Governor Josh Shapiro presents his 2025-26 budget proposal to the Pa. General Assembly, as Speaker Joanna McClinton and Lt. Governor Austin Davis look on. (Photo/pa.gov)
By Marc Levy
ASSOCIATED PRESS
HARRISBURG, Pa. — Pennsylvania Gov. Josh Shapiro will seek more money for underfunded public schools and public transit in his budget proposal unveiled Tuesday, while he is also hoping to win support for legalizing marijuana and introducing taxes on skill games viewed as competitors to casinos and lottery contests.
The Democrat is also seeking more money for universities, offering hundreds of millions of dollars in tax breaks to encourage new power plant construction and relying on billions in surplus cash to balance spending.
To help unveil it, Shapiro delivered a budget speech to a joint session of the General Assembly in the state House of Representatives’ chamber.
Shapiro’s proposal surpasses $50 billion for a state budget in Pennsylvania for the first time, requesting $51.5 billion for the 2025-2026 fiscal year beginning July 1 as Shapiro gears up for his re-election campaign.
However, Shapiro’s hands are tied to a great extent, bound by a huge increase in costs for medical care for the poor, as well as a slow-growing economy and a shrinking workforce that is delivering relatively meager gains in tax collections.
Passage will require approval from Pennsylvania’s Democratic-controlled House and its Republican-controlled Senate.
All told, Shapiro’s spending request would increase total authorized spending by 9% through the state’s main bank account, or about $3.8 billion, including a $230 million supplemental request for the current year’s spending.
Of that, about $2 billion would go toward human services, including medical care for the poor, and another $1 billion would go toward K-12 schools and higher education institutions.
Most of the new education money — $526 million — is viewed as part of a multiyear, multibillion-dollar response to a court decision that found that Pennsylvania’s system of public-school funding violates the constitutional rights of students in the poorest districts.
The budget proposal holds the line on personal income and sales tax rates, the state’s two largest sources of income. But it instead uses about $4.5 billion in reserve cash to balance — the second straight year of multibillion-dollar deficits.
Tax collections are projected to increase by $2.3 billion to $48.3 billion, or 5%, but a large portion of that rests on whether lawmakers will go along with several proposals by Shapiro.
That includes raising almost $1.2 billion from legalizing adult-use marijuana, expanding how the corporate net income tax is applied and introducing taxes on the skill games that are viewed as competitors to casinos and state lottery contests.
Still, lawyers for the schools that sued the state were asking for much more than Shapiro is proposing, while nursing home operators, home care providers and counties that maintain mental health networks would receive far less than what they are seeking in reimbursements.
Elsewhere in the plan, Shapiro is proposing to send nearly $300 million more, or about 20% more, to public transit agencies as he works to stave off cutbacks by the Southeastern Pennsylvania Transportation Authority, the Philadelphia region’s public transit agency struggling to regain ridership lost during the pandemic.
The plan also seeks to shave reimbursements to cyber charter schools, saving nearly $400 million in payments by public schools, and close two state prisons, with the state’s 24 prisons at about 82% capacity.
Shapiro does have a cushion of about $10.5 billion in reserve, thanks to federal COVID-19 relief and inflation-juiced tax collections over the past few years. Shapiro’s proposal would leave about $6.4 billion of that unspent.
This year’s $47.6 billion spending plan required about $3 billion of surplus cash to balance, eliciting warnings from Republicans that the state must slow the pace of spending or risk depleting its surplus within several years.
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