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Budget Talks Begin As Revenue Shortfall Gets Wider

State lawmakers return to Harrisburg next week for the relatively action-packed month of June. It’s a time reserved for finalizing a state budget before the July 1 deadline, and all signs point to a tough road ahead.

A projected $1.2 billion deficit is likely to grow, as May tax collections have been lackluster.

“May’s collection numbers, to date, have been below what we would’ve hoped,” said GOP Senate Majority Leader Dominic Pileggi. “So we’re very closely watching how the month of May will close.”

Republicans, who control both legislative chambers, are considering what a budget would look like without any new revenue – that is, what a budget would look like with significant spending cuts.  

“We haven’t really discussed raising revenues yet,” said Sen. Jake Corman (R-Centre), chairman of the Senate Appropriations Committee.

The governor’s budget proposal included spending increases for education, and Republican leaders say their members are eager to see those funds remain in the budget. But for now, those increases don’t appear to be in the no-new-revenue scenarios GOP leaders will offer to their members in caucus meetings next week.

“It’d be very difficult to do anything new under the current climate,” Corman said.

Pileggi says if cuts aren’t palatable, lawmakers will consider how to raise money to support next year’s spending plan.

“In that category, there’s a long list of 20 or 30 potential revenue generating ideas,” he said. “An extraction tax is one of them.”

The governor is opposed to passing a tax on the extraction of natural gas, sometimes called a severance tax. He points to the existing impact fee charged to natural gas companies for each well they drill. But some Republicans from both the House and Senate, including leadership, favor such a move.

An extraction tax is the single largest revenue generator of all the potential money sources on the table, netting several hundred million dollars. Other changes – like freezing business tax cuts, further tightening up a corporate tax loophole, and increasing taxes on tobacco products – each yield less money. Democrats say an extraction tax would be more popular among Pennsylvania voters than other revenue-raising moves.

Some Republicans see a political benefit to passing an extraction tax. More moderate Republican Senate and House members, especially in the southeastern part of the state, see it as a way to score with their constituents. Other GOP members see it as a way to take some air out of Democrats’ sails. Tom Wolf, Governor Tom Corbett’s Democratic opponent in the general gubernatorial election, is campaigning on a spending platform that depends on an extraction tax.

GOP leaders also say that raising revenue to balance this year’s budget would be greeted with resistance from many of their members. Passing something like a severance tax would likely require Democratic votes – especially in the more conservative House. But preliminary budget meetings have been among Corbett’s administration and Republicans.

Randy Albright, the Democrats’ executive director of the Senate Appropriations Committee, said there’s been no unequivocal indication that Republicans intend to reach across the aisle for Democratic support on a particular measure.  

“They have to first figure out where they are internally before they talk to us,” said Albright.

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