Pennsylvania Senate to vote on plan to close $2B budget hole

Michael Rubinkam
Associated Press

Consumers' utility bills would go up, Marcellus Shale drillers would pay a tax they've long resisted and Pennsylvania would make a new effort to capture tax revenue from internet sales under legislation poised for a vote in the state Senate.

Democratic Gov. Tom Wolf speaks to reporters in his offices in his first public appearance after letting a nearly $32 billion budget bill become law without his signature, despite it's being badly out of balance after revenue talks with lawmakers collapsed, Wednesday, July 12, 2017 in Harrisburg, Pa. (AP Photo/Marc Levy)

Republicans who control the chamber unveiled their plan to close a $2 billion hole in the state budget late Wednesday, including a proposal to borrow $1.3 billion against Pennsylvania's annual share of the 1998 multistate settlement with tobacco companies.

The bill drew the support of Democratic Gov. Tom Wolf, but could run into trouble in the House, where majority Republicans last week rejected a proposal to leverage the tobacco money and are likely to resist calls for higher taxes to help balance the $32 billion budget.

Senate Majority Leader Jake Corman, R-Centre, defended the plan, saying lawmakers had held the line on new taxes as long as they could but simply needed more revenue to fund vital services.

"This isn't anything that any of us wanted to do," he said.

More: Highlights of Pennsylvania Senate's $2.2B revenue package

More: Wolf consolidation plan on table in budget talks


The legislation cleared a key committee late Wednesday. The full Senate will vote on it Thursday.

It includes a severance tax on natural gas drilling that Corman said would generate about $100 million per year. Gas drillers would continue to pay an existing impact fee that is split by the state government and communities in the Marcellus.

Energy companies have long objected to a severance tax, saying it would harm the state's competitiveness. Pennsylvania is the nation's No. 2 gas-producing state after Texas.

"Obviously, they're not thrilled," Corman said. "They think they pay enough in taxes, and they probably are accurate."

But he said Senate leaders had reached an agreement with Wolf's administration on "significant permitting and regulatory reform" for gas drillers.

Consumers, meanwhile, would face $405 million in new or higher taxes from a gross receipts tax on their natural gas, electric and telecommunications bills.

The state ended the gross receipts tax on natural gas bills in 2000 as part of a broader restructuring of regulations over natural gas utilities and service. The Senate GOP plan restores the tax on natural gas bills while raising taxes on telecommunications and electricity. The tax on natural gas would be 5.7 percent. The tax on electric bills would rise by more than a half-percent to 6.5 percent, while the tax on phone bills would increase by 1 percent, to 6 percent.

GOP senators hope to raise another $43.5 million by requiring online marketplaces like Amazon and eBay to collect sales tax from third-party sellers using their sites. The Senate plan also counts on $200 million in revenue from a massive expansion of casino-style gambling that hasn't been approved and is still the subject of a disagreement with the House.

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 of dollars 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.

Wolf had allowed the badly out-of-balance budget to take effect without his signature.
"Governor Wolf commends the Senate for taking a responsible step toward balancing the budget and for their willingness to include a tax on Marcellus Shale," his spokesman, J.J. Abbott, said in a statement late Wednesday.

Failing to balance the budget could result in a freeze on some government spending, potentially affecting 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.