Pa. lawmakers and Gov. Josh Shapiro have approved a $50.1 billion state budget, officially ending monthslong impasse

HARRISBURG — The contentious — and, at times, bitter — Pennsylvania budget stalemate has finally ended.

Gov. Josh Shapiro signed the nearly $50.1 billion state budget Wednesday, as part of a breakthrough bipartisan deal that ends a key climate initiative and increases public school funding. Schools, counties, and social service providers will soon receive four months of withheld state payments, lapsed after the budget deadline passed at the start of the new fiscal year on July 1, providing the much-needed relief that some say will come too late.

The long-awaited budget deal involving Shapiro, House Democrats, and Senate Republicans marks the first time Pennsylvania’s state budget has topped $50 billion. State spending and revenue earnings have skyrocketed in the post-COVID-19 years due to federal cash infusions. The budget is a 4.7% increase in spending over the prior fiscal year and includes no new tax increases. Lawmakers and Shapiro agreed to tap into underutilized special funds and use the state’s surplus to address a budget shortfall, as Pennsylvania is on track to spend more than it brings in this fiscal year and in the future.

Both Republican and Democratic leaders celebrated the budget’s passage as a “true compromise,” noting that neither party got everything it wanted in the final deal. The spending plan includes significant energy and permitting changes cheered by Republicans and an earned-income tax credit and revisions to cyber charter funding long sought by Democrats, among other policy wins revealed Wednesday.

“Today is a good day,” Shapiro said, opening his remarks before signing the budget bills into law in the Capitol building, flanked by Democratic lawmakers.

“I would have loved to have stood here in this room with all of you on June 30, but as you know, Pennsylvania is just one of only three states in the country with a divided legislature,” Shapiro, a Democrat, said. “It requires all of us to compromise, to have tough conversations, and, ultimately, to find common ground.”

Several leaders said the budget deal approved Wednesday would not have been possible months ago, as debate had devolved into partisan finger-pointing over who was responsible for the budget deadlock and who might benefit politically from it.

Among the top wins for Senate Republicans is the end of the state’s efforts to join the Regional Greenhouse Gas Initiative, which former Democratic Gov. Tom Wolf entered without legislative approval in 2019 and has been tied up in litigation ever since. The program has drawn the ire of Republicans, and in floor remarks Wednesday, House Minority Leader Jesse Topper (R., Bedford) called it the “No. 1 issue holding Pennsylvania back from economic growth.” The 12-state program, known as RGGI, is an interstate cap-and-trade initiative that charges power plants for the amount of carbon emissions they release into the air.

Ahead of a final budget deal, some Democratic lawmakers and environmental groups spoke out against ending Pennsylvania’s involvement in RGGI as a threat to the environment. In the end, most Democratic lawmakers voted in favor of the omnibus budget bill that ended the state’s pursuit to join the initiative.

House Majority Leader Matt Bradford (D., Montgomery), a top negotiator of the budget deal, told The Inquirer on Wednesday that Democrats’ agreement to leave RGGI was part of a broader compromise to end the impasse.

“I’m one who believes there should be a price on carbon, but I recognize the reality of the situation and compromise is required,” Bradford added.

Shapiro and Democratic leaders were able to persuade Republicans, in turn, to spend more than they had wanted to this fiscal year. That additional spending allowed Democrats to invest more in public education, a new earned-income tax credit targeted toward working Pennsylvanians, and more.

“It’s much more money than we want to spend, and it took a lot longer than we wanted, but I think it was worth the wait,” said Senate President Pro Tempore Kim Ward (R., Westmoreland) in floor remarks Wednesday. “I am actually excited to vote for this budget.”

The budget deal includes more than $665 million in new funding for public schools, approximately $562 million of which would be funneled through the state’s adequacy and tax equity formulas as part of an effort to close what experts call a $4 billion “adequacy gap.“ These formulas were created last year in response to a 2023 court ruling that found Pennsylvania’s public education funding system unconstitutionally deprives students from poorer districts of an adequate and equitable education.

Senate Minority Appropriations Chair Vince Hughes (D., Philadelphia) applauded the budget agreement for its investments in public school funding, gun violence prevention, and the student-teacher stipend, among other things.

“This budget has good work in it that helps address … the issue of affordability, which sang loud and clear in the most recent election as a predominant issue that Pennsylvanians want us to address,” Hughes said on the Senate floor Wednesday.

In addition, the budget includes changes long sought by Democrats to how Pennsylvania funds and oversees its cyber charter schools. Cyber charter school leaders warned that the changes might lead to closures and mass layoffs for the virtual schools, which often serve the state’s most vulnerable populations, but they were resoundingly celebrated by Democrats and public education experts.

“We finally reformed our cyber charter school system,” Shapiro said to boisterous applause. “If a parent wants to send their child to a cyber school, that’s fine. That’s their prerogative. But we shouldn’t be overfunding them at the expense of Pennsylvania’s public schools.”

The deal, however, does not include any additional funding for mass transit, another major Democratic priority. Democrats removed mass transit from the budget negotiation table in September, after a lawsuit required SEPTA to undo its service cuts and Senate Republicans appeared unwilling to make a long-term investment in mass transit. Instead, Shapiro approved SEPTA’s use of its capital funds to help fill the budget deficit of the state’s largest mass transit agency for the next two years.

Bradford told reporters that securing a long-term revenue stream for transit agencies remains a top priority for his caucus in future budgets.

» READ MORE: Why there was no deal for SEPTA in Harrisburg after all

Inflamed, in part, by the mass transit debate, negotiations over the budget had been stalled for months until the end of October, when Shapiro convened top legislative leaders to return to talks. The renewed budget negotiations included House Speaker Joanna McClinton (D., Philadelphia) and Ward, who are the highest-ranking officials in their respective chambers but had usually stayed out of the budget talks led by Bradford and Senate Majority Leader Joe Pittman (R., Indiana).

Unlike the federal government, Pennsylvania’s state government does not entirely shut down when a budget has not been approved. Lawmakers and state employees continued to be paid throughout the 135-day impasse. But the late budget had significant impacts on school districts, counties, and social service providers — all of which are awaiting billions in expected state payments that should begin flowing again soon.

The lack of state funding has required schools, counties, and service providers to cut jobs, take out expensive loans, or stop services altogether.

» READ MORE: Loans and layoffs: Missing $3 billion in state payments, Pa.’s public schools implore lawmakers to end budget impasse

Over the course of the more than four-month impasse, Pennsylvania’s counties spent millions to make up for the loss of state dollars. In Montgomery County, officials estimated the county had spent between $40 million and $50 million from budget reserves to maintain services. Chester County officials estimated they spent $40 million in reserves, while Delaware County officials spent $12 million each month until October, when they had to reduce payments on some of their bills in the absence of state funding. Counties expect to be reimbursed for those expenses, but it is unclear when the reimbursements will come.

“Counties are at the breaking point, financially speaking,” said Kyle Kopko, the executive director of the County Commissioners Association of Pennsylvania. If reimbursements are not delivered swiftly, Kopko added, it could force additional nonprofits that provide social services to shutter.

» READ MORE: Delco homeless shelter system to close two shelters amid Harrisburg budget impasse

Even as county leaders were grateful for an end to the impasse, some expressed frustration over the contents of the final budget deal. The agreement, Kopko said, included a 2% cut to mental health services statewide, though he said the cut likely would not affect payments to counties. And it left other funds counties rely on to pay their bills — like 911 fees — stagnant, despite inflation.

Counties in Pennsylvania can increase their revenue only by raising property taxes. By failing to provide additional funds for social services, county officials argued Wednesday, lawmakers had created a situation in which counties would immediately or eventually have to raise property taxes.

The combination of the cuts and the failure to increase funds for public transit and other needs, Delaware County Councilmember Christine Reuther said, meant the state had essentially passed the buck to the counties.

“They’re not solving problems. They’re not saving people from tax increases,” she said. “They’re just making somebody else do their dirty work.”

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