Pennsylvania legislators get a one-sided picture at a hearing on shale-gas taxes
By Lee Branstetter, Nathaniel Horner, Granger Morgan, Ed Rubin and Parth Vaishnav of CMU
July 19, 2015
This article was written by Carnegie Mellon University's Lee Branstetter, a professor of economics and public policy; Nathaniel Horner, a doctoral candidate in the Department of Engineering and Public Policy; Granger Morgan, the Hamerschlag University Professor of Engineering and founding director of the Scott Institute for Energy Innovation; Ed Rubin, the Alumni Chair Professor of Environmental Engineering and Science; and Parth Vaishnav, a post-doctoral fellow in the Department of Engineering and Public Policy.
Thaddeus Stevens is spinning in his grave.
The venerable Pennsylvania Republican, portrayed so vividly in the movie “Lincoln” by Tommy Lee Jones, was a man ahead of his time. He helped establish tax-financed public education in our commonwealth — a massive expansion of government at a time when many believed government had no obligation to educate its citizenry.
Mr. Stevens’ stern visage still looks down on our legislators in Harrisburg, where a party bearing the name Republican holds a solid majority. But he can’t be happy with what he sees these days.
Back on June 1, state Sens. John Eichelberger, R-Blair, and Gene Yaw, R-Lycoming, conducted a hearing on Gov. Tom Wolf’s severance-tax proposal, which would impose a tax on the revenues of shale drillers in Pennsylvania. At a time when the state’s finances are in perilous shape and public education is still reeling from savage cuts instituted by our former governor in 2011, this is a matter of vital importance.
You might expect that our leaders would seek the input of authentic experts who could offer dispassionate, objective analysis of the issues. There are plenty of them in Pennsylvania’s great universities. Sadly, none was invited to Harrisburg, despite the efforts of members of the Democratic minority to secure their inclusion. Instead, Messrs. Eichelberger and Yaw primarily sought the advice and counsel of shale-gas and business-association lobbyists who are paid to protect their members’ bottom lines, not to worry about what is best for Pennsylvania. And that one hearing is the only one the Senate has conducted this summer.
To its credit, the Eichelberger-Yaw committee did call upon the state’s Independent Fiscal Office to offer its analysis of the governor’s tax proposal. Using the dispassionate, facts-based analysis of the kind that has made the IFO such a valuable resource in Harrisburg, IFO director Matthew Knittel projected that the severance tax would bring in vast amounts of revenue — as much as $1.86 billion per year by 2020 — while the gas industry in Pennsylvania would continue its robust expansion. The sky would not fall, the industry would not leave, the golden goose would not be cooked. No one in the room offered a serious challenge to the IFO’s methodology or conclusions.
But then the “hearing” went on as if this serious analysis had never been heard. Four of the next six witnesses were paid industry lobbyists, and the sixth witness hailed from the Commonwealth Foundation, whose “research” is bought and paid for by conservative political interests.
These witnesses insisted that any severance tax would lead the shale-gas industry to abandon our state. To shore up their wobbly case, the lobbyists painted a dire picture of an industry in financial crisis that, as Sen. Art Haywood, D-Cheltenham, pointed out, directly contradicts the bullish outlook our shale-gas industry presents to Wall Street.
We understand that the committee would want to give the shale-gas industry a chance to comment on the governor’s tax proposal, but asking its representatives about the impact of a severance tax is like asking fourth-graders whether they want more homework or not.
In the face of popular support for a severance tax, Marcellus Shale Coalition president David Spigelmyer cited the results of a poll that offered Pennsylvanians a false and dishonest choice: Would they support a severance tax if it resulted in job losses? This is dishonest because analysis by academic as well as respected industry researchers — including our own analysis — shows that a well-designed severance tax would have very little effect on the industry’s rate of return on investment and therefore on its incentives to keep operations and jobs in Pennsylvania.
Cuts in state funding for education have already resulted in job losses — in our schools. The hearing reached a moral low point when Mr. Spigelmyer accused severance-tax advocates of “exploiting children.” National media coverage of the disgraceful collapse of public education in Philadelphia — a collapse triggered by draconian state budget cuts — bears witness to the losses we can never undo. Thousands of children across the commonwealth have had their education shortchanged by the previous administration’s choice to prioritize driller profits over our children’s future.
Fortunately, many Republicans in Harrisburg do recognize the moral obligation we bear to provide for the education of our children and the degree to which our state’s fossil-energy reserves provide us with the means to do so. The spirit of Thaddeus Stevens lives on in Republicans such as Kate Harper of Montgomery County, Tom McGarrigle of Delaware County, Robert Tomlinson of Bucks County and Gene DiGirolamo of Bucks County, all of whom have sponsored bills calling for a severance tax in 2015.
Many other Republicans in the House and Senate have co-sponsored severance-tax bills. In fact, the entire Southeastern Republican delegation in the Senate has signed on to some kind of severance tax in recent months, showing that a bipartisan coalition supports this commonsense proposal.
Of course, there is disagreement about the details — we can and should have a legitimate debate to resolve them, and Mr. Wolf has signaled an openness to compromise. But we cannot afford to do any longer what Mr. Wolf’s predecessor did — give the fossil-energy industry veto power over a severance tax. Let us start putting this resource to work for our children and their future, as every other major fossil-energy producing state has done. We do not have more time to waste.
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