State shortfalls return lawmakers to severance debate
BY ROBERT SWIFT
Times Shamrock Writer
A debate over levying a state severance tax on natural gas production that began in 2008 in the halls of the Capitol shortly after the Marcellus drilling boom began is seeing new life.
The closest a severance tax came to passage previously was with an unusual statement of intent by House Democratic leaders and Senate Republican leaders in the 2010 state budget package to pass the tax.
With Democratic Gov. Ed Rendell in his last months in office and Republican gubernatorial candidate Tom Corbett winning election after campaigning against a massive energy tax, that statement of intent proved hollow.
When Mr. Corbett took office in 2011, he shifted the focus to substituting something different from a tax that would be in line with his no-tax campaign platform — the local impact fee on natural gas drillers. The impact fee was enacted in early 2012 and has since generated more than $600 million for local governments in drilling regions and a variety of state programs, said Corbett spokesman Jay Pagni.
But as Pennsylvania dealt with successive years of tight state budgets, the idea of a severance tax continued to hold sway for many Democratic lawmakers and a small but growing number of GOP lawmakers as well.
Democratic gubernatorial candidates hoping to unseat Mr. Corbett have aired TV ads trying to outdo their rivals in the May 20 primary with the size of a tax they would propose if elected.
Now a deteriorating state fiscal picture has spurred bipartisan talk in the Legislature of attaching a severance tax to the fiscal 2014-15 state budget package that faces a June 30 passage deadline.
The release of the state tax revenue report for April on Thursday may give an idea of just how serious this talk is. If the report shows a projected revenue shortfall above $500 million, Senate Appropriations Chairman Jake Corman, R-34, Bellefonte, has suggested interest in a severance tax will increase.
“We have the potential to revisit the whole severance tax issue,” said Terry Madonna, Ph.D., pollster at Franklin and Marshall College.
Rep. Mario Scavello, R-176, Mount Pocono; isn’t waiting for the next revenue report. He is introducing a bill to levy a 5 percent severance tax with revenue going to pay for public pension costs in order to head off hikes in school property taxes and a smaller portion going to fix high-hazard dams.
Pennsylvania needs new revenue because it can’t afford additional cuts to programs, said Mr. Scavello.
“There’s not too many places we can cut anymore,” he added.
A severance tax could produce the revenue needed to steer Pennsylvania through the next energy boom with investments in education and utility infrastructure, said Sen. John Yudichak, D-14, Plymouth Twp.
He recently introduced a revised 5 percent severance tax bill that would generate revenue for education, economic development and Growing Greener and other environmental programs.
One major question is how enactment of a severance tax would affect the annual impact fee paid by Marcellus drillers. A provision in the impact fee law provides that if a severance tax is enacted, the impact fee is terminated.
Mr. Yudichak called the impact fee a flawed policy. He said the fee goes to local governments in counties with active Marcellus wells while the gas industry has an impact way beyond the actual drilling due to pipelines and compressor stations.
“The impact of the industry is beyond the well pad, but our tax policy is located in the drilling counties,” he added.
Sen. Lisa Baker, R-20, Lehman Twp., said she will have to look closely at any severance tax proposal with consideration of how it would affect municipalities in her sprawling Senate district that receive impact fee revenue.
Still, a severance tax faces significant hurdles.
Mr. Corbett has spoken adamantly against a severance tax on numerous occasions.
House GOP leaders don’t support a severance tax at this time, said Stephen Miskin, spokesman for House Majority Leader Mike Turzai, R-28, Pittsburgh.