Shale-tax dispute delays Pennsylvania House budget vote

HARRISBURG - Conflict among Democrats over how money from a proposed Marcellus Shale gas-extraction tax would be distributed - and an unusual intervention by Gov. Rendell - derailed a vote Tuesday in the state House on budget-revenue legislation.

With three weeks until the deadline for adopting a new budget, Democratic leadership pulled the key bill during debate on the tax.

Democrats and Rendell say the tax revenue, projected to bring in at least $140 million, is needed to help cover a budget shortfall of at least $1.3 billion.

Earlier, the House overwhelmingly approved changes to the state's two major government pension plans - including lowering the size of pensions for new employees - aimed at helping reduce a looming spike in costs to taxpayers.

Under the Democratic leadership's shale-tax plan, 80 percent of the revenue would go to the state's general fund and 20 percent would be divided among local governments in the counties where the gas is drilled and environmental-cleanup programs.

But the caucus rift was made abundantly clear by the number of Democrats who spoke out against giving such a large share to the state.

Rep. David K. Levdansky (D., Allegheny) offered a proposal to divide the revenue, with the first $50 million going to the state, after which it would be split evenly between the state and local governments. He said residents he encountered in many of the 55 counties with shale deposits were opposed to such a large share going into state coffers.

"I traveled 1,000 miles across the state holding hearings about this in May," Levdansky said. "The people don't want it all to go to the state. They want it to address their needs."

Several hours of debate on the issue ended abruptly after House leaders met with the governor. Afterward, the House voted 118-80 to send the bill back to the House Appropriations Committee to reconcile tax issues.

"The votes weren't there because some things need to be ironed out," Rendell said at a late afternoon news conference.

He also said there was agreement with Democratic leaders that the House budget-revenue legislation should also have the blessing of the Republican-led Senate.

To that end, he said, he and the leaders of the four legislative caucuses would meet again Wednesday. "I don't expect an agreement and everyone singing 'Kumbaya,' but to set out solid assignments we can work together toward," Rendell said.

The House passed a $29 billion budget in March; the Senate has yet to vote on one.

Senate Republican leader Dominic Pileggi (R., Delaware) said Tuesday night that the collapse of the Democratic proposal was a setback for a timely budget resolution. "It makes it difficult to get into serious negotiations when there is a gap in the spending positions and revenue-generating proposal," he said.

The goal of the budget-revenue legislation is to raise $320 million. The bill includes a 10-cents-a-pack increase in the cigarette tax and new taxes on cigars and smokeless tobacco. It also would remove the 1 percent vendor discount for businesses that pay taxes on time.

Rendell and House Democrats have said they would balance the proposed budget through a combination of new taxes, new federal funds, and program cuts.

House Republican leader Sam Smith (R., Jefferson) said he believed Tuesday's "nonvote" on the revenue package indicated a reluctance by Democrats to impose taxes.

Rep. William F. Adolph Jr. (R., Delaware) argued that the proposed shale tax would drive away good-paying jobs in a lucrative industry "before they even get here."

In a vote earlier Tuesday on the pension bill, the House passed an amendment that would increase employees' contributions, raise the retirement age to 65, and increase from five to 10 years the amount of time to be employed in order to vest in the plan.

The changes would affect anyone hired under the Public School Employees' Retirement System after July 1, 2011, and anyone under the State Employees' Retirement System after Jan. 1, 2011.

The recession has decimated the two pension plans, and in 2001 lawmakers voted pension increases to kick in in 2011. Supporters say the bill would help lighten the blow as government obligations come due in the next two years.

"It accomplishes short-term relief, which is so essential, but it also incorporates long-term reform," said Rep. Glen R. Grell, (R., Cumberland).

A final vote is expected on Wednesday.