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PENNSYLVANIA HAS A BUDGET. That sound you hear is the sighs of relief from every single county, nonprofit, and school that relies on state money.
But here at Access Harrisburg, I strive to tell it like it is. And the truth is, while this budget is done, it leaves most of Pennsylvania’s underlying fiscal issues — and major policy disagreements — pretty much untouched.
LET’S START WITH THE FISCAL REALITY. Pennsylvania took in $46.4 billion last year. It approved a $50.1 billion plan. The difference between the state’s revenue and spending is roughly $4 billion. That’s a deficit. The commonwealth is on track for the same next year, and Independent Fiscal Office (IFO) projections show that the annual deficit will only grow.
This year's shortfall was covered by the state’s cash reserves, as well as money pulled from the “couch cushions of bureaucracy," as state Senate Majority Leader Joe Pittman (R., Indiana) put it.
(For instance, the state was able to transfer $200 million from the Joint Underwriting Association, a state-created nonprofit that provides subsidized medical malpractice insurance. Lawmakers looking for budget cash first tried this maneuver seven years ago. I’m sure some of you just felt a rush of nostalgia.)
As my colleagues and I at Spotlight PA have repeatedly written, differences over spending drove the four-month budget impasse. Then all the major players got together for the first time in months, and — just three weeks later — a budget burst forth from closed-door talks and passed with wide bipartisan support.
Many a snarky lobbyist has joked to me that this is a plan whose contours were clear for months, if there was only the political will.
STILL, TOP DEMOCRATS AND REPUBLICANS CAN’T STOP CONGRATULATING THEMSELVES FOR IT. “All of us here held the line and stayed at the table and demanded a serious budget that meets the needs of Pennsylvanians,” Gov. Josh Shapiro said last week.
The hope for all leaders is that this budget will prompt some economic growth — enough, in fact, to overcome any future deficits. And that’s a hell of a bet.
SO WHO'S CRITICAL OF THE DEAL? A strange, cross-ideological coalition.
“The budget spends far too much, though significantly less than Gov. Josh Shapiro’s proposed plan,” Nathan Benefield, chief policy officer at the free market Commonwealth Foundation, said in a statement. “The deal expands our structural deficit, drains reserves, and threatens a tax increase in 2026 or 2027.”
Said Ray Murphy of the leftist Pennsylvanians for Accountability from Yass, Billionaires, and Corporations (PAYBAC) coalition in a statement: “While we all celebrate the end of a budget impasse that has caused much harm, the fact is that this was the last chance to act before next year’s federal cuts push the state’s finances off a cliff — and the legislature choked.”
And a final word from state Treasurer Stacy Garrity, the Republican who wants to challenge Shapiro next year, speaking on a radio show last week: “It's crazy, and everybody's patting themselves on the back, and I can't understand it.”
SOMETHING NO ONE WANTS TO TALK ABOUT? The undoing of a Trump administration tax cut.
The fiscal code decouples Pennsylvania’s corporate tax code from the federal one to prevent businesses from taking advantage of two provisions within Trump’s omnibus tax bill. They allow businesses to more quickly deduct the cost of research and experimentation and deduct costs associated with some buildings used for manufacturing.
The IFO estimated in July that those exemptions could cost Pennsylvania up to $900 million this fiscal year alone.
The move is not without critics. In a statement, the PA Chamber of Business and Industry said that the provision will “make Pennsylvania less competitive by discouraging research and development.” The Department of Revenue is also required to submit a study on the tax change to lawmakers by the end of 2026.
AT LEAST ONE DEMOCRAT PLEDGED TO REJECT A BUDGET THAT FAILED TO FUND TRANSIT. State Rep. Malcolm Kenyatta (D., Philadelphia), however, ultimately voted yes. In a text message, he told Access Harrisburg that, while he opposed using capital dollars for operating costs, the short-term move “took transit funding off the table in this budget deal.”
With school districts threatening to shut down without a deal, an unfinished budget was “not acceptable or tenable.” Kenyatta added: “The way to get the funding we need to get for mass transit will be made possible by flipping the state Senate. That's where we need to focus.”
TRANSIT WASN’T COMPLETELY FORGOTTEN. The fiscal code allows agencies to put digital ads on the back of vehicles, a measure first pitched by state Sen. Frank Farry (R., Bucks) aimed at boosting revenue.
Then there’s the state’s medical assistance transportation program, which takes Medicaid recipients to appointments for free.
It’s a lifeline for many people, but state Senate Republicans have raised repeated concerns that it’s too expensive. Enter the human service code, which directs the state to study the efficacy of a so-called “brokerage” model that would effectively privatize the system. The National Conference of State Legislatures says that 34 other states use it, and it “may deter fraud and abuse.”
Clever observers may remember this was studied in 2020 and found to be inefficient. Rich Farr, executive director of RabbitTransit in Adams and York Counties, noted the same to Access Harrisburg in an email, pointing to other states' experiences.
“We’ve watched the … brokerage model fail in state after state,” Farr said in an email. “The promise of improved oversight and reduced administrative burden has repeatedly proven to be an illusion.”
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