Pennsylvania Gov. Shapiro proposes $48 billion budget with focus on education, economy, and people

Gov. Josh Shapiro said he wants to invest in the people of Pennsylvania with a $48.3 billion budget that directs new funding to education, economic growth, and creating better opportunities for residents.

“We need to build a more competitive Pennsylvania that starts in our classrooms, runs through our union halls and small businesses, through our farmlands and our high rises, our college campuses, and leads to a life of opportunity and a retirement with dignity,” Shapiro said during his budget address Tuesday in the state Capitol rotunda – the first time a governor has given an address there in the building’s nearly 120-year history.

Shapiro spoke about the successes of his first year in office, which ended with an upgrade in Pennsylvania’s bond rating and a $14 billion surplus. In his second year, Shapiro said he believes it is time to invest some of the surplus “squirreled away in Harrisburg.”

“Look, it is not a badge of honor, nor is it something to be politically proud of for some lawmakers out there to say: I took more money from the good people of Pennsylvania than I needed and then bragged about how I just kept it in some bank account here in the Capitol,” Shapiro said, in a rebuke to lawmakers who argue the commonwealth should safeguard its reserves.

Shapiro noted that even if every one of the proposals in his budget passes, the state would still have an $11 billion surplus at the end of June 2025.

The spending proposal includes a response to the state court ruling last year that Pennsylvania’s K-12 education funding system is unconstitutional by providing more than $1 billion in new funding for public schools.

Shapiro’s budget builds on a 2022 campaign pledge to provide career pathways for young adults with a plan to overhaul the commonwealth’s public university and community college system, with a 15% increase in funding for state-owned universities and a 5% increase for the state’s four land grant universities.

It proposes more than $500 million in investments in the state’s first economic development strategy in more than 20 years while continuing a phased reduction in corporate income taxes, speeding state permitting to “work at the speed of business,” and redirecting more than $283 million in state sales tax to avoid public transit fare hikes and service cuts.

Republican leaders responded with criticism that the plan is unrealistic and does little to improve the state’s economic prospects.

“Today, we heard not a moderate Gov. Shapiro,” Senate President Pro Tempore Kim Ward (R-Westmoreland) said after Shapiro’s address. “But obviously a very liberal-minded Gov. Shapiro.”

Ward expressed concern that Shapiro’s plan didn’t address state regulations that she said caused Pennsylvania to lose business, jobs and population to other states. Ward also called the plan a “budget of unicorns and rainbows.”

“We will dig into this budget, we will look at it hard, we will try to find out where he’s coming up with the money to pay for this,” Ward said. “In addition to just raiding the rainy day fund, where is this money coming from?”

‘The future of the commonwealth’

House Speaker Joanna McClinton (D-Philadelphia) said she is confident that much of Shapiro’s proposal would become a reality as lawmakers and stakeholders negotiate in the coming months.

“No longer will we wait to invest in the future of the commonwealth of Pennsylvania, because the future starts right now, today,” McClinton said. 

House Appropriations Committee Chairperson Jordan Harris (D-Philadelphia) said Pennsylvania can’t afford another year without raising the minimum wage, without fixing toxic and crumbling schools, or without making college affordable.  

 “You’re going to hear people talk about how much this costs. But look, the cost is too great for us not to do it,” Harris said, adding “ … We can’t afford another year of disinvestment in the Commonwealth of Pennsylvania.” 

But House Minority Leader Bryan Cutler (R-Lancaster) described the budget as a “phishing scam” that claims to offer a fix for education and mass transit while keeping taxes low and making Pennsylvania more competitive.

“With a proposal like this, I can see why at first blush that many Pennsylvanians would want to buy in,” Cutler said, adding, “ … just because it looks good, you shouldn’t click the link because it could lead to ruin.”

In his address, Shapiro prodded lawmakers to move this year on initiatives that have languished in the Pennsylvania Legislature as neighboring states have acted decisively.

Shapiro called on lawmakers to raise Pennsylvania’s minimum wage from $7.25, where it has been since 2009, to $15 an hour to keep pace with each of its neighbors.

“We are falling behind, it’s anticompetitive, and it’s hurting our workers,” Shapiro said. “We have seen proof that Pennsylvania workers living in border counties would rather drive into another state for work so they can earn a higher wage than take a job at home in Pennsylvania.” 

The governor’s budget calls for tapping a new revenue source by legalizing and taxing the recreational use of cannabis by adults, which all of Pennsylvania’s neighbors — save West Virginia — have already done. Administration officials said revenue from legal marijuana is projected to reach $250 million annually in five years.

Shapiro said that in addition to ensuring that the new industry is regulated and taxed, legislation should create jobs and build wealth in the communities that have been disproportionately impacted by criminalization of marijuana. It should also provide for the expungement of criminal records for people convicted of nonviolent possession of small amounts of marijuana, he said. 

Not mentioned in Shapiro’s address but included in the budget is a plan to regulate and tax slot machine-like skill games, which have proliferated in a legal gray area outside the authority of the state’s Gaming Control Board. Administration officials estimate it would generate $150.4 million in the first year.

“While I expect you will carefully analyze my proposals and seek your own in the final budget, your analysis shouldn’t be used as an excuse for paralysis,” Shapiro said. “It’s time to solve these pressing problems, to meet this moment responsibly and with bipartisan compromise.”

Education funding

The February 2023 Commonwealth Court decision declaring Pennsylvania’s education funding system unconstitutional provided the overarching narrative for much of Shapiro’s first year in office.

By choosing to forego an appeal in the state Supreme Court, legislative leaders accepted the court’s mandate to change the system, Shapiro said Tuesday. He called on lawmakers to build on the commitment to students and teachers they have already shown by approving money for building repairs, in-school mental health services and free school breakfast.

Shapiro’s proposal would adopt the recommendation of the bipartisan Basic Education Funding Commission to bring each of Pennsylvania’s school districts up to an adequate funding level based on the expenditures of its most successful districts.

It would provide $872 million in the first installment to close the $5.4 billion gap over the next seven years. In addition, school districts would receive an additional $200 million in basic education funding through the state’s fair funding formula and reset the base amount each school district receives at 2023-24 levels so that no district sees a cut.

The proposal also follows the commission’s recommendation to spend $300 million a year over the next five years to repair school buildings.

Funding the 500: A landmark school funding case put K-12 spending on trial

Shapiro called on lawmakers to update what he called an antiquated charter school law that forces school districts to overpay for charter school tuition. He noted that when Pennsylvania first allowed charter schools in 1997, online charter schools were almost unheard of. Today, nearly 60,000 students attend cyber charter schools..

The charter school law provides the same funding to online charter schools as it does to brick-and-mortar charters. That amount varies widely from one school district to another. By setting a statewide charter school tuition at $8,000, school districts would save $262 million a year, Shapiro said.

 “If you combine those savings with the new money I’m proposing for 500 school districts, that would mean nearly $2 billion more for public schools next year,” Shapiro said.

Shapiro said it’s also incumbent upon the state to make sure students have the freedom to chart their own course and determine their next steps after graduating from school.

“If you’re in the 10th or 11th grade and you’re excited about being a welder or a plumber, we should celebrate that and we should treat that career path with the same level of respect to someone who chooses to go to college,” Shapiro said.

Shapiro said his budget would build on record investments in vocational and technical schools and trade apprenticeships by establishing a program to connect young workers with skills to thousands of employers who need them.

And for those who choose college, Shapiro said his budget would improve access by capping state university and community college tuition at $1,000 per semester and increase state grants for private university students to nearly $7,000 a year. 

In his first budget address last year, Shapiro said Pennsylvania’s higher education system was broken. On Tuesday, he outlined a plan to unite the 10 state-owned universities with the state’s 15 community colleges while preserving local leadership. The budget would provide $975 million in new funding for the combined public university and college system.

“Together our public colleges and universities will create pathways to affordable credentials and degrees while opening up the doors of opportunity and meeting the Commonwealth’s workforce needs,” Shapiro said.

Shapiro’s proposal would also change the way Pennsylvania’s state-related universities – the University of Pittsburgh, and Penn State, Temple and Lincoln universities – are funded to make state appropriations performance-based rather than writing a blank check.

‘…sick and tired of losing to friggin Ohio’

While Shapiro touted his administration’s wins in attracting new industry and its work to improve the business environment, he said Pennsylvania is still outspent by neighbors in its economic development efforts.

“Let’s be frank. Their investment is paying off and I am sick and tired of losing to friggin Ohio. We need to catch up right now,” Shapiro said.

At the core of Shapiro’s economic development strategy is a $500 million bond issue to make industrial sites ready for business by obtaining permits and installing utilities.  

Economic growth should not be solely focused on city high rises and suburban office parks, Shapiro said, noting that 600,000 Pennsylvania residents work in agriculture on 53,000 farms that contribute $132 billion to the state’s economy.

“To ignore that is not only disrespectful to our farmers, it doesn’t make sense economically. In the same sentence when we talk about life sciences, manufacturing, robotics, we should be talking about investing in our farms and in our farmers,” Shapiro said.

To that end, the proposed budget includes investments to help farmers upgrade their equipment and to promote animal health and disease prevention by funding a new state animal testing laboratory in western Pennsylvania.

Speaking about human services, Shapiro told the story of a 60-year-old single mother who cares for her adult son who requires 24/7 care. Although funding has been available for in-home care, many families who need such services have been unable to obtain them because too few people are willing to do the job for the wages offered by the state.

“I’ve listened to those families. I’ve seen the exhaustion and the desperation in the eyes of parents and caregivers who are doing everything right. But they still can’t get their kids the services they need. It’s heartbreaking,” Shapiro said.

Shapiro’s budget would provide $216 million that would allow the state to draw down another $266 million in federal money to allow community based service providers to pay higher wages to in-home care providers. 

In another anecdote,Shapiro recalled Nicolas Elizalde, a 14-year-old student killed in an ambush shooting after a football game at Roxborough High School in Philadelphia. His mother Meredith, who was in the audience Tuesday, has been a vocal advocate for gun safety laws, Shapiro said.

“With gun violence at unacceptable levels in our communities, it is long past time for us to take real action,” Shapiro said.

His budget proposal includes $75 million in new funding for gun violence intervention, prevention, investigation, and prosecution. It would also provide $30 million in school- and community-based gun prevention, security for nonprofit institutions such as synagogues and churches, and create the Office of Gun Violence within the Pennsylvania Commission on Crime and Delinquency. 

But Shapiro called on lawmakers to do more, noting that many “talk a big game on law and order,” yet allow loopholes in background check requirements to go unclosed. 

In closing, Shapiro pointed to the lavish murals that adorn the walls of the Capitol rotunda, saying that their images of Pennsylvania history give him hope for the commonwealth.

“When I walk these halls, and I see these depictions of our past, I can’t help but feel optimistic about our future, a future we will build together staying true to the words and the creed of William Penn as we work to do what is truly wise and just.”

This article was updated at 5:42 p.m. on Feb. 6.