Jul. 17, 2015

HARRISBURG – House Appropriations Chairman William F. Adolph, Jr. (R-Delaware) said “Governor Wolf has tried to justify his unnecessary, knee-jerk veto of the state budget by saying it was necessary to achieve his goal of imposing a severance tax on the extraction of natural gas in Pennsylvania to fund education.”

On March 3rd, the governor presented a plan with his budget proposal to enact a severance tax—a tax the Pennsylvania Independent Fiscal Office characterized as the highest state severance tax in the country— as a way to raise one billion for state education spending.

To determine if the governor’s severance plan would actually deliver the revenue the administration suggests his severance tax would generate, the House Appropriations Committee analyzed the governor’s proposal to see what revenue it would generate given current market conditions.

“It is shocking how much the administration has overstated the revenue a severance tax would generate. Our analysis shows that due to current market conditions, a severance tax would only generate a fraction of what the governor suggests and would not get anywhere close to the billion the governor is promising for schools across the state,” said Adolph.

The following table shows that severance tax revenue estimates offered by the administration do not accurately take into account the fact that market prices for natural gas are approximately two-thirds lower than estimates upon which the administration has based their revenue estimates.
The administration has validated changing market conditions and the negative impact it has on generating revenue by recently acknowledging the state’s Oil and Gas Lease Fund is projected to collect less revenue due to declining prices and lagging royalty payments for drilling that occurs on state-owned land.

Chairman Adolph went on to say “the governor’s characterization of a severance tax as a panacea for this budget is patently inaccurate. What has become absolutely clear is the administration is using this severance tax as a distraction for their true desire to pass huge spending increases and enact inequitable distribution of state taxes.”

Representative William Adolph
165th Legislative District
Pennsylvania House of Representatives

Media Contact: Michael Stoll
WilliamAdolph.com / Facebook.com/RepAdolph