Pennsylvania Senate mulling severance tax on drilling

MICHAEL RUBINKAM and MARC LEVY
(AP) Republicans who control the Pennsylvania Senate discussed the possibility of a severance tax on Marcellus Shale gas drillers last week as they sought agreement on a plan to plug a $2 billion hole in the state budget.
With the stalemate in its fourth week, senators returned to the Capitol for negotiations on a revenue plan that could include a mix of tax hikes, borrowing and other measures to balance the $32 billion budget.
A Republican senator said the GOP caucus discussed a severance tax on drillers. The senator spoke to The Associated Press on condition of anonymity because the budget talks were being held in private.
The gas industry has long resisted a severance tax, saying it would harm the state's competitiveness, and GOP leaders have long rejected such a tax. Gas drillers currently pay an “impact fee" that is distributed among the state government and local communities where drilling takes place.
House Republicans failed to agree on a way forward last week, rejecting a proposal that would have combined $1.5 billion in borrowing with hundreds of millions drawn from programs not included in the state budget — an approach designed to avoid higher taxes.
That left it to their counterparts in the Senate, which convened briefly before recessing for private discussions that lasted for several hours.
Democratic Gov. Tom Wolf allowed the badly out-of-balance budget to take effect without his signature. The governor has said he could support borrowing to help close the deficit, if accompanied by increased taxes he views as necessary to avoid a credit downgrade. Democratic lawmakers have said he wants a tax package of $700 million to $800 million.
Lawmakers and Wolf have discussed a range of tax increases, including new or higher taxes on electric and natural gas utility bills, telephone services and cable bills. Wolf — along with Democratic lawmakers and some Republican moderates — have pressed for a severance tax on natural gas production.
Failing to balance the budget could result in a freeze on some government spending, potentially impacting schools and counties that administer social service programs. Additionally, nearly $600 million in state aid to Penn State, the University of Pittsburgh, Temple and Lincoln universities and the University of Pennsylvania's veterinary school remains in limbo.