COMMONWEALTH OF PENNSYLVANIA GOVERNOR’S OFFICE HARRISBURG

CHARLES B. ZOGBY SECRETARY OFFICE OF THE BUDGET

December 13, 2011

The Honorable Joseph F. Markosek Pennsylvania House of Representatives 51 2E Main Capitol Building P.O. Box 202025 Harrisburg, PA 17120 Dear Representative Markosek: I am writing today to explain the vital importance of the House of Representatives passing immediately and without amendment the FY 20 11-2012 Capital Budget Act (S.B. 1054) so as to allow ongoing funding for legally contracted capital projects and not disrupt this important source of economic stimulus and jobs at this sensitive time for Pennsylvania’s economy. Each year, as a requirement of the Pennsylvania Constitution, the Governor must submit a Capital Budget to the General Assembly and the General Assembly is constitutionally required to enact a Capital Budget Act. For FY 2011-2012, the Capital Budget bill was submitted to the General Assembly in the spring of 2011 and was passed by the Pennsylvania Senate in June 2011 with a vote of 49-0 and has been waiting House action since. The Governor’s Office has repeatedly provided information in an effort to move this vital piece of legislation forward. Passage of the FY 2011-2012 Capital Budget Act is required before the Commonwealth can issue the additionally required General Obligation Bonds to continue to provide payments for legally contracted capital projects. As you may know, the Commonwealth issues its General Obligation Bonds on a “cash flow” basis rather than on a “project” basis. This means that every Commonwealth General Obligation Bond funds a portion of the total costs of literally thousands of current, ongoing capital projects. Due to the volume of approved capital projects currently underway (literally well over 1,500 such capital projects), the Commonwealth issues its bonds to fund likely cash requirements of the various bond-funded programs on a four to six month basis. This approach allows the Commonwealth to keep borrowing costs and the relative size of each bond issue to a minimum. It also requires the timely issuance of bonds to ensure that there is no interruption in project funding due to the lack of bond proceeds. Failure to enact the 2011-2012 Capital Budget Act before the holiday recess will lead to the Commonwealth having to shut down thousands of ongoing capital projects and the jobs that

December 13, 2011 Page 2 go with them, which are providing economic stimulus to the Pennsylvania economy in this trying time. At present, the Redevelopment Assistance Capital Program (RACP) has depleted all available funds in its capital account and the program is currently unable to make contractuallyrequired reimbursements to contractors and local governments. It is estimated that at least $44 million in RACP payments are currently sitting in the Pennsylvania Treasury unpaid because of the House of Representatives failure to enact the FY 2011-2012 Capital Budget Act. An additional $110 million in RACP reimbursements are currently being reviewed by the Office of the Budget and are likely to be remitted to Treasury within the coming weeks. Again, these contractually-obligated payments will not be made if the House fails to act. Finally, it is estimated that well over $1.5 billion in RACP projects will not be funded if the FY 2011-2012 Capital Budget Act is not enacted. The potential impact of failure to pass the Capital Budget Act is not limited to RACP. Vitally important infrastructure projects ranging from repairs and reconstruction of roads, highways and bridges, flood control projects, high hazard dam repairs, prison construction, higher educational institutions and improvements to state-owned facilities will begin to shutdown and contractors will go unpaid. Thousands of construction workers will be laid off and the economy will begin to suffer if the FY 2011-2012 Capital Budget Act (S.B. 1054) is not passed by the House of Representatives before the holiday recess. I trust that the infomiation provided to you will assist you in the completion of your Constitutionally-required duties to enact a Capital Budget Act for FY 2011-2012. Sincerely,

Charles B. Zogby

cc:

Hon. James Cawley Hon. Joseph Scamati Hon. Dominic Pileggi Hon. Jay Costa Hon. Jake Corman Hon. Vincent Hughes Ms. Anrimarie Kaiser Mr. Pete Tartline Mr. Andrew Ritter Mr. Rick Dreher Mr. Danielle Guyer

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