While neither the House nor the Senate was in session last week, budget negotiations reportedly continued among top officials behind closed doors. The timeline for reaching an agreement remains uncertain.
Late budgets have become standard in Harrisburg. With this year’s missed deadline, the past four (and 14 of the last 21) state budgets have come after June 30. While there is no immediate government shutdown or disruption in state services, prolonged impasses can have ripple effects for public entities that rely on state funding to operate.
The Pennsylvania State System of Higher Education (PASSHE) board voted earlier this month to raise tuition for the first time in seven years, citing delays in state funding. PASSHE Chancellor Christopher Fiorentino said the $139-per-semester hike would be reversed if PASSHE’s requested 6.5 percent increase is included in the final agreement.
School districts across the Commonwealth are also watching closely. Reserve funds vary widely, and some districts may be forced to borrow money or dip into savings to cover basic operations like payroll and utilities.
If a budget deal is not reached by July 31, the state Department of Education will miss payments for special education and community colleges. And if the impasse drags past August 28, larger disbursements — such as funding for basic K-12 education — will also be delayed.
Pennsylvania’s two largest transit systems are also bracing themselves: SEPTA and Pittsburgh Regional Transit have both approved budgets that would require service cuts if additional state support does not materialize.
The most significant challenge to reaching a deal appears to be disagreement over the total spending number; Gov. Josh Shapiro’s $51.5 billion proposal is $3.9 billion higher than last year’s enacted budget.
House Democrats have backed key elements of the governor’s proposal, namely significant increased spending on public schools and more money for public transit.
Republicans have called the governor’s spending proposal unsustainable and expressed concern over using one-time revenues to support recurring spending. Shapiro’s plan calls for a $1.6 billion transfer from the state’s Rainy Day Fund and proposes two controversial new revenue streams: legalizing and taxing recreational marijuana and imposing a new tax on skill games.
Neither of these ideas has gained consensus in the legislature, and Senate Appropriations Chair Scott Martin recently said marijuana legalization will not be part of this year’s final agreement.
The PA Chamber continues to advocate for growth-oriented policies that strengthen the Commonwealth’s long-term economic competitiveness. Recent bipartisan improvements have expanded Pennsylvania’s corporate tax base by hundreds of millions of dollars. In response to these pro-growth changes, corporate tax collections have surged in Pennsylvania, up 92 percent in the past five years.
We believe the solution to Pennsylvania’s revenue challenges is attracting more taxpayers — businesses and individuals — by advancing reforms that make the Commonwealth a more competitive and appealing place to live, work, and invest.
As negotiations continue, the PA Chamber will continue to engage with leaders in both parties and the governor’s office to promote policies that support economic growth and responsible budgeting.