Last week, lawmakers in the PA House and Senate wrapped up the third and final week of appropriations hearings, continuing their review of Governor Josh Shapiro’s proposed $51.5 billion spending plan for the 2025-2026 fiscal year.

With a focus on fiscal sustainability and spending priorities, lawmakers pressed state departments on key issues including rising program costs, workforce shortages, and the long-term viability of current state programs.

Committee lawmakers heard testimony from several state agencies last week, including:

 

• Governor’s Budget Office
• Office of the Treasurer
• Department of Insurance
• Department of Human Services

 

Below are some relevant highlights for the business community:

 

• Governor’s Budget Office: Lawmakers pressed Budget Secretary Uri Monson on the state’s growing structural deficit, questioning how proposed spending increases would be sustained without tax hikes. Concerns were raised about the administration’s reliance on overly optimistic revenue projections, which differ significantly from estimates by the Independent Fiscal Office. Lawmakers also sparred with the administration over its calls for (and characterization of) unitary combined reporting, which the PA Chamber opposes, as well as the projected revenue from legalizing recreational marijuana and taxing skill games.

 

• Office of the Treasurer: Lawmakers praised Treasurer Stacy Garrity for managing state finances and asked questions on the long-term impact of the governor’s $51.5 billion proposed budget. She highlighted a projected $3.5 billion deficit this year, growing to $6 billion next year, which could drain the General Fund by 2026. Lawmakers raised concerns over the potential for a “fiscal cliff” by 2028. Garrity also discussed ongoing efforts to improve the 529 and Keystone retirement plans, which stalled in the Senate last year. Despite a strong cash balance, she warned of tough fiscal choices ahead.

 

• Department of Insurance: Lawmakers voiced concerns about rising health and workers’ compensation insurance costs for employers. Key topics included potential federal action on health insurance and its impact on Pennie, the state’s health exchange. Pennie could lose 150,000 enrollees if federal tax credits expire at year’s end. Insurance Commissioner Michael Humphreys discussed consumer protections under Act 146, which helps overturn claim denials, and the implementation of the Pharmacy Benefits Manager law, Act 77, to regulate middlemen. The department is also addressing auto and flood insurance.

 

• Department of Human Services: Lawmakers questioned the proposed $2 billion increase in DHS funding and criticized the sustainability of Medicaid spending, particularly the $1.2 billion for GLP-1 medications like Ozempic for weight loss. Other issues like the Medicaid waiver for able-bodied individuals without dependents, potential federal funding cuts, and the cost of rural hospital closures were discussed. Other topics included funding for child welfare services and inefficiencies in maternal health programs. Lawmakers also questioned the cost of DEI and anti-discrimination training for DHS employees.

 

With the appropriations hearings complete, lawmakers are now tasked with reviewing the testimony and preparing for further negotiations on the state budget. While the Pennsylvania Constitution mandates an agreement by June 30, recent years have seen the budget process extend beyond this deadline.