The meat of the last recession and prior to it. So this panel is going to be a a bit of a History Lesson. Take this off depressingly wonderfully if we can say that as a phrase. Ive heard him speak a few times ive never had to be so negative so that is something to take into consideration. I cut it its got to be a bit of a History Lesson so i want to set the stage a bit for what was going on in the years in the months leading on so when the financial downturn started and so just a reminder of the Great Recession and thought it at the end of 2007 and i was the largest collapse in state revenue on record by 2010 states were looking at a loss of 191 billion dollars in total in revenue that they had lost between from the start of the downturn and of course when there are times of economic downturn hitters more pressure on social Safety Net Services and things that cost a more money and so you have that inverse effect of more budget pressure at a time where the dollars are disappearing and so id like to set the stage a little bit individually for these two states. For four months heading into 2009 before the federal stimulus began kicking in this day was looking at 80 million deficit heading into 2009 if you think that spot the analysts are projecting a charge of 3 million deficit through 2010 days god so by the at the university of vermont and the chorus are cutting millions of dollars of scratch their varsity baseball and soccer team that seems comment in a recession. Major athletic teams getting a race from the books and i think for vermonts trough who was in 2009 to state revenue trough. And revenues were down 8 from their prerecession peak. And then we have our again which was even worse. The revenues fell 15 from the prerecession pick out there know for again. And heading into 2009 it was looking at a billion dollar deficit to tackle. And at that point governor kulongoski had ordered agencies to cut 5 or whatever was left of the remaining six to seven months of the fiscal year. And again a very common divide lawmakers and governor during the recession and i had a billion dollar deficit to tackle but then the out years the following two year revenue forecasters were predicting that the state was going to be looking at a 752 Million Dollar hole overwhelming numbers and i wanted to start off by asking you on every state is different Different Things different budgets and so i wanted to start off by asking what the economic drivers were figure individual states budget and how those started showing up as red flags perhaps when you first started getting in the in conducting forgot i start going south and we will start left to right sorry my left. Well thank you lace for setting the stage. Reason first of all the budget shortfall was projected to triple between or nine and ten in vermont i believe for us to legislator over both my budget and went and spent what did that they should have but seriously that exacerbated the challenge that we were already confronting we have a well diversified economy manufacturing Higher EducationAgriculture Health care and of course tourism so that it wasnt over reliance on the single sector i remember chatting at the time with ted and some of our colleagues and expressing relative pleasure that i wasnt the governors of state michigan thats overwhelmingly dominated by a particular industry because we have some diversification we acted quickly in vermont beginning in january or are 20 or nine i took a 5 pay cut invited all of the folks of my administration to do the same. That allowed us to go to the bargaining table with the state of Employee Union and extracted 3 cut from them. Which had never happened in our States History it hasnt happened since. We downsized our workforce by 7. 8 mostly through but not entirely we have layoff which will unpleasant but the reality that we were confronting at the time. We took advantage of the extra food stamp opportunities. Which microphone earlier. We face the challenges as you all know of a time of revenue contraction exactly when the burden of Public Service demand is greater. So its a real collision of fiscal measures that made a particularly challenging for all of us at the time but there was an analysis done by one of the major Media Outlets after the recession and waited for him on as the fourth least economically stressed states coming out of the recession so i felt really good about how people in the public and private sectors came together. I went to a church and stack firewood for families who need it and make the stick for slander valuable to a lower and moderate income people to get the fire what they need more cold in vermont in the winter as you know. So i think the combination of our response as well. It was a challenging time and one that will certainly remember but open not to experience again. Well work and has the economic structure that makes it very difficult for us to handle a recession and just to give you about the profile or again is sent largest a land area and so 90 80 with a Natural Resources plus economy to agriculture fishing there was even gold mining you did not have Much Technology in oregon prides was tectonics it was still the scope Building Company that had a couple spinoffs intel did not come to orca which now is the largest employer until 1978 and they had built out to have a bigger and bigger footprints but the important thing to understand is the Manufacturing Technology that they have for us the at the weakness for assist that when an income tax that we do not have a general sales tax i think really wanted to states in a country that did not have a sales tax are free prone taxation systematic and say that because our neighbors just to the north of us who we are always looking at washington its just the opposite ourselves maybe they have no income tax so when a recession comes to us what happens is you have a quarterly forecast and its based upon income tax filing. And we were picking up very quickly and 2007 the people were not filing businesses. We are holding back not fighting on employees. Employees that were going to file a we. Finding the temporary advance payments they werent filing so we had a fairly good idea that something was up. And the other thing i have to tell you is that in the federal state relationship or again is one of those five states out west that are that this ongoing relationship with the governments interception and i sample the federal government owns 52 of oregon. When we reliant upon their footprint here this is just september coreys a large number of National Resource agencies in oregon because of the ocean fish, birds, everything else. So what happens is that in a snapshot of or again in his heyday in the seventies and eighties we were cutting about eight to nine feet of timber both federal and state lands federal force. Lance after dean environmental legislations equality. Everything else has less than a big or feed of the turbulence. The reason why this is so important to us is there another federal programs that off the federal for sense that there are run by agriculture, we got to 25 of the receipts from the sale of the timber awful slant and they were 24 of the 36 counties that were heavily reliance upon that money and the other big agency is a bright adjustment rowlands that are fraught i give the railroads it was a land scam the government said the land back week at 75 of a cut off of those lands for these counties where those trees are located. The dilemma forces with that than 1 million board feet of tampa. These counties who have for a year relied upon their payments from the federal government behind financial strait today still. There are 12 counties are still heavily reliant on that. It was a cultural problem for them because they had gotten so used. The government gave us 5 Million Dollars. And they were using that money to actually from their county governments and now you go and tell them to raise their property taxes everybody in a county says weve never paid property tax at that rate and they wont. So this was putting pressure on the state and the federal response of the forest land. And because of the nature of our tax system and because of our economic ex which is manufacturing predominantly and we have a budgeting process of what we do is to start off with the governor who looks at the last idea budget. Adds a number of inflation factors which we call the continuing Service Level budget. Which means how much money you need for the last time 2. 6 billion dollar down and oregon as an example of international implement rate was about 95 i heard was around ten in oregon it was 12 five it was very difficult and so we would come again and i was getting the Quarterly Financial reports that we were in trouble. You make the budget cut at the and as liz said at the end of the budgetary process until 5 of what they had at that time. Who was probably more like 20 of what they had to cut and how we handle this was actually probably the thing that i thought was what we did best of all. The president and i had known each other for years and i used to go have breakfast with very saturday morning and the sole purpose of our meeting was to keep legislation from coming in the session because well we both concluded and this is truly both concluded was if they came in this was going to be a foot fights because everybody has an Interest Group in our objective was to keep them out and i would handle it through the statutory process called the allotment process which designates where the budget cuts come from and we were able to do that. And so there were the helpless a great deal and ive always thought this and the president hadnt stepped up and said they couldnt come in and he just said he wouldnt do it took a lot of flak because the legislators didnt one of the cadets and we both agreed that it wasnt good to do that. Thats how you look through this time period. Governor thank you. We started talking about what we do in terms of cutting. Cutting is kind of the firstly response and dipping into reserves. Governed i want to hear about your interactions with the legislator and that historic detail. What we did not deep into our reserves which im very proud we are throughout this process as well aaa violated i think we handled it well from that standpoint but in 20 or nine as you suggested legislator over my body feature quantitative would suggest i was right i was right but it exaggerated the challenge of the year ground by including as after the left office. That engineer 2011 so i think couldve been handled a little better. Are cutting of my easy. We have a process in vermont where joined Fiscal Committee a five narrative a chamber hasnt parts or improve budget changes when legislators not in session up to a certain level so utilized that process we reduced our head count but i mentioned i member travel my budget team going over potential cuts in terms of dental health for kids. My thought was that analysts for 29 years. And then they said we gotta go back on this and i said thats my initiative and they said well everything is going to be on the table controversial car was causing some of her highway a push back on that. But i said its going to be Human Services for people of the state. I know the priority is on my number saying to after years go by those red areas are more important i get that does something is gonna have to yield so we went through that process of making choices through the government is all about i quoted president kennedy who wants a set to govern us to choose and that explained that the legislator thought that was our responsibility and we have to Work Together to make some choices and overall we. During this time leading into 2009, in or eight there was talk over federal stimulus now the federal government can play a role so im curious between ten or eight leading up to nine when they figured something out, our states involve the and what were those discussions like governor douglas . What started early on and having life you with a bit after the or election where the president elect invited governors to come to talk about everything or anything for particular the financial practice while we are facing about a week and a half notice 50 governors showed up in philadelphia. I dont want to say there was some governors he likes some tomato a alone we have the whole gang theyre pretty well with and the Vice President i like to talk about this and then fist amber i was vice chair and she had time are pretty with a couple of colleagues before the House Appropriations committees what they began to work on this before the new administration came in and iconic other sound support was coming with the give and take members of the house because every subcommittee chairmen was determined to get something within his nurse jurisdiction of the package so i realized early on that this was going to be more constrained and companies would prefer and i realized that there is a school of thought that the earlier package that and mental in our solar going over three had too much discretion. Some call it governor slush funds although they never told me i had a one. But i think it was an overreaction because i think education for example which is the second biggest piece of the package or informal were facing a demographic crisis. The number of kids of our Public School has declined by 1 prayer figures of the last 20 it is going to continue for 20 more. We dont need more teachers we dont need as many as we have. We need fewer schools and theyre going through a consolidation enclosure process now so my point is rather than a holstered teacher salaries would have been nice to be able to use that money for transition funds to achieve some School Consolidation and not the impact on some of our Committee Just i think there really should have been more flexibility for states because one size doesnt flow what do you think about that . Are states involved was the flexibility better or worse . Well as i said, i think they had a longstanding history relationship with the federal government so its a love hate relationship with, we worry sometimes in sometimes we dont agree of a variety of environmental issues, and i was just remembering something that was said, i remember that right after i got elected i think there were 12 governors that were new at that time and i remember somebody saying to us, you guys are really lucky and we were coming out of this session of the. Com and they said look every governor in an eightyear period will have a recession and you guys are very lucky because you have yours coming in this is a free ride and foolishly i believe that, i kept saying, guys and if you look at it, we were on the ascendancy and i was thinking, boy they were right about this. But you know, and looking at how you handle these things i remember one particular debate i was having with the head of my Human Services department and the social Safety Agency and it was corrections and it was just me and these two doctor goldberg never talked about money he was the head of the Human Services department and he only talked about people and he said this is whats going to happen a few cars that budget here and he would give me this picture of his children and all of this and tears in my eyes and max williams who is now by the way the executive director of the largest and morgan and max looked at me and he ran the Corrections Department at that time and he said governor you and i both know you picked them to run agencies he said you know if government can only do one thing just one a State Government we dont have to have a huge bilbo one thing you have to do is to ensure that the citizens are safe in their homes and in the streets of their communities and that is why you have to prioritize what i mentioned and those are the debates you have with people about what youre going to do and theyre both right and i have served on the Supreme Court so i lean towards maxes argument but i wasnt about to tell people that i cut the Human Services budget to keep people in jail and i was in the right people but should do and it is the difficult, because when i say we cut the budget 5 theyre not people they have different impacts and a lot of them are just the administrative process like the number of people, we did the same thing we didnt hire people we had a reserve fund of about 800 million before the federal government stepped in iowa hes had the experience of the stimulus they came in and they asked us just before we got here do you guys remember ed and i vaguely remembered it because they came into pieces, one piece was direct and who is more on the social side, it was a tax cut and the other side was this, i cant remember, was it ten or 20 billion dollars but we got about 200 million and for the death of me i cant remember what we did with that and the reason was it was unrestricted the government didnt put any restrictions on it and i think i know they did with, it i think i dumped it into the school fund, is what i did and subsidized at that time as it was coming out of the or one or three recession and i put it in that but there is an interesting distinction because i love to getting unrestricted funds it put more hooks and required us to report into a number of things and i call our whole budget guy before i came here and i asked him what he did with that and he couldnt remember and thats why you probably should have some transparency and accountability when you give us money. Its an excellent point and im curious, now that youre both not an office anymore, just this idea of accountability with the federal stimulus and yes its a real pain and to be diligent and have to be constrained with how you spend the money and reported it but from an accountability perspective is that the better way to do it or is there some sort of happy balance between free money and what came and oh nine . Well i enjoy the free money and with all due respect to our federal partners states have the balanced budgets every year and who are these folks who rack up a trillion dollar deficit and spend money on bridges to nowhere and telling us how to manage our money i mean come on so i really trust states to get the job done and make responsible decisions about Spending Priorities and there certainly has to be accountability and they relied on state auditing functions and then reviewed at the federal level so i think its a process that works now come back to what he said earlier states are in different places and i mention that oregon had an Unemployment Rate that was well above the National Average and hours was consistently blow and its 2. 1 today and we just cant find anyone to work it so i just think that states are different enough that this kind of federal prescription really is not the way to go. You know a story, i remember now we were talking here that there was one issue that came in the era stimulus that i actually at and for me do not want money, you have to understand i was actually thinking, why do i want to do, this ill tell you what it was, we probably got a billion dollars and that for education and school and what happened was the largest champ of it, 600 went to special education but it went to a School District, didnt come to this day, it was sent to them and i remember the budget people, we were sitting around talking and at first who is like hey this is cool, look at how much money were getting and then we started to get into, well you know what theyre doing because most of the money that we got that were for social services, whether or housing or whatever there is a benchmark out there, there are people and we know what we are spending the money on and we can actually evaluate when that money for special education when it was not about it was just a single grant, and well what you did is in the School District you increase the budgets for us and this was a one time pay and as soon as i got done right now had the problem because the state supplies 70 of this came through 12 school funding, they had to come up with why fill that hole and there was actually a debate about what you want to take it and i think after the Affordable Care act, remember there are a number of states you dont want to increase the medication match and this is our relationship with the federal, government my biggest concern is the government makes promises and after 2019 who is 90 demand papers and, then every governor knows, what the government given they can take away, so lot of people say why would i want to do this because were gonna blow our budgets up on, but we have utilized the Medicaid Program to fund this plan but it just look at it from our position it is good today and there is a consequence for your goodness, that makes a great point and we were able to ourselves off two or three years but the state has to pick up the slack but i thought it worked well and the sudden unexpected collapse of the revenue structure and the fusion was welcome at that particular time and of course there are two types of funding, the support principally and medication education and then the grants that were competitive and handed out by various federal agencies and those were last concerning in terms of ongoing budget requirements. So i guess it was okay overall so i think theyre gonna been more discretion for states but it was the right remedy at the right time. Lets talk about where the money went and where there are some categories our easier to get money to than others, political pressure is one way or the other. So we have an unusual for grant that request from the federal government, every electric utility and vermont got together and filed a common application and what i heard at the time is they were competing with each other but in vermont we had only one unified application and it was successful and i think that was helpful in accelerating a moving stay towards us margaret and we got there fast and then we wouldve otherwise there were some sluggishness on the parts of the federal agencies frankly and i know some of the rule broadband fans from our u. S. Were slow and coming and i think we got into the first couple of months in 2010 which was the year after the pass and the only distributed like 15 of the broadband and it started the second round of some places where wondering whether they should apply for a second round when they hadnt heard yet, other applications from the first round theme so there are some demonstrated issues believes competitive grants from from on came from the broadband bill and for this margaret and that was very helpful and of course transportation we have to talk about that but it did accelerate paving projects prompted a new Shovel Ready Projects but the accelerated lands that we already had and that is welcome and the accountability piece was kind of interesting, and we had to quantify the number of jobs created or retained and you mentioned the reporting requirement and its a little swirlish. To come up with those numbers i remember telling that my eyes are kind of funny think it was our absolute power he reported to the governor. We were hypothesizing if we had a bridge projects and we had a trust built on site we could identify the number of jobs created but what if we bought a preconstructed tries to bring to the site how do we calculate on the number of jobs that went into that. So i would frankly take the number of jobs created in the somewhat of a grain of salt but it certainly was helpful. Within reach to target the administration and Congress Said of a prison Unemployment Rate but it help us to move us in the right direction. Because of the high Unemployment Rate i actually prioritize social safety net. I was after this and i think we are on capitol beside one of the largest utilization of snap program if anything in the country and again i still do it because of that. And ten for the another one. We were trying to get money to and expand the case loads i remember its one of the anomalies of the reception. I passed probably the largest, the legislator passed and i signed it but i created the program it was my idea but i decided that one of the things i wanted to do was to have every child in oregon under 18 have access to health care and i wanted to expand Oregon Health plan which is really to put the federal government in medicaid and our contribution to it and its a very unique program because to be very truthful program is a nationalization, rationing health care, from a list unique system that oregon has. So what i wanted, and what i did and because i was always observing even in prior administrations when i was in other positions, every time there was a recession low income programs get cuts. Its a soft underbelly of politics and every state in that advocates for these people. And i decided that what we do is develop ulcers program and that would be driven into the middle class and so i actually had a target 100 and 85 of the part of 40 that four which meant there was people in oregon. Here is original have got a program and i am actually going at people who are making 75,000 dollars that had access to health care for their children. And the reason and the legislator and the reason is if we drive into the middle class this will not be the first thing cut because through the make anything sense through these people when youve got their neighbors where they live on this plan and we did this in a recession so i utilized every dollar i could and be used a hospital provider attack as funding mechanism of it and i think you probably have one of the highest percentage of children covered of many state in the country for health care and it was the right decision but there was i just decided that official safety night was what we had to maintain during this period of time we did the same thing jim said we must of guy and three four 500 on transportation and it was very beneficial to us it wasnt just a project they kept people employed there were people that had to be or kept employed by the states to be able to do the projects we had a number of energy grants because we were pushing very hard to try and move organ was one of the first states after california to develop a renewable portfolio standard and we were actually investing a lot of state money as partners with wind generations were sore i know we got a number of grants from the pardon of energy for new Companies Technology on Battery Development thanks to that nature so as tough as this was it actually we got through as best as i think we could have by investing in the social safety net looking into the future about Renewable Energy and going that route and there were cuts there is no doubt about it but its very tough to cut education and so it all has a priority especially in a recession these kids social for school can still need hot lunches and we have to do those things so its a balance that i think you have to do but all things are equal when youre in this business and you have to make choices and german i think you made the right was but other people may think differently. The soundtrack for all of the Strings Attached and the hoops to jump through with this money but if you were able to seize on a needed a policy priority will not pardon and health care in oregon and turn the stimulus to move something forward may not have happened otherwise im curious before we get into the wrapping things up a portion of this was some of the federal stimulus money on grounds for assisted up funding with some of it come with less Strings Attached was it easier to move what we have the compare and contrast of the mechanics or what is the easiest part what was the hardest part . The easiest part was to not discretionary grants in the medication i educational you just saw potential for gravity competitive grants were required some work but remember that only the state could apply for a class vigil Utility Companies could apply directly and if the politics could apply so i held a couple of big meetings we had at least one of our senators commerce well with local officials and the private sector to talk about the grand process to make sure everybody was engaged in this so i think the easy part was when we dont have no discretion and just to be clear on this im not sure id say we did things that we would have been able to do otherwise but we did them faster i think we were on track for broadband deployment for the smart codevelopment for the transportation projects but these accelerated those efforts by some estimates part perhaps five years so thats real and i started says on the transportation projects it kept people employed at a time when they needed jobs so i think that had a very positive impacts and in that sense you may recall some of our colleagues on my side of the aisle so that the time we are going to take a federal money is that driven and we dont want to cross town telling us what to do in the end of course almost every governor took almost all the money so i think they understood that it was beneficial what was the easiest and hardest and most difficult during that journey . I think a direct ground so the school to history and Connecticut Program for the best. My argument with me with here is that i dont think it was enough and ill tell you where. I think federal stimulus should have been directed towards homeownership and trying to keep people in their homes and not lose their homes. A lot of people had their homes going the foreclosure and to be very frank with you i think that some of the bitterness youre seeing played out the body quality today is because people wondered why if you pay a lot of banks if you get all the Motor Companies work and you find something to keep me in my home . I just think it couldve been broader and the president obamas position he wanted to do that Congress Just had a different view of it and couldnt happen but i think that it was the right thing for the federal government to do at this time where all this takes what in this position that we need to help and thats what the federal government in federal prisons about you help when we really need it. Before we get to the questions, i wanted to just quickly ask you by the time he guys relieving office the recession technically had ended all the state revenue certainly has not recovered yet so many more years although vermont was closer to being there than oregon was but the stimulus money was trying out or in some cases had completely dried out how is that transition you know how did you prepare to if you knew it was happening. What some of the key things you did so win yourself off . Thats the budgeting challenge that delivered to earlier people want one at a time when resources are temporarily and hands down over the long term. So my pitch to the legislation with that weve just got to recognize that this federal largest is ending over the next couple of years and of course we had projections on exactly how much it was going to be but that is when they decided to overspend and couldnt restrain themselves and i think the states paid for that in facing consistent shortfalls during most of the time spent and it was exacerbated because you know it on the corner by Tropical Storm and irene that came to visit from on in the summer 2011 after i left office. But on the heels of the recession or Natural Disaster that wiped out a vast amount of extra structure which is added insult to injury so i think we couldnt should have shown more budgetary restraint i tried but we still did okay compared to what you might have been by weaning ourselves away i mentioned the pay cuts and the layoffs earlier within a couple of years after i left all of that was restored i think unwisely are folks who were entered at the time because her or the famous from Emmanuel Court about you know not red cross to go to waste some degree we didnt we did not learn from that exercise restraint on ongoing basis. But saliva. I just said all the states are diffident some six another and on this one organism very smart. Through the administrative process which the havent almost where you have a direct amount garcia, we got past what was called a kicker. And that is the economist forecast at the end of the legislative station. What the Revenue Growth will be in the next millennium. And if its over 2 at the end of the balancing on two hands thats like forecasting the weather on june 30th 2000 and then predicting what the temperature is going to be on july 1st 2002 that is a text policy for organ because if it does above the 2 all of the crease goes back for the great preparation of a direct Payment Service if not tax refund one in the heart of this recession is the governor and i return 1. 5 billion dollars so the taxpayers of oregon. It is a self inflicted heart of the problem that we have. And a transition out of it on two things one is that theres an individual kicker an accord worker. I think the cardboard kicker as the governor and the legislator and we put it into a Rainy Day Fund and we had about 8 Million Dollars so was a transitional for us out of this you know there is no easy way no one or again is probably the last into a recession because of the income tax issue and i reporting where the last out because the last thing employers throughout the entire people why jim is out of the recession and theyre planning going ahead we are still probably and its trying to figure out how waiting for employment to pick up and so how the transition we do is we make a major effort to actually on the Business Development side and try to help companies actually recover so they start hiring people because that is our lifeblood in oregon. Looking at it again i think that when i left for office because of the recession under oath and i actually got a group together and we developed what we call the resets and it was my efforts to look at or against a government and to move forward after i left off is as a blueprint of what we had to do and arrange all the way from the will be budget