With mounting pressure to find new revenue in the face of an estimated $1.4 billion budget gap this year, the Corbett administration is signaling it may be open to levying a new extraction tax on Pennsylvania’s natural gas operators.
At a press conference in Harrisburg today, Corbett said he still doesn’t like the idea of taxing gas production, but he’s open to raising revenue and imposing new taxes if the legislature deals with one of his top priorities– pension reform.
Corbett wants to replace the state’s public pension system with a less costly hybrid 401(k)-style program for future hires.
“Right now we have a 50 billion dollar problem,” he said, referring to pension obligations. “We have to deal with that if you want me to even consider dealing with revenue. I’m not going to say revenue is a severance tax or any other type. Let’s deal with the cost driver first.”
Corbett says he is willing to miss the legally-mandated June 30th budget deadline in order to get a deal done, noting that Lieutenant Governor Jim Cawley has already cancelled a planned family cruise.
Speaking with reporters after the press conference, Corbett’s Budget Secretary, Charles Zogby, was clear that raising taxes on drillers is still on the table.
“There’s multiple options we can look at,” he said. “I’m not ruling out a severance tax.”
Legislators from both parties have been proposing various gas tax bills.
Steve Miskin, a spokesman for the House Republicans, says a tax is something, “we’re not advocating right now,” but added, “I know a lot of people are advocating it, so I gather it’s on the table.”
Pennsylvania is the largest gas-producing state in the country without a tax on production. Instead, companies pay an impact fee for every well they drill. Depending on the market price of gas, the fees range from $40,000 to $60,000 per well. Drillers continue to pay over a 15 year span, with the price declining over time.
Over the past three years, the impact fees have brought in an average of $210 million annually.
Taxing gas production has become a major issue in the gubernatorial campaign. Corbett’s Democratic challenger, Tom Wolf, is pushing for a five percent tax on production, which he says he’ll spend on primarily on public education.