(File Photo: Source for Photo: Pennsylvania Gov. Josh Shapiro delivers his budget address for the 2025-26 fiscal year to a joint session of the state House and Senate at the Capitol, Tuesday, Feb. 4, 2025, in Harrisburg, Pa. (AP Photo/Matt Rourke)
HARRISBURG, Pa. (AP) — Pennsylvania Gov. Josh Shapiro will seek more money for underfunded public schools and public transit in his budget proposal unveiled Tuesday, while he hopes to win support for legalizing marijuana and introducing taxes on skill games viewed as competitors to casinos and lottery contests.
The Democrat — a rising star in the party who is seen as a potential 2028 White House contender — 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 in which he touted his efforts to help Pennsylvania’s economy compete with other states. He urged lawmakers to be willing to invest the state’s surplus cash.
“Pennsylvania is on the rise and we are not gonna stop,” Shapiro said during a 90-minute speech to lawmakers. “You see, we have the resources we need to make smart investments now and to maintain a responsible balance in reserve.”
Anything that passes will have to get through a divided Legislature, with the House controlled by Democrats and the Senate by Republicans. The plan drew applause from Democrats — House Speaker Joanna McClinton, D-Philadelphia, called it a “bold plan from a visionary” — but the scale of the spending increase faces strong resistance from Republicans who say it’ll drive Pennsylvania into a fiscal ditch that will eventually require tax increases.
Shapiro’s spending plan breaks $50 billion for the first time
Shapiro’s proposal tops $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.
Shapiro’s hands are tied to a great extent, bound by a huge increase in costs for the medical and long-term care for the poor, as well as a slow-growing economy and a shrinking workforce that is delivering relatively meager gains in tax collections.
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, more than $2 billion would go to toward human services, primarily to meet the rising cost of medical care for the poor, and an extra $800 million would go toward K-12 schools and higher education institutions, including Penn State, Temple, Pitt and state-owned system schools.
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 plan needs surplus cash and new sources of money to balance
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 increasingly cropping up in bars, pizzerias, convenience stores and standalone parlors.
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 were also hoping for substantial increases in aid that they didn’t get.
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.
Shapiro wants lawmakers to approve the tax credits to fast-track the construction of big power plants in Pennsylvania amid an energy crunch that threatens to raise electricity bills across Pennsylvania, the nation’s second-biggest natural gas-producing state.
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.
The union that represents prison staff, the Pennsylvania State Corrections Officers Association, swiftly said that it will fight the closures, saying closing two prisons will endanger officers and inmates.
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. Republicans suggested that Shapiro’s plan ignored the reality of fast-widening deficits and lacked good ideas to improve the state’s sluggish economy.
“When you have to govern, you have to make hard decisions,” Senate Majority Leader Joe Pittman, R-Indiana, said in a news conference.
House Appropriations Chairman Jordan Harris, D-Philadelphia, said that if Republicans don’t want to use the state’s surplus then they should explain what they’ll cut.
“Ask them who they’re willing to turn away, ask them who they’re willing to turn down, ask them which of the most vulnerable Pennsylvanians don’t deserve this medicine,” Harris told reporters.
