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Pennsylvania Budget Negotiations Drag On, Calls Renewed for NatGas Tax

Some lawmakers returned from recess to the Pennsylvania Capitol on Monday as the state remains without a revenue package to balance a nearly $32 billion budget that Democratic Gov. Tom Wolf let pass into law last week without his signature for the third year in a row.

The Republican-controlled legislature has yet to agree on how the budget should be funded, prompting State Treasurer Joe Torsella to warn late last week that Pennsylvania could run out of money to cover its bills by August if they don't act. While Republican leadership earlier this year again nixed Wolf's 6.5% natural gas severance tax proposal soon after he proposed it, lawmakers on both sides of the aisle are calling for a vote on similar legislation to help get the budget funded.

A small bipartisan group of lawmakers in the state House of Representatives last week sent a letter to Speaker Mike Turzai urging him to bring Marcellus Shale severance tax legislation up for a vote. A similar vote failed by a wide margin about two years ago. The House remains in recess, however, with no timeline for lawmakers to return. The state Senate reconvened on Monday, with Majority Leader Jake Corman advising the chamber's members that they should be ready to stay through mid-week as budget negotiations continue behind closed doors.

The state must also close a $1.5 billion shortfall for the fiscal year (FY) that ended in June, while it still faces a $700 million deficit for the 2017-2018 FY. Lawmakers have discussed the state borrowing money, a gambling expansion and further privatizing the state's liquor system, among other things, to cover those gaps.

In response to lawmakers calling for a severance tax to help plug the state's deficit, Marcellus Shale Coalition President David Spigelmyer fired back in a letter to Turzai on Tuesday. "This is a false narrative, devoid of vision or leadership to grow Pennsylvania's economy through pro-business policies that can provide for a stable and sustainable tax base for the commonwealth and jobs for Pennsylvania citizens," he wrote.

Beyond the revenue package, the budget that became law last week once again cuts general fund appropriations for the state Department of Environmental Protection (DEP), which oversees oil and natural gas development.

DEP, which receives about 22% of its funding from the state and the rest from the federal government, fees and fines, is set to receive $147.7 million, less than the $148.3 million it received last FY. The cut comes after years of workforce reductions and pleas for more funding at the agency. DEP's general fund appropriation has steadily fallen from a high of $245.6 million in FY 2002-2003.

As the state works to get the budget funded, the Pennsylvania Environmental Defense Foundation has already filed in the Commonwealth Court for a declaration that part of it is unconstitutional after the state Supreme Court ruled last month that royalties from the Oil and Gas Lease Fund cannot be transferred to cover general budget purposes and instead must be used for conservation.

The budget calls for a $61.2 million transfer from the fund, in part to pay for some of the state Department of Conservation and Natural Resources’ general operations.

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