Severance tax could provide Growing Greener with $72 million this year

House Democrats say Pennsylvania needs a natural gas severance tax to help balance the state budget, fund key environmental programs and avoid cuts in other areas.

Despite facing a Republican majority and a Republican governor opposed to a severance tax, House Democrats introduced a new plan for a severance tax Tuesday morning. The effort, led by state Rep. Greg Vitali (D-Delaware), would impose a 5 percent tax plus 4.6 cents per thousand cubic feet of gas extracted.

The revenues from the tax would be split between the state’s General Fund, local governments, and the state Environmental Stewardship Fund, which pays for the state’s Growing Greener program.

State Rep. Greg Vitali (D-Delaware) introduced new severance tax legislation Tuesday. Behind him, a counter tracks how much money the state "lost" since October 2009 because no severance tax was passed.

If the tax was enacted this year, it would generate an estimated $245 million in revenue, with $78 million going to the General Fund, $72 million to the Environmental Stewardship Fund and $78 million to be divided among counties and municipalities impacted by the drilling.

Mr. Vitali said the state’s budget deficit made it necessary to have all revenue streams on the table, even if the Republican majority opposes the severance tax.

“We know that we don’t drive the bus, but we also know that we’re staring down the barrel of a $4 billion budget deficit and that’s going to put enormous pressure to find new revenue sources,” said Mr. Vitali.

Senate Republicans are looking into a tax or fee structure to allow local governments to mitigate the impacts of drilling at the local level. State Sen. Gene Yaw (R-Lycoming) has proposed allowing counties to assess property taxes on natural gas drilling wells and keep all revenue at the county and municipal levels.

Mr. Vitali said the Senate proposal was not broad-based enough on the distribution side because it ignores the state General Fund and environmental programs.

“We need moneys for environmental programs like Growing Greener. The local impact fees are not going to do things like preserve farm land and deal with acid mine drainage and support sewage treatment plants,” said Mr. Vitali. “We need to do more than simply have impact fees.”

The Growing Greener program was initiated under former Gov. Tom Ridge and was boosted by former Gov. Ed Rendell. It is funded through a combination of bonds – which have been exhausted – and the Environmental Stewardship Fund.

Jan Jarrett, executive director of PennFuture, a Harrisburg-based environmental lobby, said the program would be crippled because the remaining money in the Environmental Stewardship Fund will be used entirely for paying debt on previously issued bonds.

“That leaves practically nothing left for funding Growing Greener projects,” said Ms. Jarrett.

Other Democrats also stressed the need for the severance tax revenues at the state level, particularly in anticipation of coming budget cuts in the next fiscal year.

“We need the revenue and it makes no sense to have it off the table,” said state Rep. Dan Frankel (D-Allegheny), House Democrat caucus chair. “Fiscally responsible is not just cutting every appropriation; it’s also finding revenue that makes sense.”

“It will enable us to avoid some of the dramatic cuts in public education that we’ve been hearing about,” said state Rep. Steve Santarsiero (D-Bucks). “We need it for the environment, we need it for education and we need it for the Commonwealth of Pennsylvania.”

According to the Pennsylvania Budget and Policy Center, a liberal economic policy center in Harrisburg, the state would have collected $130 million in severance tax revenue by now if then-Gov. Ed Rendell’s initial severance tax proposal was passed in October 2009. That plan was similar to the proposal put forth Tuesday by House Democrats but never gained much traction in the General Assembly.

Last year, the House passed a severance tax plan with a higher rate, but the Republican-controlled state Senate refused to touch the bill. Now, with Republicans in charge of the state House as well, the Democrats’ new plan may have a very difficult road ahead of it.

Gov. Tom Corbett has promised not to increase taxes and specifically opposes a severance tax.

Detailed break-down of Rep. Vitali’s new severance tax proposal