HARRISBURG, Pa. — As Pennsylvania approaches the end of June, Governor Josh Shapiro and the state’s lawmakers are engaging in critical discussions concerning the state budget. With just two weeks left before the new fiscal year begins on July 1, there remains a significant challenge of aligning the Governor’s fiscal plan with legislative approval, especially with the state’s politically divided government.
One key aspect of the debate is the potential legalization of marijuana for adult use, which would make Pennsylvania the 25th state to do so. Additionally, there are discussions around increasing the minimum wage and introducing taxes on “skill” games, which resemble slot machines and are increasingly found in places like bars, convenience stores, and individual parlors.
Governor Shapiro and Democratic lawmakers, who have a majority in the state House of Representatives, have prioritized boosting funds for public education and public transit systems. While Senate Republicans do not oppose these priorities outright, their main concerns include controlling the rising costs associated with Medicaid and regulating the expanding skill games industry.
Shapiro’s fiscal proposal for the 2025-2026 period suggests a $51.5 billion budget, marking a 9% increase in state operations, or an approximate $3.8 billion rise. A significant portion, $2.5 billion, is earmarked for Medicaid, necessitated in part by unanticipated healthcare costs following the COVID-19 pandemic. To navigate this, lawmakers may choose to understate the Medicaid budget temporarily or defer significant reimbursement obligations to providers like hospitals and county health systems.
The Governor’s budget maintains current personal income and sales tax rates but proposes to use $4.5 billion from reserve cash. Projected tax collection is expected to grow by $2.3 billion, yet half of this increase depends on potential revenue from legalized marijuana and changes in corporate tax regulations, as well as the regulation of skill games. The House has already passed a bill allowing marijuana use for those over 21, though Senate Republicans stand in opposition.
On another front, Senate Republicans have backed legislation to tax skill games at a rate of 35% and to limit the number of these machines per establishment. This is causing unease among bar owners and may lead to many currently operating machines being banned.
In response to a court order, Shapiro’s budget proposes an additional $800 million for instructional funding in K-12 schools and higher education, focusing particularly on districts that have been identified as underfunded. This is part of a larger, ongoing solution to address disparities in educational funding as outlined by a recent court decision. Legislation passed by the House aims to further cut costs for public schools by reducing reimbursements to cyber charter schools, though the Senate’s stance on this is uncertain.
Another pressing issue involves human services providers, such as nursing homes and mental health services, which are seeking increased funding absent from Shapiro’s proposition. Notable requests include a 10% increase ($370 million) for agencies providing home care for Medicaid-qualifying individuals. Meanwhile, staffing shortages persist, with thousands of shifts remaining unfilled monthly due to unattractive wage offers.
Additional funding is also required for public transit agencies, with Shapiro advocating for $283 million more, approximately a 20% increase, to prevent service reductions and regain ridership post-pandemic. Democratic support is strong for this, though Republicans seek equivalent investment in highway infrastructure funded possibly by new revenues, perhaps from the gaming sector.
Regarding labor, the House recently passed a proposal to raise Pennsylvania’s minimum wage above the federal standard of $7.25 per hour, marking Pennsylvania as the 31st state to implement a higher minimum wage. The increase, varying by county, faces resistance from Senate Republican leaders.
As the deadline approaches, these discussions encapsulate some of Pennsylvania’s most significant legislative and financial hurdles, demonstrating complex negotiations shaping policies for the upcoming fiscal year.