HARRISBURG, Pennsylvania (Reuters) - Pennsylvania Governor Tom Wolf, who faces re-election this year, presented on Tuesday a $32.9 billion budget for fiscal 2019 that called for a single tax increase on natural gas extraction, a proposal he has failed to win for the past three years.
Wolf, a Democrat, battled the Republican-led legislature for three years over tax and spending issues which led to extensive delays in implementing a final budget, putting the state’s credit rating in jeopardy.
Last year, Wolf signed the budget in July but a revenue package to fund it was not approved until October. This year, his budget seeks to increase spending 3.1 percent or $969.8 million.
Budget director Randy Albright told reporters: “We are in the best fiscal position since the Great Recession a decade ago.” Albright said tax collections through January are $90 million ahead of projections.
In the latest budget, Wolf once again proposed a tax on natural gas extraction that he said would yield $248.7 million to pay for education spending of $225 million.
“Pennsylvania is one of the few states fortunate enough to have abundant natural gas resources,” he said in his budget address.
“Yet we are the only one of those states without a severance tax. Everywhere else — Texas, Oklahoma, Louisiana, Alaska — they’re bringing in billions of dollars from the oil and gas industries.”
The state’s Republican-controlled legislature has rejected Wolf’s three previous attempts to impose a severance tax on the state’s booming gas industry, which is based on the fracking technique. Democrats and some Republicans favor the tax.
Senate Majority Leader Jake Corman, a Republican, said the severance tax “will not happen.” He supported increased education spending but called for cuts to make the new tax unnecessary.
Wolf also brought back another rejected proposal from last year, reducing the state’s corporate net income tax to 7.9 percent from 9.9 percent by 2023. He would pay for the reduction in part by eliminating the so-called “Delaware loophole,” in which Pennsylvania businesses incorporate in Delaware, which has no corporate income tax.
Pennsylvania’s improved fiscal health was evidenced by a projected balance at the start of fiscal 2019 of $41 million, compared to a deficit of more than $1.5 billion at the start of fiscal 2018.
Albright said the state’s $65 billion pension liability for state employees and teachers will begin to decline this year and is on track to be eliminated between 2035 and 2040.
Reporting By David DeKok in Harrisburg, Pennsylvania; Editing by Daniel Bases and Cynthia Osterman