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March 24, 2011 | By | Posted in Legislature

Business loan fund gets $330 million from tobacco fund

Committee recommends prohibiting access by executive donors

By Darwyyn Deyo | PA Independent

HARRISBURG — Gov. Tom Corbett's proposed liberty loan fund was in the spotlight Thursday during the Department of Community and Economic Development  budget hearing before a House committee.  

The liberty loan fund has been proposed to be a sort of one-stop shopping place for the DCED's various loans and grants, making it easier for businesses to apply for the funding they need. But members of the House Appropriations Committee were concerned about the fund's structure and oversight, as well as its accessibility.

“It seems to me in your efforts to congeal a lot of these line items, and to use your words ‘make it easier for people to find and identify,’ that may be so, but will it necessarily make it easier for people to access?” said Minority Chair Joe Markosek, D-Allegheny. “Sure, they might be able to find the correct place to go, but if it’s going to be much more difficult for them to access these funds what good is that?”

Acting DCED Secretary C. Alan Walker said the fund would give the department needed flexibility.
 
The liberty loan fund "gives us a pool of money of about $1.9 billion to work with for economic development programs moving forward,” said Walker.
 
“We would use our certified capital providers to identify the quality applications (and) go to a one loan application system, which we don’t have now," he said. "We need the flexibility to transfer money between accounts right now.”
 
The fund would be overseen by an authority of 15 board members, Walker said, including one appointee from each of the legislative caucuses, residents nominated by the legislative caucuses, one nominee from the governor and two or three cabinet secretaries. Voting matters would be ruled by a simple majority instead of a supermajority.

Walker called it a sort of public-private partnership.

The committee also recommended preventing individuals who contributed to the governor’s campaign from accessing liberty loan fund.
 
Tobacco settlement fund how much?

The liberty loan fund also calls for the proposed transfer of $220 million from the tobacco settlement fund, plus $110 million in assets, which the fund’s authority would manage or liquidate as it best saw fit. Representatives on both sides were surprised at the $110 million in transferred assets, as it was not mentioned during Corbett’s budget address.

“The assets of the endowment would be transferred into the liberty loan fund, which is somewhere around $330 million,” said Bryce Maretzki, special assistant to the secretary. “They would be managed by the new authority as they’ve been managed now, and we would have to make decisions as to make the cash calls on the equity. Potentially we would have to liquidate them on a judicious basis.”

Maretzki said any restrictions on the funds from the tobacco settlement fund would be determined through legislation.

Walker said he did not expect litigation from the tobacco companies over the transfer of funds to the DCED away from health-oriented projects, according to his lawyers.

Expediting state permits

Walker also testified about delays in issuing state permits, saying he would would work to speed up the process. He cited a case in Clearfield County in which a company was told it could not start work for 180 days because the state Department of Environmental Protection (DEP) did not have a typist to draw up the permit.

“I’m merely here as an expediter to make sure permits get their proper attention,” said Walker. "Our bureaucracy in Pennsylvania is not working especially well, and some departments work better than others.”

Having left the hearing to call the DEP, state Rep. Greg Vitali, D-Delaware, returned to challenge Walker on the story and alleged he spoke with someone at the DEP — whom he would not identify — who said Walker had the project in Clearfield County pushed up in line.

Walker said he would be happy to attend a hearing on the matter.

Picking winners and losers

State Rep. Gordon Denlinger , R-Lancaster, raised concerns about the state government “picking winners and losers,” when it comes to economic grants.

Walker said the department will be moving away from grants to loans and will require a higher private sector match.

“If you get a large private match you’re betting on the people running the (company), you’re betting on the technology, but I think the days of entitlement money and handouts are over,” said Walker. “They clearly have to prove to us they have something that’s viable, and we are really going to try to pump up our metrics to help us identify the winners.”
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