Governor Josh Shapiro and Pennsylvania’s lawmakers are rushing to reach a deal on next year’s budget. With the deadline of July 1 fast approaching, there are still major disagreements over how to cover Shapiro’s proposed spending increases, particularly with a government split between Democrats controlling the House and Republicans holding the Senate.
One of the central goals for the governor and his Democratic allies is to boost funding for public education and transit systems. Republican lawmakers don’t oppose those ideas outright but are more focused on controlling costs, especially rising Medicaid expenses and the widespread use of “skill games”—video gambling machines found in convenience stores, restaurants, and standalone venues.
Shapiro’s spending plan for the FY 2025/26 totals $51.5 billion, marking a 9% increase over the current year. Around $2.5 billion is targeted for Medicaid, partly due to unexpected healthcare costs that arose when individuals remained eligible for Medicaid after the COVID-19 emergency ended. Lawmakers could attempt to delay some of this burden by underestimating costs or deferring payments to hospitals and other providers.
One of the thorniest issues is how to close the projected deficit. Although Shapiro doesn’t propose any hikes to income or sales taxes, his plan leans heavily on reserve funds of $4.5 billion. He is also counting on higher revenue from new tax streams tied to cannabis legalization, changes in corporate taxation, and tighter regulation of skill games. However, all of that depends on legislation still up in the air.
The governor is also proposing an extra $800 million for public schools and universities. Approximately $526 million of this is intended to start complying with a court ruling that said the current school funding formula is unfair to low-income districts. Meanwhile, a separate bill seeks to cut cyber charter school reimbursements, which could save public districts hundreds of millions if it passes the Senate.
Social services providers are also pushing for more money, especially organizations offering home care to Medicaid patients. They’re asking for a 10% ($370 million) bump, citing chronic staff shortages caused by low pay.
Shapiro also wants to boost funding for public transit by $283 million, roughly a 20% jump, to help transit systems recover from pandemic-era ridership declines. Democrats are on board, but Republicans want highway projects to receive comparable attention, possibly funded through revenue from skill game taxes.
The House recently passed a bill to raise the state’s minimum wage above the federal level of $7.25 per hour. Under the proposal, more populated counties would see faster and steeper increases. However, Senate GOP leaders have signaled opposition, casting uncertainty over whether the plan will move forward.
Cannabis industry actors from around the country, such as Curaleaf Holdings Inc. (TSE: CURA) (OTCQX: CURLF), will be hoping that Pennsylvania legalizes marijuana so that residents who wish to consume the substance can legally access it instead of taking risks by resorting to the black market.
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