Proposal features shale tax levy, education trust fund, fee credit

Harrisburg – Dec. 16, 2014 – State Sen. Jim Brewster (D-Allegheny/Westmoreland) will soon introduce a plan that would earmark revenue from a new shale gas extraction tax for public schools while retaining current well impact fees that support local government operations.

“My ‘Extraction for Education’ proposal is simple, reasonable and credible because it uses the proceeds of an extraction tax to support education,” Brewster said. “Yet it also retains funds that are currently generated from impact fees for use by local and state government. Pennsylvania taxpayers, school children, teachers and others who are involved in the education community have paid a high price because the Corbett administration has failed to embrace a responsible shale gas extraction tax.”

Brewster said a 5 percent levy would generate between $700 million to $1 billion. His plan calls for distributing this revenue via a new basic education subsidy formula that is now being developed by a bipartisan legislative commission.

Under the plan, shale drillers would be able to credit current impact fee expenses (Act 13) against their severance tax liability. That way, the senator said the effective tax rate is 5 percent, which would keep the industry competitive. The current impact fee equates to an estimated 1.8 percent tax over the life of the well, he added.

“It is important that energy companies pay a reasonable tax for a Pennsylvania resource, but we also need to balance well fees and market competitiveness so we don’t harm the industry,” Brewster said.

Brewster said he was encouraged that Gov.-elect Tom Wolf campaigned on using a robust shale tax to fund education. He said the governor elect’s support for a responsible shale tax is critical. The lawmaker said he hopes his plan will be the basis for further legislative discussions.

Targeting new dollars for education is important because Gov. Tom Corbett and his administration cut $1 billion from schools, Brewster noted. School districts have never recovered from the funding reduction and homeowners have seen their property taxes rise. Approximately 75 percent of school districts have raised taxes as a result of the underfunding of schools in Pennsylvania.

According to figures cited by the Pennsylvania Public Utility Commission – the state agency responsible for collection and distribution of the state’s current impact fee — more than $200 million was generated from impact fees (Act 13) every year since 2011. A portion of the funds collected from the well impact fee are distributed to local municipalities to cover the impact of drilling in their communities.

Under the Brewster proposal, all revenues from his proposed extraction tax would be placed in the “Extraction for Education Fund” and all dollars would be spent in support of education.

“All funding earmarked for the Extraction for Education Fund will be used to help schools, taxpayers and children and not siphoned off for other purposes,” Brewster said. “We have to make the connection between the extraction tax and education clear.”

In 2011, Brewster authored legislation linking an extraction fee to education support (SB 1286). However, the bill was never acted on by the Senate.

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