Pa. passes $50.8B budget that sends more money to poorest schools, skips difficult policy questions

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HARRISBURG — Pennsylvania lawmakers have sent Gov. Josh Shapiro a $50.8 billion budget that makes major new investments in education but fails to address skill games regulation or other pressing policy questions.

The deal was cut behind closed doors, and its details were in flux until late Saturday, when committees in both chambers advanced bills during a rare weekend session. The full legislature took final votes Sunday, almost two weeks after the June 30 statutory deadline.

It will put more than $900 million into education; provide a pension bump to thousands of retired school, state, and emergency response workers, many of whom retired before 2001; and require data centers to report their annual energy and water consumption to the state. The plan also preserves the state’s nearly $8 billion rainy day fund — a key priority for Republicans, who control the state Senate.

It does the latter by pulling more than $500 million from off-budget “special” funds, taking unused funds from agency bank accounts, and using accounting maneuvers such as delaying $1.3 billion in payments to the state’s Medicaid managed care organizations.

“This budget allows the commonwealth to fight yet another day,” Senate Appropriations Chair Scott Martin (R., Lancaster) said on the chamber floor Sunday before the main spending bill passed 44-6. The state House approved it a few hours later by a 167-35 vote.

House Appropriations Chair Jordan Harris (D., Philadelphia) told reporters after a committee vote Saturday night that the plan would ensure that individuals on Medicaid plans receive their healthcare.

“At the end of the day, people get paid. Bills get paid,” Harris said. “Whether it gets paid today or gets paid tomorrow, the bills will get paid.”

The budget does not change the state’s fiscal reality — that it spends more money than it brings in. It also does not include any new revenue-generating policy changes, such as new taxes on tech firms supported by lawmakers from both major parties.

Fiscal conservatives denounced the budget’s fiscal maneuvering. State Rep. Marc Anderson (R., York) invoked the arrest of bootlegger Al Capone for tax evasion. “He was cooking the books,” Anderson said. “Citizens of the commonwealth, what we’re doing today … is voting on a budget that cooks the books.”

This year marks the commonwealth’s fifth straight late budget. They have ranged from minor delays in which policymakers spent a few extra days finalizing details to 100-plus-day impasses that stretched county, school, and nonprofit finances to the limit. While this year’s delay is comparatively short, the pattern of missed deadlines has frustrated local leaders, who face the consequences of a cutoff in state funds.

Leading up to the deal, lawmakers said negotiations were running smoothly because they were not taking big policy swings as they had in the past. The lean final product reflects that.

It does not eliminate a sales tax break given to data centers of a certain size that had increasingly earned bipartisan opposition in recent weeks.

It also will not legalize recreational marijuana, include new recurring funding for mass transit, or boost the state’s minimum wage, as Shapiro and other Democrats had called for. Still, Harris offered: “It’s a good budget.”

Also missing from the deal is a regulatory framework and tax on games of skill. A state Supreme Court ruling set an October deadline for lawmakers to act before the devices are subject to seizure. Shapiro and other lawmakers support taxing skill games, which have proliferated around the state, and have floated plans they say could raise as much as $2 billion in annual revenue.

In the aftermath of the court’s ruling, Senate Republicans called addressing skill games a “critical piece” of resolving this year’s budget. However, in an interview with WCCS Radio late last month, Senate Majority Leader Joe Pittman (R., Indiana) said that “from a legal standpoint,” lawmakers do not need to act.

“The challenge now is that, given the Supreme Court decision, it’s very clear this is gambling. We have to approach this from the perspective of it being some sort of age-restricted environment,” Pittman said, adding: “Finding that balance I think is going to be one of the biggest challenges we have.”

In February, Shapiro pitched a $53.3 billion budget plan that would have borrowed $1 billion in bonds to fund housing, energy, and schooling infrastructure projects, and created a $100 million fund to respond to potential federal government shifts. Neither made it into the final deal.

Still, the budget embraces an “Innovate in PA 2.0” program proposed by the governor, which will allow the state to sell $125 million in tax credits to insurers. Those dollars then subsidize venture capital firms and fund grants for the life sciences and biotechnology industries.

The budget’s enabling legislation also restricts the spread of food manufacturing waste on farmland; creates several new special tax zones, including one at a Philadelphia shipyard; switches state SNAP benefits to chip cards; and gives the go-ahead for drillers to expand wells that target gas deep underground.

Some rank-and-file Democrats did not support the deal.

During debate, state Sen. Nikil Saval (D., Philadelphia) said the budget “deferred” debates about “certain critical issues that are at stake for many, many constituents.” He said he opposed the budget because it does not address rising costs of energy, housing, or public transit, and it does not include any significant revenue generators.

“I believe these are issues that we cannot defer at this moment, and these are issues that our constituents do not want us to defer,” Saval told his colleagues.

Inside the education plan

The budget will allocate an additional $58 million to basic education and $55 million to special education, bringing their respective totals to $8.3 billion and $1.6 billion. It will also transfer $125 million from the Commonwealth Financing Authority to a program for improving school facilities.

It will drive an additional $565 million to school districts that lawmakers have determined are historically underfunded or have high property tax burdens, which matches Shapiro’s proposal from earlier this year.

In 2023, Commonwealth Court found the state’s education funding system is unconstitutionally inequitable after a group of advocates, including the Education Law Center and the Public Interest Law Center, sued the state. Lawmakers then passed a 2024-25 fiscal year budget that acknowledged a $4.5 billion adequacy gap. With this year’s investment, which matches the amount lawmakers allocated in the last budget deal, the legislature has put $1.9 billion toward closing that disparity.

Deborah Gordon Klehr, executive director of the Education Law Center, said in a statement that the budget was another step toward “constitutional compliance” and will make a difference in the lives of students.

“But our schools remain billions of dollars short of the funding the General Assembly identified as needed,” Gordon Klehr said. “And until every child — wherever they live — has access to a well-funded public school, Pennsylvania’s constitutional obligation remains unmet.”

Adding that lawmakers must “accelerate” their plan to comply with the state constitution, Dan Urevick-Ackelsberg, senior attorney at the Public Interest Law Center, noted in a statement that some historically underfunded schools had to make cuts this year.

“The warning signs are clear,” said Urevick-Ackelsberg. “To provide children the education the constitution demands, we need more teachers and more programs.”

Lawmakers also adopted multiple non-financial education policies.

Public and private schools will be required to provide at least 30 minutes of recess for students in full-day kindergarten through fifth grade, and maintain confidentiality when testing students’ body mass index.

Public schools will need to perform weekly wellness checks for students enrolled in virtual instruction. Cyber charters are already required to do the same, and the provision will tighten the guardrails for how cybers must conduct those checks and add new reporting requirements when a student fails to participate.

Lawmakers are adjusting a policy — adopted as part of last year’s budget — preventing students who are habitually truant from transferring to a cyber charter during the school year. It will now require that these students’ parents be notified that they can petition for an “educational best interest hearing” before a magisterial district judge. That judge can sign off on a student’s move to a cyber charter if they determine it’s the best educational option.

Additionally, school districts will have until the end of 2027 to provide the state Department of Education with an inventory of their facilities — including details about the age, size, and purposes of the properties they own or lease, and the grade levels those properties serve.

The budget does not include funding for a private school voucher program, which was at the center of a debate that triggered a major budget impasse in 2023.

It also lacks — for the first time in years — a funding increase for multiple related programs in which the state provides tax breaks to businesses and individuals that donate to scholarships that help students to attend private schools.

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