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As the deadline approaches for state lawmakers to pass a 2019-2020 state budget, a separate debate about how to fund long-term infrastructure needs in Pennsylvania rages on.
During a statewide media call on Tuesday, members of the Wolf administration again pressed the Republican-led General Assembly to pass legislation that would enact a severance tax on natural gas production and devote the proceeds to tasks such as expanding broadband access, preventing floods and investing in walking trails.
The tax, which would be in addition to the state’s impact fee on well drilling, is being sought to fund Gov. Tom Wolf’s $4.5 billion Restore Pennsylvania plan.
The plan would fund infrastructure projects across the state in 11 areas, including high-speed internet access in rural communities, stormwater infrastructure and blight remediation projects, among others.
Wolf rolled out the plan this winter and has been traveling the state to drum up local support. Indeed, dozens of municipal officials have backed the governor’s plan, seeing new funding they can tap without adding new local taxes to address community priorities, including environmental cleanup and redevelopment of vacant properties.
But Republican leaders and business groups, including the state chamber, strongly oppose the funding source. They argue a severance tax would hurt an industry that has been pumping up the state’s economy.
“Our view is that a single industry shouldn’t be singled out to pay for what we believe is a common good,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry.
Wolf has faced an uphill battle over the severance tax, which he has proposed every year he has been in office. GOP leaders have insisted that Restore PA, which is not funded under the governor’s $34.1 billion budget proposal for the next fiscal year, wait until at least the fall for legislative debate. The next fiscal year begins July 1.
“No chance this month,” said Jennifer Kocher, a spokeswoman for Senate Republicans. “It’s a fall issue.”
She said the governor’s plan is riddled with problems. For example, she said broadband internet is complicated and costly and requires a private-sector solution.
“We have no interest in implementing a new tax on any employer to set up a slush fund without specifics on how that money will be spent,” Kocher said.
But Sam Robinson, Wolf’s deputy chief of staff, and Eric Gutshall, Wolf’s secretary of intergovernmental affairs, argue that the latest version of the governor’s severance tax has bipartisan support because of the tangible infrastructure needs that would be funded. The House version of a Restore PA bill has nearly 100 cosponsors, while the Senate bill garnered 25 cosponsors. But Republican committee leaders have to be willing to bring up the bills for votes before they can be debated in the full House and Senate.
“We will operate as if the best time to do this is yesterday,” Robinson said.
The administration officials said the governor has not closed off the conversation about alternatives to the severance tax, but he believes it is the best way to pay for this initiative.
Wolf’s plan calls for spending the $4.5 billion over four years. The governor wants to fund infrastructure work by issuing bonds that would be backed by the tax revenues on natural gas production and paid back over 20 years. The tax would be based on how much gas drillers extract and would depend on the average annual price of natural gas from the previous calendar year. It would start at $.091 per thousand cubic feet.
The administration does not believe the added tax will stymie investment in the natural gas industry in Pennsylvania, the only state in the country without a severance tax. Robinson said the administration wants to put Pennsylvania’s tax rates in line with other gas-producing states, including Texas, which collected $1.4 billion in severance taxes last year.
Republicans have an alternative plan, dubbed Energize PA, which includes eight bills and does not call for any tax increases. But it would include tax incentives for companies to boost natural gas-related manufacturing and expand gas pipelines for distribution, which could spur investments and create more construction jobs.