$200 Million Lost to Legislative Inaction on Drilling Tax

Since October 2009, state has lost revenue that could have reduced cuts to schools, colleges, health services

Jul 14, 2011, 13:50 ET from Pennsylvania Budget and Policy Center

HARRISBURG, Pa., July 14, 2011 /PRNewswire/ -- Pennsylvania has lost $200 million from legislative inaction on a Marcellus Shale drilling tax — revenue that could have prevented state cuts to schools, colleges and health services for the state's most vulnerable.

The Pennsylvania Budget and Policy Center is tracking in real-time how much drilling tax revenue has been lost since October 1, 2009 by not having a tax in place. The ticker will hit $200 million mid-afternoon on Friday, July 15. View the Drilling Tax Ticker here.

"Lawmakers have allowed drillers to avoid a tax that they pay everywhere else, and middle-class families are paying the price," said Sharon Ward, Director of the Pennsylvania Budget and Policy Center. "$200 million could have kept more teachers in the classroom, college tuition more affordable and prevented a hike in property taxes."

Across the country, 98% of natural gas is produced in states that have drilling taxes or fees. In many energy-producing states, that revenue supports critical services like education and health care, as well as environmental protection and the local impacts of drilling.

Pennsylvania is the largest mineral-rich state in the nation without a drilling tax or fee of any kind. All 11 states with more gas production than Pennsylvania have a tax or fee. Unlike those states, Pennsylvania is giving away a one-time resource.

The $200 million in lost revenue could have helped prevent budget cuts that will increase the cost of child care for many working parents, strain child protective services, reduce access to full-day kindergarten, and place limits on care for seniors and people with disabilities.

"It makes no sense to leave Marcellus Shale fees on the table, while weakening child care quality and asking low-income families to pay substantially higher co-pays for it," said Christie Balka, Director of Child Care and Budget Policy at Public Citizens for Children and Youth.

Pennsylvania lawmakers plan to take up a Marcellus gas drilling fee in the fall, but several proposals now before the Legislature are deeply problematic. Most would give the lion's share of local funding to only eight drilling counties, while doing nothing to address state cuts to education and local services.

"Unfortunately, lawmakers are promoting narrowly-targeted bills that benefit a small share of Pennsylvanians, and leave other taxpayers to foot a larger bill for education, the environment and drilling-related impacts," Ward said.

Revenue from the drilling tax could make a substantial contribution to the Commonwealth. By 2015, total annual revenue could be between $180 million and $550 million, depending on the proposal.

Most voters see a statewide drilling tax as a way to restore recent cuts to education, early childhood programs and other state-funded services. A Quinnipiac poll released in June found that 69% of voters would support a new tax on drilling companies to balance the state budget.

Ron Sofo PhD, Superintendent of the Freedom Area School District in Beaver County, said that any economic benefit from increased drilling is undermined by recent cuts to education and workforce training — some of which could be offset by a drilling tax or fee.

"Legislators and Governor Corbett refuse to have natural gas drillers pay a reasonable tax, which they do in every other state, to pay for negative environmental impacts and invest in a highly skilled state workforce," Dr. Sofo said. "How can anyone say that our state leaders are wisely investing in our future prosperity?"

Patrick M. Sable, Chief Financial Officer of the Allegheny Intermediate Unit, said property taxpayers already contribute significantly to schools and more state revenue is needed to support education.

"New businesses and new types of businesses must also contribute their fair share to funding the essential responsibilities of our state, first of which is public education," he said.

Even if lawmakers enact a drilling fee in the fall, it will still mark a full two years after the Legislature first considered the issue, Ward noted. In the meantime, legislative inaction has undercut environmental protection in the Marcellus Shale and passed the local costs of increased drilling on to state and local taxpayers.

"Lawmakers have put the interests of out-of-state drillers like Exxon Mobil and Shell ahead of the interests of Pennsylvania communities," Ward said.

You can view PBPC's Drilling Tax Ticker here. The Ticker can be embedded on other web sites by copying the "Embed Code" from the upper-right-hand corner of the Ticker. View the methodology used to create the Ticker.

The Pennsylvania Budget and Policy Center is a non-partisan policy research project that provides independent, credible analysis on state tax, budget and related policy matters, with attention to the impact of current or proposed policies on working families.

SOURCE Pennsylvania Budget and Policy Center