Marcellus tax eyed to fill state budget shortfall
http://republicanherald.com/news/marcellus-tax-eyed-to-fill-state-budget-shortfall-1.942789
Marcellus tax eyed to fill state budget shortfall
BY ROBERT SWIFT (HARRISBURG BUREAU CHIEF RSWIFT@TIMESSHAMROCK.COM)
Published: August 12, 2010
HARRISBURG – Tapping revenue from a proposed natural gas severance tax is part of Gov. Ed Rendell’s plan to close a remaining gap in the new state budget.
The governor presented revenue-generating options that include $70 million from a severance tax, savings from a nearly 2 percent across-the-board spending cut and ending a 1 percent state vendor discount to legislative leaders for consideration Wednesday.
The meeting came one day after President Obama signed a $26 billion federal fiscal bill to aid cash-strapped states. That influx of federal aid leaves Pennsylvania with a revenue hole now estimated at $280 million in its $28 billion budget.
Rendell’s proposal also includes a $50 million reduction to the basic-education subsidy for school districts, which is one of the few items that received an increase in the new budget. But that would be offset by $387 million in federal aid to preserve teacher jobs to be distributed by the same method as the subsidy. The U.S. Education Department estimates that aid will support nearly 6,000 education jobs in Pennsylvania either by avoiding layoffs, rehires or new hires.
Severance tax revenues can help address state revenue needs, but a severance tax is also needed to deal with the impact of the drilling boom in the Marcellus Shale formation, said Rendell’s chief of staff, Steven Crawford.
“It is the right thing to do, knowing the stress this is bringing to local governments and conservation districts,” he said. “It’s about having the (natural gas) industry paying their fair share.”
House and Senate leaders have officially declared their intent to pass a severance tax by Oct. 1 and have it take effect Jan. 1, 2011, but many details have yet to be hammered out, such as the tax rate and revenue split between statewide and local uses.
The $70 million sum reflects what Rendell projects for a severance tax, said Senate Majority Leader Dominic Pileggi, R-9, Chester. The tax structure is undecided, and GOP senators want a large share of the revenue going to local municipalities and environmental programs, he said.
“Whether it results in $70 million going to the General Fund or not is an open question,” Pileggi said.
Both caucuses plan to review the governor’s proposal in the next few days, but the governor has leeway to decide what cuts he wants to make if an agreement isn’t reached.
A spokesman for the Pennsylvania School Boards Association warned against cutting the basic-education subsidy because of the new federal aid.
“State subsidy dollars can be used in many different ways, including purchasing education equipment and materials, while the federal education jobs money can only be used for compensation and benefits, so the two are not equal in our view,” said PSBA official Tim Allwein.