Pa.'s missed opportunity
By Dan White The new fiscal year has arrived, and Pennsylvanians are still without a budget. The legislature has passed a spending plan, but it ignores significant problems and will likely need to be revisited as soon as revenues begin to come in below expectations. Consider it the budget of missed opportunities.
The new fiscal year has arrived, and Pennsylvanians are still without a budget. The legislature has passed a spending plan, but it ignores significant problems and will likely need to be revisited as soon as revenues begin to come in below expectations. Consider it the budget of missed opportunities.
Despite all the partisan rancor of an election year, there was an opportunity for both Democrats and Republicans, for the eastern and western parts of the state, and for the executive and legislative branches to swallow their collective pride and do what was right. Instead of compromising, however, they flubbed a golden opportunity to put the state on a better long-term fiscal track.
Though the details are complicated, the opportunity was relatively simple. Gov. Corbett, correctly, has insisted on pension reform, without which long-run costs will continue to balloon out of control and crowd out funding for other programs like education and transportation. Democrats, and some Republicans, correctly, are insisting on a severance tax for drillers in the Marcellus Shale. Both of those demands are the right things to do. However, the political stubbornness and special interests of both sides are preventing either improvement from happening.
On the pension side, long-term costs are rising faster than revenues. This requires the state to continuously feed more tax dollars into its pension systems, dollars that could otherwise be spent on schools, roads, and bridges, each of which are woefully underfunded. Continued inaction on pension woes will cost us more each year as ratings agencies take notice. As our ratings fall, our cost of borrowing rises, and even less money will be available for infrastructure.
On the revenue side, the state is missing out on millions of dollars in additional tax revenue by not levying a severance tax on drilling activity. We are the only major producer of natural gas in the United States to not levy such a tax, and advocates of zero severance taxes are simply wrong on the economic impacts that a moderate and competitive levy would have on the state.
Looking at the examples set by other shale states, a severance tax will not single-handedly drive the industry out of Pennsylvania. Drillers will be less profitable, but energy companies go where the energy is.
Implementing a moderate severance tax in place of impact fees, in line with neighboring states and sensitive to our relatively high corporate tax rates, will not reduce profitability enough to choke off economic growth in the Marcellus Shale region. What will choke off economic growth is inadequate and crumbling transportation infrastructure, which will only get worse without additional tax dollars to fund maintenance and expansion. It would be criminal not to take advantage of the energy assets the state has been blessed with, especially when they could be funding better schools, roads, and bridges.
While the details might be complicated, the overarching theme is not. More revenues and less long-term spending pressures are a win for Pennsylvania and taxpayers. It's time Harrisburg focused on the big picture and paved the way to a better future.