‘Fracking tax’ in play in Pennsylvania governor race

Pennsylvania Republican Governor Tom Corbett’s reelection campaign is being fought, and lost, over the issue of public education. Corbett has consistently trailed his Democratic opponent by double digits in polls where voters have repeatedly identified education as their number one electoral priority.

Tom Wolf, the Democrat, is running against the deep cuts Corbett made to state support for schools, which resulted in the loss of at least 23,000 education jobs and local property tax hikes statewide. In June, the Pennsylvania Association of School Administrators found that three-fourths of the surveyed school districts expected further tax increases this year. In response, Wolf promises to wrest desperately needed revenue from the state’s booming natural gas industry.

Corbett’s austerity measures were particularly painful because Pennsylvania’s funding for education is unusually stingy. A 2013 Education Law Center report [PDF] found that the state only covers 35.8 percent of school funding, leaving the great majority of the responsibility to local jurisdictions. This arrangement exacerbates disparities between predominantly lower income school districts and their already advantaged wealthy neighbors. Similar inequalities mar education funding across America, but only nine states offer less support than Pennsylvania, which falls almost ten percent below the national average in school assistance.

Wolf promises to not only reverse Corbett’s education cuts, but bring the state’s contribution up to 50 percent with what the candidate says would be a predictable and fair funding formula that takes into account differing financial capacities of the districts. (The details of Wolf’s promised policy are not yet clear.) But if he wins, Wolf will not be the first to pursue such a course.

Since the 1960s, Pennsylvania politicians have repeatedly expressed support for such generosity, but only in 1975 and 1976 did the State fulfill that commitment. Corbett’s predecessor, Democrat Ed Rendell, established a framework to analyze the individual needs of the state’s hundreds of school districts, the costs of providing for them, and a payment structure that took both considerations into account — but Corbett’s administration abandoned the policy.

Wolf’s campaign promise is dependent upon a huge pot of untapped revenue, which could be found in the gas wells of the Marcellus Shale. Pennsylvania is the only state with an active natural gas extraction operation that does not tax the actual product (although impact fees  are assessed on the wells to mitigate the costs incurred by local communities). In the first half of 2014, according to the Pittsburgh Tribune-Review, $9.6 billion of gas was extracted from Pennsylvania wells; judging by those numbers, it is estimated that a 5 percent severance tax (which is assessed on the removal of non-renewable resources) could bring in over $1 billion in revenue — roughly the equivalent of what Corbett cut from education aid.

Although Wolf is likely to face Republican majorities in the legislature, State Senate Majority Leader Dominic Pileggi recently told a gathering of businesspeople that a severance tax on natural gas is inevitable next year.

“I think a severance tax will happen and go a long way towards restoring education funding,” says Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, which has argued for taxing natural gas to support education. But a severance tax alone is seen as unlikely to get Pennsylvania to 50 percent state funding. “It’s a very positive start, but it’s probably not going to be enough to get us back to where we need to be.”

Wolf proposes making up the rest of the shortfall with the ever-popular promise to close corporate tax loopholes, but state GOP lawmakers are unlikely to consider what they see as a tax hike on business. All of which means Wolf, should he succeed in winning the governorship and pushing through a severance tax, will still have his work cut out for him. Bringing Pennsylvania’s school funding up to national norms could prove an education for the Keystone State’s new chief.