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House Ds Fail To Muster Votes For Severance Tax Bill, Deficit Gets Bigger

After caucusing most of Tuesday, House Democrats failed to put together enough votes to pass a modest size tax bill saying they will come back in June to try again.
           At nearly the same time, the Majority and Minority Chairs of the Senate Appropriations Committee told a PCN call-in show audience the state's deficit is likely to be at least $1.4 billion, up from $1.1 billion last month.  Revenue numbers for May are likely to again be significantly below expectations.
            Both Senators said additional cuts will be necessary to balance the state budget.
            The tax bill-- House Bill 325 (sponsor withdrew)-- would impose an 8 percent natural gas production severance tax and increase tobacco (no cigar) taxes to raise about $330 million.
            A group of legislators led by Rep. David Levdansky (D-Allegheny) held up action on the tax bill advocating for increased funding going to a variety of environmental programs.  Since all the votes for any tax increase in the House would have to come from the Democratic majority, even a few holdouts was enough to sink the effort, at least for now.
            House Bill 325 was amended this week to at least give a nod to concerns expressed by Rep. Levdansky as it came out of the House Appropriations Committee by adopting an 8 percent severance tax giving 80 percent of the revenue to balance the state budget and earmarking the remaining 20 percent of the revenue from the proposed natural gas production severance tax to a variety of environmental programs-- 12 percent to municipalities and counties affected by drilling, 4 percent to the Environmental Stewardship Fund, 2 percent to county conservation districts, one-half percent to the Hazardous Sites Cleanup Program, one-half percent to the Game Commission, one-half percent to the Fish and Boat Commission and one-half percent for Low Income Home Energy Assistance Grants.
            Rep. Levdansky's own legislation-- House Bill 2443 (Levdansky-D-Allegheny)-- imposes a 5 percent natural gas production severance tax depositing 45 percent in the General Fund, 22 percent in the Environmental Stewardship (Growing Greener) Fund, 20 percent in a new Local Government Services Fund for counties and municipalities in the drilling areas, 2 percent in the Hazardous Sites Cleanup Fund, 3 percent in the Conservation Districts Fund, 2 percent to the Game Commission, 4 percent to the Fish and Boat Commission and 2 percent to the Low-Income Home Energy Assistance Program.
            Governor Revises Tax Plan
            At a press conference,  Gov. Rendell said he understands how difficult it is to gather the votes needed to pass a tax package like the House Democrats tried to do this week.
            On his own tax plans, the Governor said he is still pushing for a natural gas production severance tax and a tax on cigars and smokeless tobacco products.  On his plan to eliminate all Sales Tax exemptions, he said the plan might be too complex to do in an election year.
            In response to a question about considering alternatives, including cuts,  Gov. Rendell said he would be happy to consider cuts like closing some State Parks to generate additional funding for education.
            The Governor also said tax amnesty has netted $64 million so far, only about one-third of the $190 million they anticipated.  The program ends June 18, so there's still time to rake in more money.
            House Democrat Budget Cuts
            In response to Republican calls for more budget cuts, the House Democrats put out a summary of all the budget cuts they have made from FY 08-09 up to and including the proposed FY 2010-11 budget they passed in March in House Bill 2279 (Evans-D-Philadelphia)-- a total of a little more than $1.9 billion in General Fund and nonpreferred appropriations.
            Those cuts included over $102 million from environmental agencies, including: $73.8 million from DEP (32.2 percent), $29 million (24.1 percent) and $19.7 million (24 percent).
            These cuts do not include $383 million diverted from DCNR's Oil and Gas Fund over the last 3 years, the $135 million diverted from the Environmental Stewardship Fund to pay Growing Greener II debt service and for the Hazardous Sites Cleanup Program, a "one-time" diversion of $52.7 million from the Keystone Recreation, Parks and Conservation Fund, the diversion of $15 million from the Recycling Fund or the $10.5 million reduction in the Resource Enhancement and Protection (REAP) farm conservation tax credit over the last few budgets.
            Over the last 8 years $1.3 billion in environmental funding was diverted to either balance the budget or fund programs that could not get funding on their own.
            Senate Rs Preparing New Budget Spreadsheet
            Senate Majority Leader Dominic Pileggi (R-Delaware) said in a podcast his Caucus is preparing a new state budget spreadsheet based on the most recent deficit estimates of at least $1.3 billion.
            Once that new spreadsheet is finished, they will share it with the other Caucuses to begin real budget discussions.  Sen. Pileggi said they asked Gov. Rendell to revise his budget request weeks ago based on the new budget realities, especially the $1.1 billion in new spending the Governor proposed.
            He said they also asked the Governor for his latest estimates on expected federal revenues since the Governor's budget was based on at least $2.3 billion in federal Medicaid funding and a total of $2.7 billion in federal stimulus funds that were not yet all approved by Congress.
            Sen. Pileggi said, in light of the failure of the House to get votes for revenue increases and the lack of votes in the Senate, he felt tax increases "would not be an issue this year."
            He said an on-time budget could be passed, if they get cooperation from Gov. Rendell.
            As it stands now, it is almost certain there will be even more cuts to environmental programs and the strong potential of additional staff reductions to balance the budget.
            It's a race to the bottom for environmental programs.
            NewsClips: House Democrats Have Budget Plans, But Aren't Close To Agreement
                                Vote On Natural Gas Severance Tax Could Be Weeks Away
                                Would Taxing Natural Gas Extraction Be Boon Or Doom?
                                Both Sides Face Off On Natural Gas Severance Tax
                                Unions Form Coalition To Fight Off Attempts To Cut State Jobs
                                Natural Gas Severance Tax Mulled As Crime Concerns Raised
                                Rendell Abandoned Plans To Change Sales Tax 
                                Editorial: Gas Severance Tax A Necessary Evil
                                Editorial: Too Much Gas On Marcellus Shale
                                Editorial: Here's A Way Government Should Work On Severance Tax


5/31/2010

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