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Government Outreach -July 19, 2023

Government Affairs & General Updates
July 19, 2023


1. Pa. House brings severance tax idea back around, raising an old debate in the nation’s 2nd-largest gas producer - There’s talk of a severance tax on natural gas in Harrisburg again. The state House passed a resolution directing a nonpartisan committee to study severance tax structures in other major gas-producing states. Some advocates see the recent legislation as a chance to reset the debate. Pennsylvania is the country’s second-largest gas producer, behind Texas. When the fracking boom started in the commonwealth over a decade ago, some argued a severance tax–which would charge producers based on how much gas they take from the ground–would hurt the fledgling industry or send it out of the state. Instead, Pennsylvania levies an impact fee, which charges drillers for each hole put in the ground. The fee has raised $2.5 billion since it was created in 2012. Much of that goes to counties where the most drilling takes place, to use for things such as infrastructure upgrades and public safety. Former Democratic Gov. Tom Wolf proposed a severance tax in each of his eight years in office–to staunch opposition from Republican lawmakers. In his first proposal in 2015, Wolf claimed a severance tax could raise $1 billion each year, which he hoped to put toward education. He later said the initial figure was not realistic. Gov. Josh Shapiro did not propose a severance tax during his campaign or in his first budget plan. His office did not respond when asked if he would support a severance tax. The oil and gas industry has strongly pushed back on any attempt at a severance tax and have argued the impact fee essentially is a tax that goes directly to communities affected by drilling. “Once again, Pennsylvania appears to be examining whether to impose additional taxes on the natural gas industry,” said Stephanie Catarino Wissman, executive director of the American Petroleum Institute Pennsylvania after the House resolution passed. “At a time when we need more energy, the focus should be on policies that enhance our state’s economic competitiveness and create a climate that attracts additional investment, not discourage it.” Read More


2. Gambling revenue broke records in 2022-23, driven by continued growth in online gambling. Last year was a record-breaker in terms of gambling revenue and tax dollars generated by it, the Pennsylvania Gaming Control Board announced Tuesday. Tax revenue from casino and online gambling hit almost $2.37 billion in 2022-23 while overall revenue topped $5.5 billion. Both topped the previous records set in 2021-22. The increase was largely driven by increased online gambling - iGaming revenue increase by $300 million in 2022-23 over 2021-22 (a 24% increase). The positive overall results came despite the fact that seven of the 17 casinos generated less retail slots revenue than they did in 2021-22. Overall in-person slots revenue was up just 1.74%. Revenue from in-person table games was down just over 4% overall with 11 casinos generating less table game revenue than they did in 2021-22.


3. Lawmakers punted 911 reauthorization to the fall when they left Capitol for the summer. Any legislative action on increasing the state surcharge for the 911 emergency call system is off until the fall session, thus creating a short window to resolve a funding issue before the county-run system faces a major deadline. The state law authorizing the 911 system and establishing the current 911 surcharge sunsets on Jan. 31, 2024. This law establishing a $1.65 per month surcharge on wireless devices was enacted in 2015 and reauthorized in 2019. Failure to reauthorize by the end of January would have a number of consequences, according to the County Commissioners Association of Pennsylvania (CCAP). "If the statute sunsets without reauthorization, that means there would no longer be authority to levy the surcharge that supports 911 systems," said CCAP spokesman John Buffone. "And that would mean that if counties were going to keep their 911 systems running, they would have to figure out how to backfill more than $300 million annually in lost revenues." 


4. House Republican proposes performance metrics for determining state-related university funding. The House Minority Chairman of the Education Committee has introduced legislation that would set performance measures for determining how much each state-related university should receive in state funding. The state-related funding requires approval of a super-majority - meaning at least some House Republicans must join Democrats in supporting it. Like the budget and related code bills, the state-related funding has been tied up by the partisan impasse in the General Assembly. House Republican have balked at supporting the state-related funding because they say reforms they want tied to the funding have not been included. House Democrats have countered that House Republicans could have enacted reforms when they had the majority in the chamber last session. Under House Bill 1574, beginning in 2024-25, the state-related funding calculation would take into account such factors as: the four-year graduation rate; the percentage of students of who receive Pell Grants; student retention rates; the Baccalaureate degree production per 100 full-time students; net tuition and fees; post-graduation employment rates and wage rates; the number of students enrolled in programs for agriculture, science, technology, engineering and math; and the number of high school students who are dual-enrolled. The legislation is prime sponsored by Rep. Jesse Topper, R-Bedford.


5. Pa. Supreme Court to consider insurance coverage for COVID-19 business losses The fight over COVID pandemic mitigation efforts aren’t over even if almost all of those mitigation efforts have been fading in the rearview mirror. The state Supreme Court last week announced it will take up the appeals from disputes between a tavern owner and a dentist and their insurance companies over whether the businesses’ insurance policies should have covered some of the financial losses they suffered during pandemic business shutdowns. The court’s move comes after the Superior Court handed down – on the same day – different opinions in cases that sound identical. In the tavern’s case, Allegheny County Common Pleas Court had originally sided with the tavern owner, but the Superior Court overturned that decision. The Superior Court ruled in favor of the insurance company, concluding that because the pandemic mitigation measures didn’t cause physical damage to the tavern, the losses weren’t covered. In the dentist’s case, both Allegheny and the Superior Court sided with the dentist. The divergence seems to have been due to differences in the businesses’ insurance policies. Read More

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