying job to put foodon the table. Instead of pitting sides against one another,we wanted to bring them together to find real solutions.The meeting was held at the Oak Place CommunityCenter in Indiana and focused on issues surrounding thetreatment of water after it is used in the natural gas drillingprocess, as well as an evaluation of our water resourcesin Pennsylvania.An additional focus was on the use of water in the frack-ing process and its treatment and cleansing before safelybeing released back into local waterways.Throughout the hearing, many testifiers offered sugges-tions for legislative or regulatory changes they felt wouldhelp balance our environmental responsibilities with thiseconomic opportunity.The following individuals testified at the meeting: ThomasBeauduy, deputy director of the Susquehanna River BasinCommission; Pennsylvania Department of EnvironmentalProtection Secretary John Hanger; Ray Walker, vice presi-dent of Range Resources; Paul Hart, president of Hart Re-source Technologies; and Susan McClure from the IndianaCounty chapter of the League of Women Voters.

What is Fracking?

Large amounts of water are used during thehydraulic fracturing – or “fracking” – processnecessary to free natural gas from undergroundshale deposits.Fracking involves pumping water down to theshale deposit with a signiﬁcant amount of pres-sure behind it in order to fracture the depositand free the gas for harvesting.

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My colleagues and I listen to one of the testiﬁers at the House RepublicanPolicy Committee hearing I hosted focusing on the Marcellus Shale.

Reed Hosts Hearing About Water Issues with Marcellus Shale DrillingFast Facts About the Marcellus Shale and Natural Gas

General facts:

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The Marcellus Shale underlies 54 of the 67 counties of Pennsylvania – all but the southeastern andsouthcentral portions of the state.

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In October 2008, Pennsylvania State University professor Terry Engelder estimated that the gas lockedin the Marcellus Shale could ultimately yield 363 trillion cubic feet of natural gas – an amount equal to13 years of current U.S. natural gas demand.

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The ﬁrst Marcellus well went into production in 2005.

Economic impacts

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During 2008, the Marcellus Shale natural gas industry in Pennsylvania generated more than 29,000 jobs.

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For every $1 million of output created by natural gas production in the Pennsylvania Marcellus Shale,6.9 jobs are created.

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The Marcellus Shale natural gas industry in Pennsylvania could be generating $13.5 billion in valueadded and almost 175,000 jobs in 2020.

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For every $1 that the Marcellus Shale natural gas industry spends in the state, $1.94 of total economicoutput is generated.

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