Is the Answer to Pennsylvania’s Budget . . . Robbing Peter to Pay Paul?

All eyes are on Harrisburg as the clock ticks down to the June 30 state budget deadline.  Some say that to reach next week’s deadline would require a final budget in place by the end of today.  At this point, Gov. Corbett appears intent on meeting the June 30 deadline . . . that by itself will mark a change from the past administration.  I don’t recall if Ed Rendell’s budget was late all eight years of his administration but certainly most years.

There are some hurdles for Corbett’s budget before it is finalized. Some sticking points include whether the $300 million in Tobacco Settlement Fund revenue remains in the general fund as Corbett proposed in his preliminary budget.  In the past, the tobacco fund revenue was not included in the general fund but helped fund social and welfare programs.  There was a claim in March by Pennsylvania’s Auditor General Jack Wagner that over the past few years, over a $1 billion has quietly diverted from the Tobacco Settlement Fund to the general fund to help balance the state’s budget. You know the saying, ‘robbing Peter to pay Paul’.

If the $300 million revenue from the Tobacco Settlement Fund were to come out of the general fund, it is possible that some of the spending cuts to basic and higher education and welfare programs could be restored.  If you recall, Corbett’s preliminary budget announcement back in March indicated excess tax revenue of $78 million but to date, he has refused to increase spending.  The state tax revenue in March and April of this year was higher than expected so it would seem to suggest that Corbett could afford to restore some of the education and welfare spending cuts.

Will Corbett’s final budget package include a Marcellus shale impact fee?  My guess . . . highly unlikely. But the real question is why is the state not charging an extraction tax or impact fee to the drilling companies?  It defies logic; I absolutely do not understand why the opposition to charging the companies– especially given the current and potential future damage to the environment and roads caused by the gas drilling.

I certainly do not claim to be any political guru; but when you look around this country and see that every other state is charging some form of a drilling tax, impact fee, or whatever you want to call it; it does beg the question, why doesn’t Pennsylvania?  Is the answer so that Corbett can stand on his campaign promise of no new tax increase?  Is the administration’s reluctance to impose a Marcellus shale fee have anything to do with campaign financing support? I wonder how much revenue the state has already lost and will continue to lose by not imposing a Marcellus shale impact fee. 

As school districts across the state are challenged to balance their own budgets and taxpayers face property tax increases – again I have to ask, why not tax the Marcellus shale drilling companies.

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  1. 1. Governor Rendell had all late budgets — not once did he get it done on time.

    2. Yes, the Tobacco settlement monies have been diverted to the general fund, even though were not supposed to have been.

    While I do not agree with keeping it in the general fund, I can see doing so for one more year to help ease the pain caused by the loss of federal stimulus money (a loss that people seem to forget when they blame the state for cutting funding)

    3. There are arguments over what to do with the “surplus” of excess revenue. Democrats are proposing to spend it (actually, they are proposing to spend twice as much as it is estimated as being.) The Governor (and Republicans in the Legislature) are saying don’t spend it b/c there are looming liabilities.

    The deciding factor for many? The Auditor General (a Dem) came out in support of the Gov’s (a Rep) position that this “surplus” should NOT be spent because of the looming liabilities the state faces in everything from unemployment comp benefits to pension benefits.

    4. An extraction tax on Marcellus Shale is a really tricky issue and you have to travel the state to understand why (and how differently this issue is seen from place to place.)

    People here in the Southeast (most of whom have never seen a well or the effects on a community) simply say “tax it,” and fully expect to gain some benefit from that tax.

    People in other communities where drilling is occuring want impact fees that stay in affected communities to help pay for the wastewater treatment upgrades, road improvements, etc. that are directly attributable to the gas exploration. Those people do NOT want that money going to Harrisburg to be “wasted” in other geographic areas untouched by drilling.

    This means the legislators in charge of choosing a path are at odds on how to proceed — and also means that neither group has the votes to pass their particular vision.

    5. People claim there is no tax on shale drillers, but they do pay a ton of money into state coffers through corp taxes, licensing fees, etc. Further, the gas industry is treated exactly the same in PA as the oil and coal industries that have been here for years and are (just like natural gas) extracting natural resources. Because of this, people argue that a tax on just marcellus shale drillers is not equal taxation.

    I don’t know that any of this helps your thinking, but it can add to the debate.

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