PA Senate Budget: EITC increase out, severance tax in

Speaker Mike Turzai called the PA House to Harrisburg on Saturday, July 23 in the hopes of securing enough votes in his party to pass a revenue package to fund the 2017-2018 budget without new recurring revenues.

He failed.

After members of his own party rejected Turzai’s reckless plan, he sent the House home and called on the Senate to propose its own revenue package.

The PA Senate took up this challenge and passed a package on Thursday, July 27th.

It is noteworthy that in the current anti-government, anti-tax environment in Harrisburg, Senate Republican leaders acknowledged that PA does not have a spending problem, but instead has a revenue problem.

Senate Republican leaders refused to support a cuts-only budget or an irresponsible budget that relies exclusively on one-time revenues and borrowing. Instead, they took seriously the government’s responsibility to educate children and to provide critical human services. They raised new revenues in order to fund things that matter to our quality of life and our futures.

This plan is a compromise and a product of our divided government. It is not a plan many will be excited about, but it may be the best we can hope for this year.

PA School Code (HB 178)

  • The Senate eliminated a proposed $20 million increase in funding for PA’s Educational Improvement Tax Credit program. We applaud this action!! Pennsylvanians shouldn’t pay higher taxes or experience cuts in other areas of the budget in order to subsidize more middle class families’ private/religious school tuition bills.
  • The School Code, unfortunately, still contains the teacher layoff bill. Under current law, teachers may only be furloughed if schools consolidate, if student enrollment declines, or if a program is curtailed. This language would make it easier for school districts to furlough more teachers by changing PA law and allowing school districts to use “economic reasons” as an additional reason for cutting positions. It would also eliminate seniority when determining which teachers would lose their jobs.
  • It also delays the implementation of the Keystone Exam graduation requirement until 2019-2020, prohibits lunch shaming in schools, requires schools to provide students in grades 6-12 instruction related to the prevention of opioid abuse, and prohibits teacher preparation programs from requiring students to get a passing score on the Praxis exam in order to graduate.

Key Revenue Proposals in the budget bill (HB 542)

  • PA will borrow $1.2 billion to fill in a hole left in the 2016-2017 budget.
  • A severance tax on natural gas drillers would generate about $80 million in new revenue in addition to the current impact fee. Unfortunately, the rate of this tax is very low and the tax is coupled with looser state permitting and regulatory oversight over the natural gas industry.
  • Reinstating the gross receipts tax on natural gas bills, which was eliminated in 1999, and increasing consumption taxes on electricity and phones would generate nearly $445 million in new revenue.
  • Sales tax remittances on goods purchased from internet companies would generate $43.5 million.
  • Commercial-grade fireworks would be allowed to be sold in PA, taxed at 12% and generate $3 million.
  • A change to the tax appeal process would raise $40 million.

For a deeper dive into the Senate budget deal, click HERE to read an analysis from our allies at the Pennsylvania Budget and Policy Center.

This bill is now in Speaker Turzai’s hands. He and other House Republican leaders will need to decide if they will support this bipartisan compromise or if they will continue to obstruct the budget process and insist on imposing their extreme agenda of cuts and reckless budgeting on Pennsylvanians.


On the federal level, the failure of the US Senate to pass a healthcare bill that would enact cuts to Medicaid means that for now more than $140 million in federal Medicaid reimbursements to PA schools are safe. This is great news for PA students. The thousands and thousands of people who spoke up and showed up made this happen. Your advocacy matters and it works!