Area state lawmakers agree that a natural gas extraction tax is a needed economic initiative that would take Pennsylvania off the map as the only state without the severance tax. However, opinions on the details behind the tax proposal vary.
State Rep. Gene DiGirolamo, R-18, of Bucks County, proposed Wednesday a 3.2 percent natural gas extraction tax without touching the current percent impact fee. The amount taxed on natural gas production would meet the 5 percent mark newly elected Democratic Gov. Tom Wolf proposed during his gubernatorial campaign and bring in $600 million each year.
Budget discussions are quickly approaching with about a $1.9 billion deficit that needs to be filled. DiGirolamo said what’s being proposed will not completely close the nearly $2 billion shortfall, but it’s a start.
The proposed bill outlines areas of spending revenues from the severance tax would cover — about 40 percent of revenue is planned for education; 35 percent designated for pensions; 15 percent for human services; and 10 percent to environmental programs statewide.
Several county representatives agreed there’s a need for a severance that wouldn’t have an enormous impact on the gas industry, while ensuring the community reaps the benefits of increasing state income.
Some might may say the move is a one-party view point. Former Republican Gov. Tom Corbett was against the concept of a severance tax and said it would potentially decline oil drilling in Pennsylvania, while Wolf hoped to implement a 5 percent severance tax on natural gas extraction.
Approval is coming from both sides of the aisle in Delaware County. Republicans and Democrats agree there’s a need for a severance tax on the growing natural gas industry in Pennsylvania.
“Everyone, Democrats and Republicans, understands that we need an extraction tax,” said state Sen. Daylin Leach, D-17, of Upper Merion, adding that it’s an important discussion in Pennsylvania since it’s the only state to be without a one.
Leach said Wednesday, although he approves of the overall tax enforcement, he thinks it should be higher than 3.2 percent to bring additional revenue.
“People from out of state are coming here and taking our resources,” he said, adding that a more reasonable state tax would equate to the national average of roughly 6 percent.
State Rep. Thomas Killion, R-168, of Middletown, supports the 3.2 percent proposal without eliminating the impact fee.
“We can’t take away the impact fee that directly impacts the community,” he said Wednesday, adding that the state would lose out on $1 million in yearly revenue if the fee was eliminated.
Killion said as long as the revenues are used in a way that directly benefits the community, he approves of the proposal. He said the top items on his list that need the most funding are education and pensions.
When asked if he thinks a bill will make it on Wolf’s desk, he said the proposal “will definitely pass in the House,” but wasn’t sure what would happen on the Senate level without further discussion.
State Rep. Greg Vitali, D-166, of Haverford, also a supporter of the severance tax, opposes outlining specific percentages in a proposal when the state’s needs change year-to-year. He said he believes DiGirolamo included those percentages to appeal to interest groups to gain support.
“The approach in this legislation is a wrongheaded approach done for political reasons,” he said.
Vitali wants to see the funds diverted directly to the general fund and eliminate the impact fee to send 100 percent to the state’s general fund budget. Eliminating the impact fee would take away money going to municipalities falling on the Marcellus Shale track.
Similar to Leach’s view on increasing the percentage to become more competitive with other states, Vitali said he wants to severance tax to hit 5 or 6 percent.
But negotiations must continue before a legislation is finalized.
A memorandum seeking co-sponsorship was floating around Senate offices from Sen. Tom McGarrigle, R-26, of Springfield, seeking support for the increase with the “revenue generated being earmarked for public education funding,” a spokesperson from McGarrigle’s office said.
McGarrigle’s views on the tax have not changed since his campaign and has discussed his plan for a 4 percent severance tax.
Others include Sens. Art Haywood, D-4, of Cheltenham, and Vincent Hughes, D-7, of Philadelphia. Both plan to present a tax proposal Thursday that would fund education, environmental programs, and pensions.