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Senate, House Leaders Agree On Budget, Includes Leasing More Land For Drilling
Senate and House leaders Friday announced a broad agreement on a $27.9 billion state budget framework that includes several tax increases along with a proposal to lease more State Forest land for Marcellus Shale drilling.

Gov. Rendell, who by choice did not participate in the legislative budget discussions, said the proposal does not meet his three goals: sustainable revenues sufficient for at least the next two years, no further cuts in education and health care. He said he would veto the measure if it came to his desk.

Senate and House Leaders, when asked what if the Governor comes in with his own suggestions for changes or spending more money than the framework, said, "This is the agreement."

Senate Majority Leader Dominic Pileggi (R-Delaware) issued this specific statement after the Governor's veto threat--

“For weeks, the governor has held near-daily press conferences criticizing the General Assembly for not acting on a budget. He has not been personally engaged in the budget discussions for more than a month. Now that a bipartisan agreement has been reached, he is attempting to derail it, 73 days after the budget was due.

“In 2008-09, when the governor wanted to spend more money, his revenue estimates were wildly inaccurate and the result was a $3.2 billion revenue shortfall.

“This year, the governor wants to raise taxes, and his revenue estimates are again inaccurate, but in the opposite direction.

“We intend to honor the budget agreement that has been reached, and we fully expect the House to do the same so that this budget will be passed to the governor.

“I’m confident that after some reflection, the governor will realize that Pennsylvanians have waited long enough for a budget, and he will be able to set aside his ideological differences and support this bipartisan, bicameral compromise.”

The Proposal

The budget revenue projections include an anticipated $100 million by leasing more state land for Marcellus Shale drilling, specifically $143 million will be transferred from the DCNR Oil and Gas Lease Fund to fill the 2009-10 budget gap, plus an additional $125 million transfer for 2010-11.

These diversions are on top of the $174 million taken from the Oil and Gas Lease Fund to balance the 2008-09 budget.

During a news conference in Pittsburgh, Gov. Rendell said he thought the leasing idea was something he could support, but doubted it would raise as much money as estimated in the proposal.

The proposal also cuts $75 million from the state's various tax credit programs, but the details are not yet available on which tax credits would be affected. The Resources Enhancement and Protection (REAP) tax credit is on the list of those that maybe cut.

The House-Senate budget compromise includes several other new sources of "recurring revenue," including legalizing table games at casinos- $100 million, a 25-cent per pack hike in the cigarette tax- $114 million, a rollback of the Capitol Stock and Franchise Tax to 2008 levels- $373 million and a new Sales Tax on the tickets and punch cards and other items used in small games of chance- $100 million.

The Governor's Budget Office disputes many of these revenue projections. As a result, Gov. Rendell said the budget proposal is not balanced and will result in a $1 billion budget deficit next year.

Work will continue through the weekend to draft the legislation necessary to enact this agreement and determine how specific line items will be funded. Leaders have scheduled a meeting of the Budget Conference Committee on Monday to put the agreement in print.
The plan could be voted on in both the House and the Senate as early as next week. Follow on bills to authorize table games and casinos will take more time.

A more detailed summary
 of the proposal is available online.

Reaction to Leasing Expansion

Pennsylvania Environmental Council President and CEO Don Welsh issued the following statement on the proposed budget framework agreement--

“This budget proposal does nothing to address the critical funding shortfalls facing Pennsylvania’s environment. In fact, it continues the theme of making millions of dollars of cuts and diversions from agency budgets that are already insufficient.

“The proposed budget framework includes $100 million from expanded drilling on state-owned land, an approach opposed by environmental, conservation, recreation and sportsmen groups. Market prices for natural gas are significantly lower today from when the state leased 74,000 acres of public land in 2008. The idea of expanding drilling on state lands when the returns would be artificially low doesn’t make sense and isn’t good business for our state.

“Furthermore, any revenues generated by additional extraction under the proposed budget framework would go to the General Fund and not the state programs meant to help address the resource and infrastructure needs associated with extraction activities. This at a time when agencies, already straining to meet state and federal requirements, face unprecedented budget cuts and rising workload.

“Even in difficult economic times, you can only go so far before those charged with protecting our environmental and public health are unable to do the job they’ve been asked to do. This budget proposal does not address the very real needs facing our state’s resources, and in fact may only serve to make the situation much worse.”

Jan Jarrett, President and CEO of PennFuture offered these comments.

"This budget gives a big sweetheart deal to the multi-national gas drilling industry," said Jan Jarrett, PennFuture's president and CEO, "but it gives bupkis to the average Pennsylvania taxpayer. Opening up more state land to drilling means all Pennsylvanians lose their access and enjoyment of unspoiled nature.

"In fact, just about everybody except the gas industry loses under this budget deal." she continued. "Are you a smoker who wants to quit? Too bad. The state is cutting funding to help you quit, and raising the tax on your addiction that now won't be treated. Do you like to help the local volunteer firefighters out by playing Bingo? Too bad on both sides. Bingo and other small games of chance will now be taxed, which will mean less money for the firefighters. Have a gambling problem? Thanks to the addition of table games at the state's casinos, you'll now have more ways to lose money. But if you're a multi-national energy corporation, you don't have to pay a severance tax and you get to drill on the public's forest land.

"This deal comes after the gas drilling industry lobbyists spent more than $1 million dollars just this year to fight against a severance tax – a tax they happily pay in other states," continued Jarrett. "So instead of paying their fair share, the industry will get sweetheart deals on drilling leases on state land.

"This is no way to balance Pennsylvania's budget. Thoughtful legislators should vigorously oppose this deal on the grounds that it cheats Pennsylvania taxpayers," said Jarrett. "It's time for our elected officials to show political courage and independence by turning down this backroom deal."

Senate Set Up

The Senate Republicans took several actions in an attempt to move the budget process, including introducing and moving their third budget bill and setting up a re-vote on the veto overrides they attempted earlier on Gov. Rendell's bridge budget.

The vehicle--Senate Bill 1085 (Corman-R-Centre)-- was introduced, reported out of and then back into the Senate Appropriations Committee. The numbers in the bill are essentially the last Senate-amended version of the second budget bill they passed-- House Bill 1416 (D.Evans-D-Philadelphia)-- that has been sitting in a House Senate Conference Committee since July 27.

For those keeping score, Senate Bill 850 (Corman-R-Centre) was the first budget bill passed by the Senate Republicans back on May 6 and later signed into law, but heavily cut, by Gov. Rendell as the bridge budget on August 5.

The Senate also took the step of voting unanimously to reconsider the vote by which the budget veto overrides failed on August 19 setting up a re-vote when the Senate returns next week.


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