Pa. Senate approves taxing drillers and consumer utility bills

HARRISBURG — The state Senate on Thursday narrowly approved a plan to balance Pennsylvania’s $32 billion budget by taxing drilling for natural gas and raising or imposing new taxes on telephone, electric and gas services.

“It’s a tough day for many of us,” Senate Majority Leader Jake Corman (R., Centre), said during debate on the revenue package, which passed 26-24. “It’s not a day that we wanted to do. I guess some advocate that we shouldn’t do anything. We should sit back and let Rome burn” or let the governor find the money to balance the budget, he said.

He added later, “It’s not our job to sit at home and do nothing.” Approval did not fall along partisan lines. Both Democrats and Republicans voted for and against it.

Negotiators have been trying for weeks to close a $2 billion gap in the state’s budget, which has been out of balance for nearly a month now.

The Senate’s vote now puts the spotlight squarely on the Republican-controlled House, where GOP leaders have derided proposals that include new or additional taxes.

Last weekend, they came in for a rare mid-summer session, but left without advancing any budget-related bills. At the end of the day, House Speaker Mike Turzai (R., Allegheny) said representatives did not want to “bail out” the Senate or the governor and said the House would wait to see what proposals came from the others.

House leaders have rejected proposals that include new taxes and have opposed any proposal that includes a severance tax — though some others in the chamber have advocated for one.

Together, the taxes approved by the Senate Thursday would raise about $500 million, according to Senate estimates. The Senate also approved borrowing $1.3 billion against a landmark settlement between tobacco companies and the states.

Senate leaders have said they plan, at a future date, to advance a gambling expansion package that would bring in an additional $200 million. No details have been worked out for that proposal, and resolving it will not be easy – the issue of exactly how to expand gambling has been controversial and bogged budget talks for several years.

The Senate’s plan imposes a new tax on natural gas extracted from the Marcellus Shale — based on volume and expected to rake in $100 million annually — on top of the so-called impact fee drillers currently pay on wells they drill.

Though there have been calls for a severance tax for nearly a decade, it has been firmly opposed by many Republican legislators who believe such a levy would scare away an industry that has created jobs and invested millions in the state.

The industry has pushed back too. In a statement minutes after the Senate’s vote Thursday, David Spigelmyer, president of the Marcellus Shale Coalition, said the proposed severance tax, together with the new tax on natural gas bills, will cost jobs and “erode the Commonwealth’s competitive advantage.”

“We remain committed and focused on fostering a meaningful dialogue with lawmakers and others about common sense policies and solutions that can help create good-paying jobs for Pennsylvanians and other important community-level benefits for families across the Commonwealth,” said Spigelmyer, whose group represents unconventional gas producers.

The Senate plan also reinstates a 5.7 percent tax on natural gas bills, with $20 million of the money raised going to the state’s heating assistance program for the poor; increases taxes to 6 percent from the current 5 percent on telephone service, including cellphones; and raises taxes on electric service to 6.5 percent from the current 5.9 percent.

The Senate proposal also closes a loophole that allows some online retailers to avoid imposing and collecting the state’s 6 percent sales tax on goods they sell.

Senators also seek to siphon $200 million from a state fund that provides insurance for doctors who have difficulty finding medical malpractice insurance elsewhere.

The legislature passed a nearly $32 billion spending plan June 30 but did not immediately approve a corresponding plan to pay for it. Wolf said he was confident lawmakers would resolve the issue quickly and allowed the spending plan to lapse into law without his signature.

But nearly a month later, negotiators were still debating how to cover a $1.5 billion shortfall in the last fiscal year and a $700 million deficit in the fiscal year that began July 1. The state constitution requires a balanced budget and appears to put that onus on both the governor and legislators.

State Treasurer Joe Torsella, a Democrat, has warned that the state could run out of money by the end of next month unless a responsible — and complete — budget is passed.

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