Sequester Cuts on Resource Extraction Don't Hit Pa. Hard

By Melissa Daniels | PA Independent

HARRISBURG — The effects of sequestration are starting to show – this time in the form of payments from the federal government for natural resource extraction.

But compared to other states – and other sequester cuts – Pennsylvania is getting off pretty easily.

The U.S. Department of Interior announced this week $110 million will be cut from mineral extraction royalty payments to states, as a result of automatic 5.1 percent across-the-board spending cuts triggered by Congress. In 2012, the payments generated $2.1 billion for states.

The payments are based on how much resource extraction occurs on federal lands. Such activity is sometimes energy related, involving coal and natural gas, but reaches other minerals like copper or cobalt.

Despite Pennsylvania’s leading role in the private resource extraction industry due to natural gas and coal, the feds aren’t in the business here. Last year, Pennsylvania received a little more than $67,000 in federal mineral receipts. The state will lose about $2,741 in payments this year as a result of the cuts.

Jessica Kershaw, press secretary for the Department of Interior, said states were notified of the payment reductions earlier this month, but are just now seeing the dollar figures.

“By law, revenue payments to states are not exempt from the sequester,” she said.

Hardest hit are Wyoming and New Mexico, which will see $53 million and $26 million in cuts, respectively.

After receiving the news, Wyoming’s Gov. Matt Mead began looking into legal ways to block the cuts, the Casper Star-Tribune reported.

The federal government doesn’t set rules for how states can use the mineral payments, meaning the money could be used to fund education, transportation or other budget items.

Jay Pagni, spokesman for the Pennsylvania’s Office of the Budget, said the fiscal effect of sequestration is less than the state originally anticipated.

“We expect about a $220 million hit to reductions in federal funding throughout various programs,” he said. “In the beginning, we thought it was going to be closer to 300 (million).”

Cuts affect 5 to 6 percent of discretionary spending.

Title One funding, which supports language arts studies in schools with low-income students, could be hit by as much as $21 million, Pagni said.

“In terms of the perspective, it is the federal government that’s choosing what is mandatory and what is discretionary in nature,” he said.

Overall, Pennsylvania receives about $21.5 million in federal funding annually, meaning the impending sequestration cuts total about 1 percent of federal dollars coming into the state.

Contact Melissa Daniels at melissa@paindependent.com