Budget chief: Corbett 'not ruling out severance tax' on gas drillers

| Tuesday, June 17, 2014, 4:06 p.m.

HARRISBURG — After years of opposition, the Corbett administration said for the first time on Tuesday that the governor will not preclude a Marcellus shale tax as part of a budget solution to close a $1.4 billion deficit.

Republican Gov. Tom Corbett stressed during a news conference that he would consider new revenue only once the Legislature sends him legislation to curb spiraling pension costs from a $50 billion unfunded liability.

“I'm not ruling out a severance tax. You didn't hear me rule out a severance tax,” state Budget Secretary Charles Zogby told reporters after the news conference.

Zogby said the governor is considering all options except an increase in the state's personal income tax of 3.07 percent and most likely a boost in the state's 6 percent sales tax (7 percent in Allegheny County).

His comment veers from Corbett's long-standing opposition to a natural gas tax.

“That means (the severance tax) is under discussion,” said Colleen Sheehan, director of the Ryan Center at Villanova University, a former GOP legislator and a political science professor. “Reality is hitting home.”

“They've been under a lot of pressure to do that (tax natural gas),” Sheehan said. “I think they're in a tight spot.”

“Pennsylvania voters across the political spectrum reject new energy taxes in favor of jobs and economic growth,” said Marcellus Shale Coalition President Dave Spigelmyer. “Uncompetitive, short-sighted new energy taxes on one of our most promising industries will lead to fewer jobs, lower energy production and less tax revenues.”

Zogby's statement “is not surprising,” said Senate Minority Leader Jay Costa, D-Forest Hills. With an income tax increase out of the question, an extraction tax “is the only place to go” for sufficient revenue, Costa said.

Another priority for Corbett, of Shaler, is revamping the state liquor system.

Asked whether he would consider a liquor plan that does not eliminate the state's more than 600 state stores as he proposed last year, Corbett said, “I have an open mind. We need to get something done.”

Pending in the Senate is a plan to expand the sale of beer to some convenience stores with restaurant licenses and to allow wine to be sold in grocery stores. Corbett prefers a House bill that was approved in March 2013 that would divest state government of retail and wholesale control of liquor and wine.

The potential trade of a shale tax for liquor privatization is not happening, Costa said.

Senate Majority Leader Dominic Pileggi said a tax increase likely will be necessary to pass a state budget for the July 1 start of the fiscal year, The Associated Press reported.

Pileggi, R-Delaware County, said Tuesday that it would be a challenge to pass a budget — even one that spends less than Corbett proposed in February — without more revenue. Corbett insisted he doesn't “like a severance tax,” noting that drillers pay a per-well impact fee estimated to be the equivalent of a tax of about 1.6 percent to 2.2 percent on production. Lawmakers of both parties are seeking a severance tax of 4 percent to 5 percent on extracted gas.

Costa said he wants 5 percent on top of the impact fee, which goes to municipalities affected by drilling and to statewide environmental programs. The impact fee was enacted in 2012.

House Republican spokesman Steve Miskin said GOP leadership is not deciding the shale tax issue now. He acknowledged that “a lot of people are advocating it, so I guess it's on the table.”

Corbett reiterated that he “will not talk revenue until we talk about cost drivers,” including a pension system with unfunded liabilities expected to hit $65 billion in four years.

Corbett spokesman Jay Pagni said the state is committed to pay $1.6 billion this year for pensions. In three to four years, that will increase to $3.3 billion, Pagni said.

Corbett said he won't sign a budget until pensions and liquor are addressed, even if that means remaining in session beyond the constitutionally set deadline of June 30. Corbett campaigned in 2010 on a no-tax theme and on passing timely state budgets.

Bill Patton, a spokesman for House Democrats, said he was surprised that Zogby, not Corbett, declined to rule out a severance tax.

“The governor himself offers very little in terms of specifics and falls back on ideology,” Patton said.

Corbett in November faces Democrat Tom Wolf, a York County businessman, who has advocated a 5 percent severance tax to fund education.

Brad Bumsted is state Capitol reporter for Trib Total Media.

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