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ICYMI: PA Chamber Op-Ed Highlights Pro-Business Budget Wins

In case you missed it … Broad + Liberty today published a new op-ed from PA Chamber President and CEO Luke Bernstein outlining the several significant pro-business changes included in Pennsylvania’s 2024-25 state budget and recognizing state leaders (including Senate President Pro Tempore Kim Ward, Senate Majority Leader Joe Pittman, and Governor Josh Shapiro) for their efforts in securing these important wins.

In the op-ed, Bernstein details key pro-growth reforms, including the elimination of Pennsylvania’s Start-Up Tax, the continued phasedown of the Corporate Net Income Tax, and the launch of the SPEED Program to streamline the state’s permitting processes. These reforms are poised to make Pennsylvania more competitive, attract new businesses, and drive economic growth. Bernstein also emphasizes the budget’s investments in workforce development, including funding for career and technical education and incentives for childcare expense reimbursement.

Full text of the op-ed is available here.

2025-26 State Budget Rundown

On November 12th, the PA House and Senate took a series of votes to finalize the budget for the 2025-26 fiscal year, following an impasse that lasted over four months past the June 30th deadline.

Total Spend

  • Total General Fund spending of $50.1 billion for Fiscal Year 2025-26, representing a 6 percent increase in state spending over last year.
  • Spends $1.4 billion less than what Gov. Shapiro proposed in February. 
  • Relies on $670 million of yet-identified one-time transfers from other special funds and accounts along with a one-time transfer of $100 million from the Joint Underwriters Association (JUA) to balance.
  • Leaves the General Fund with a $200 million projected remaining balance at the end of the fiscal year.
  • Does not take any money from the Rainy Day Fund, which currently has a balance of $7.5 billion.

Tax Changes

  • Maintains the current phase-down schedule of the Corporate Net Income Tax (CNI), from 7.99 percent to 7.49 percent in 2026.  The rate remains on track to be reduced from 9.99 percent down to 4.99 percent by 2031.
  • Maintains the improvements to Pennsylvania’s treatment of Net Operating Losses moving forward which was enacted as part of last year’s budget. Current law gradually increases the amount companies are able to deduct using losses incurred after Jan. 1, 2025, from the previous cap of 40 percent up to 80 percent in 2029. Net Operating Losses incurred prior to Jan. 1, 2025 may still be used to offset tax liabilities by up to 40 percent.
  • Decouples from pro-growth tax provisions that were enacted by Congress earlier this year for state Corporate Net Income Tax (CNIT) purposes.  Specifically, Pennsylvania’s tax code will now not follow federal law in the following ways:
    • Immediate expensing of research and experimentation (R&E) expenditures. Companies will be required to continue to amortize R&E expenditures over 5 years.
    • Immediate expensing of qualified production property.
    • The deduction for business interest expenses to include depreciation and amortization.
  • Extends the sunset of the $1.95 9-1-1 surcharge on phone lines to February 1, 2029.

Permitting Reform

  • Enacts historic permitting reform by requiring that particular permits be “deemed approved” if the agency fails to issue a decision within a specific timeframe.
  • Requires all Air Quality Permits to be “deemed approved” within 30 days of submission of the application but allows for an additional five days for the applicant and the department to work through any deficiencies. A decision on an application must be made no later than 35 days from submission, or the permit is deemed approved. Only applies to applications for coverage under general plan approvals/permits
  • Requires specific renewals of National Pollutant Discharge Elimination System (NPDES) general permits to be “deemed approved” within 60 days of submission, unless the department has received prior agreement from the applicant to extend the review time period. These permits include:
    • Discharges of storm water associated with construction activities:
    • Discharges from small-flow treatment facilities;
    • Discharges from petroleum products contaminated groundwater remediation systems; and
    • Wet weather overflow discharges from combined sewer systems.
  • Expands the Streamlining Permits for Economic Expansion and Development (SPEED) program, which was passed as part of last year’s budget and allows applicants for a number of DEP permits to engage a private third-party to conduct the technical review of the permit application in order to expedite the process.  The 2025-26 budget agreement expands SPEED by adding three additional permits to the program:
    • Storage Tank Site Specific installation;
    • Short-term construction mining general permit;
    • Concentrated Animal Feeding Operation.
  • Reforms SPEED to provide DEP with flexibility to register more third-party reviewers.
  • Adds significant transparency and accountability to state permitting systems by requiring state agencies to maintain a permit tracking system so applicants can easily assess the status of their permit application in real time.
  • Agencies are also required to make available on a publicly accessible website the following information:
    • The program under which each permit is issued;
    • The statutory and regulatory authority for each permit;
    • The time frame when the state agency must issue each permit; and
    • The average time frame within which each permit is issued.

Regional Greenhouse Gas Initiative (RGGI)

  • Removes Pennsylvania from the Regional Greenhouse Gas Initiative (RGGI), a multi-state compact which imposes higher energy costs on consumers and has been caught up in litigation since former Gov. Wolf attempted to enter Pennsylvania through executive order in 2019. The threat posed by RGGI has discouraged development of energy generation projects and removing Pennsylvania represents a significant policy and economic win for the Commonwealth.

K-12 Education

  • Adds $872 million in new K-12 public education funding. This includes:
    • $105 million increase in Basic Education Funding;
    • $40 million increase in special education spending; and
    • $562 million increase in the adequacy line through the Ready-to-Learn Block Grant.
  • Eliminates the $100 million in cyber charter transition reimbursement and makes additional cuts to the formula rate.
  • Increases the allocation for the Educational Improvement Tax Credit by $50 million, from $540 million to $590 million, with the entire increase directed to scholarships for students attending economically disadvantaged schools.
  • Enacts new early literacy requirements in all schools beginning in the 2027-2028 school year to screen K-3 students for reading competency three times per year using a universal screener: ensuring early identification, intervention, and parental engagement to support student reading success
  • No increase in funding for Career & Technical Education.
  • Allows individuals with a superintendent’s letter of eligibility to serve as a CTE director if they meet certain experience or education requirements.

Higher Education

  • Does not provide a funding increase for Community Colleges, Pitt, and Penn State.
  • $57.5 million between 24/25 and 25/26 for the Grow PA Tuition Waiver, previously named the Grow PA Scholarship program.
  • Provides a 3 percent increase in PHEAA Grants for Students
  • 5 percent increase for Thaddeus Stevens, Pennsylvania College of Technology, and Lincoln University. 1 percent increase to the State System of Higher Education.

Workforce

  • Provides $25 million for Child Care Worker Retention and Recruitment.
  • Establishes the Working Pennsylvania Tax Credit which is equal to 10 percent of the Federal Earned Income Tax Credit, which targets lower-income working families and may encourage more Pennsylvanians to enter the workforce.
  • Creates a new $10 million Affordable Housing Tax Credit Program to be administered by the Pennsylvania Housing Finance Agency (PHFA).

PA Chamber Issues Statement on 2024-25 State Budget Agreement

HARRISBURG – Today, Pennsylvania Chamber of Business and Industry President and CEO Luke Bernstein made the following statement on the passage of the 2024-25 state budget:

“On behalf of Pennsylvania’s business community, the PA Chamber thanks the General Assembly and Gov. Shapiro for passing a budget that takes important steps to make Pennsylvania more competitive. This budget includes several key legislative priorities that the PA Chamber has long championed, including eliminating Pennsylvania’s Startup Tax by raising the cap on net operating losses, modernizing our permitting processes, and advancing workforce initiatives. These provisions will help attract new economic opportunities, expedite project approvals so that businesses can grow and create jobs, help employers address workforce challenges, and equip Pennsylvanians with the skills needed for the future.”

Pennsylvania’s 2024-25 state budget addresses several of the statewide business community’s top priorities:

Permitting Reform

The budget includes significant improvements to state permitting processes that will reduce delays in development and business expansion projects. The reforms include allowing employers to work with third-party professionals to help facilitate the review of applications for many key permits, establishing timeframes for responses, and measures for easier and more transparent tracking of permit applications. These reforms will streamline the permitting process, further encouraging investment and job creation, and help ensure that the newly authorized funding for the PA Strategic Investments to Enhance Sites (SITES) Program is successful in preparing business sites for development.

The PA Chamber has worked closely with state legislators, particularly state Sen. Kristin Phillips Hill (R-York), who has advocated for permitting reform for many years, as well as Sen. Lisa Boscola (D-Lehigh), Rep. Martina White (R-Philadelphia), Senate leaders Kim Ward (R-Westmoreland) and Joe Pittman (R-Indiana), Gov. Shapiro, industry leaders, building trades, and other advocates to advance many of the bipartisan permitting reforms included in this budget.

Tax Reform

This budget gradually eliminates Pennsylvania’s Startup Tax by prospectively improving the tax treatment of net operating losses (NOLs), which allows businesses to carry losses forward and deduct them against future profits to reduce their tax liability so they can reinvest in their business and people. This change will ultimately align Pennsylvania with the federal standard and the rest of the country. As a result of this change, Pennsylvania will be a more attractive destination for new and growing businesses.

The PA Chamber has made improving the treatment of NOLs a top priority, working closely with Sen. Greg Rothman (R-Cumberland) and Senate leaders Ward, Pittman, and Scott Martin (R-Lancaster), as well as a bipartisan group of allies that also includes Sen. Ryan Aument (R-Lancaster), Sen. Nick Miller (D-Lehigh), Rep. Paul Friel (D-Chester) and Rep. Josh Kail (R-Beaver). We look forward to continuing this work with lawmakers, including efforts to improve the treatment of existing NOLs for Pennsylvania businesses that invested in the Commonwealth despite a challenging tax climate. The budget also continues the phasedown of the Corporate Net Income Tax, which will be further reduced from the current 8.49 percent rate to 7.99 percent in 2025.

Workforce Development

The budget also advances initiatives to build a skilled workforce. Initiatives include increasing the Commonwealth’s investment in career and technical education (CTE) and making it easier for qualified individuals to become CTE educators; incentivizing employers to reimburse employees for childcare expenses; creating scholarships for students who choose to enter in-demand fields; increasing the Pennsylvania Housing Affordability and Rehabilitation Enhancement (PHARE) fund to expand the availability of workforce housing in Pennsylvania; and increasing transportation funding to help Pennsylvanians get to work.

What’s in the Fiscal Code Bills?

When the Pennsylvania Senate reconvened on Aug. 30, Senators passed two separate fiscal code bills designed to advance the budget process and drive out the approximately $1.1 billion in state funding that still awaits authorization after Gov. Josh Shapiro signed the main state budget earlier that month.

The larger of these two bills, House Bill 1300, designates funding for a wide array of state programs. It authorizes certain fund transfers and directs support for education, healthcare, and emergency services.

House Bill 1300 provides $295 million in Ready-to-Learn Block Grants for school districts across Pennsylvania, which supporters are calling a crucial step toward supporting quality education and empowering innovation at the local level. The bill also designates $261 million in state aid for community colleges, a two percent increase over last year’s funding levels.

Moreover, House Bill 1300 extends $65.4 million in funding to the Pennsylvania State System of Higher Education (PASSHE) for early repayments on existing debt associated with campus buildings at the Penn West trio in California, Clarion, and Edinboro. The bill also ties state aid for PASSHE to a tuition freeze for academic years 2032-24 and 2024-25, aiming to alleviate the financial burden on students and promote access to higher education.

Additional educational allocations include $70 million in state aid for libraries; $14.5 million in funding for career and technical programs; and $11 million in grants for school safety initiatives in non-public schools. The bill also empowers the Pennsylvania Department of Education to direct up to $7 million in undistributed funds toward school districts under financial distress.

House Bill 1300 also makes notable investments in health and public safety. The bill designates $20 million for counties to support mental health services and increases the state trooper complement by around 400 troopers, up to 4,410, to bolster law enforcement capabilities.

Furthermore, the legislation helps ensure fair compensation for first responders by adjusting state reimbursement rates to the greater of Medicare or Medicaid rates. House Bill 1300 also provides certainty to nursing care facilities by requiring the Department of Human Services to base each facility’s case mix rate on the data used to determine rates for Fiscal Year 2022-23.

Other provisions include the redirection of $150 million from the Game Fund, created by oil and gas drilling rent and royalty payments on state game lands, to the Clean Streams Fund. The bill also raises the payment in lieu of taxes which several state agencies make to rural municipalities to $2.40 per acre and transfers $31 million from the Medical Marijuana Program Fund to the General Fund, reallocating resources to support broader state initiatives.

The other bill the Senate passed on Aug. 30, Senate Bill 757, focuses on two majority caucus priorities excluded from Gov. Shapiro’s enacted budget: the creation of the Pennsylvania Award for Student Success (PASS) scholarship program and an expansion of the Educational Investment Tax Credit (EITC).

Several priority issues Democrats raised in budget talks – including $100 million in supplemental funds for the state’s 100 poorest schools, $10 million in stipends for student teachers, $100 million for school mental health services, and $175 million for the Whole-Home Repairs program – received no allocation under either bill. It is likely these programs will remain a focal point when the House returns to session.

2023-24 State Budget Rundown

On July 5th, the PA House voted to concur on a state budget bill the Senate passed the week before. The House vote came after Gov. Shapiro released a statement vowing to line-item veto a $100 million educational scholarship program negotiated by Senate Republicans and his administration.

As of this writing, however, the path to a finalized budget agreement remains unclear:

  • The budget bill cannot be sent to the Governor for his approval until it is signed in the Senate, which isn’t scheduled to return to session until Sept. 18;
  • The House and Senate must still reach an agreement on various code bills that are passed in conjunction with the budget and dictate how funding is allocated;
  • Additionally, other budget-related bills, like funding for Pitt, Penn State, Lincoln, and Temple remain unresolved.

Below, find key highlights from the budget bill and elements important to the business community:

Total Spend

  • Total General Fund spending of $45.5 billion for Fiscal Year 2023-24, representing a 6 percent increase in state spending over last year.
  • Spends nearly $400 million less than what Gov. Shapiro proposed in March, and $1.5 billion less than what the House passed in early June.
  • Makes a $500 million deposit into the Rainy-Day Fund, bringing the fund to over $5.6 billion.

Tax Changes

  • Maintains the current phase-down schedule of the Corporate Net Income Tax (CNI), from 8.99 percent to 8.49 percent in 2024.
  • The Department of Revenue will receive an increase of more than $17 million for Technology and Process Modernization to complete system upgrades.
  • Expands eligibility and maximum rebates under the Property Tax Rent Rebate Program for seniors and persons with disabilities.

Education Funding

  • Adds roughly $800 million in new K-12 public education funding. This includes:
    • $567 million more for basic education subsidies.
    • $100 million more for “Level Up” supplements for low-income school districts.
    • $50 million more for special education
  • Includes $125 million for school safety grants and $100 million for student mental health.
  • As previously noted, the budget as passed by the Senate contained $100 million for Pennsylvania Awards for Student Success (PASS) scholarships – providing students in the lowest 15 percent performing schools with financial assistance to attend a private or parochial school. Gov. Shapiro reversed course and announced his intention to line-item veto this funding.
  • Senate Republicans say the budget also includes a $150 million increase for the Education Improvement Tax Credit (EITC), however this will need to be enacted in subsequent legislation.

Infrastructure

  • Continues the phase-out of State Police funding from the Motor License Fund with a goal to fully phase down by 2026-27. The reduction this year will be $125 million.
  • Provides $1.7 million within the Department of Environmental Protection (DEP) to support improvements to the permitting process.
  • Allocates $112 million in royalties from oil and gas drilling on state game lands for State Park and Forest Infrastructure Projects, double the amount that was allocated last year.

Workforce

  • Increases the Department of State’s operating budget by $3.2 million, which includes funding for occupational boards dedicating funds to licensure system modernization and upgrades.
  • A nearly 50 percent increase in Child Care Services to help low-income families afford childcare.
  • Includes increases for existing workforce development programs, including a $14 million, or 13.3 percent, increase for career and technical education and a $3 million increase to the apprenticeship training program through the Department of Labor and Industry (L&I).
  • A $3 million appropriation to the Foundations in Industry program through the Department of Community and Economic Development (DCED) will increase apprenticeship and pre-apprenticeship programs.
  • A $3.5 million appropriation to the Schools-to-Work program through L&I will support partnerships between career and technical education students and employers.

What’s Not In

  • Governor Shapiro had proposed a $15/hour minimum wage, which is not included in the budget.
  • The governor also proposed legalizing recreational marijuana, which is not included either.