Pennsylvania Senate Republicans agree on budget hole fix

July 27, 2017 GMT

HARRISBURG, Pa. (AP) — Republicans who control the Pennsylvania Senate agreed on Wednesday on a plan to close a $2 billion hole in the state budget with a mix of taxes and borrowing, including a new severance tax on Marcellus Shale natural gas drilling and higher taxes on consumers’ utility bills.

Senate Majority Leader Jake Corman, of Centre County, emerged from closed-door talks on Wednesday night to announce details of the GOP’s plan to help balance the $32 billion budget, include a proposal to borrow $1.3 billion against Pennsylvania’s annual share of the 1998 multistate settlement with tobacco companies.

The legislation cleared the Appropriations Committee with Democratic support and will get a vote in the full Senate on Thursday. It could face a tough road in the House, where majority Republicans last week rejected a proposal to leverage the tobacco money and are likely to resist calls for higher taxes.

Democratic Gov. Tom Wolf threw his support behind the Senate’s plan.

“Governor Wolf commends the Senate for taking a responsible step toward balancing the budget and for their willingness to include a tax on Marcellus Shale,” his spokesman, J.J. Abbott, said in a statement.

The severance tax is expected to raise about $100 million each year. That’s on top of a so-called impact fee assessed on gas drillers that’s currently distributed among the state government and local communities where drilling takes place.

Energy companies have long objected to a severance tax, saying it would harm the state’s competitiveness.

“Obviously, they’re not thrilled,” Corman said. “They think they pay enough in taxes, and they probably are accurate.”

But he said Senate leaders had reached an agreement with the administration of Wolf on “significant permitting and regulatory reform” for gas drillers.

Consumers, meanwhile, would face $405 million in new or higher taxes from a gross receipts tax on their natural gas, electric and telecommunications bills.

The state ended the gross receipts tax on natural gas bills in 2000 as part of a broader restructuring of regulations over natural gas utilities and service. The Senate GOP plan restores the tax on natural gas bills while raising taxes on telecommunications and electricity. The tax on natural gas would be 5.7 percent. The tax on electric bills would rise by more than a half-percent to 6.5 percent, while the tax on phone bills would increase by 1 percent, to 6 percent.

GOP senators also agreed to assess Pennsylvania’s 6 percent sales tax on vendors who reach a certain volume of sales on Amazon, eBay and other online marketplaces.

Corman defended the tax increases, saying lawmakers had held out as long as they could but simply needed more revenue to fund vital services.

“This isn’t anything that any of us wanted to do,” he said.

The Senate plan also counts on $200 million in revenue from a massive expansion of casino-style gambling that hasn’t been approved and is still the subject of a disagreement with the House.

House Republicans failed to agree on a way forward last week, rejecting a proposal that would have combined $1.5 billion in borrowing with hundreds of millions of dollars drawn from programs not included in the state budget, an approach designed to avoid higher taxes.

That left it to their counterparts in the Senate, which convened briefly Wednesday afternoon before recessing for private discussions that lasted for several hours.

Wolf allowed the badly out-of-balance budget to take effect without his signature. He has said he could support borrowing to help close the deficit, if accompanied by increased taxes he views as necessary to avoid a credit downgrade. Democratic lawmakers have said he wants a tax package of $700 million to $800 million.

Failing to balance the budget could result in a freeze on some government spending, potentially affecting schools and counties that administer social service programs. Additionally, nearly $600 million in state aid to Penn State, the University of Pittsburgh, Temple and Lincoln universities and the University of Pennsylvania’s veterinary school remains in limbo.


Levy contributed to this story from New York.