Pennsylvania lawmakers will miss the June 30 budget deadline as state faces $5.5B shortfall, top Republican says

HARRISBURG — Facing a budget shortfall of nearly $5.5 billion, Pennsylvania won’t make its June 30 deadline for passing a new state budget, a top Republican said.

Senate Majority Leader Joe Pittman (R., Indiana), the chief negotiator for Senate Republicans in closed-door budget talks where lawmakers will decide how to spend more than $50 billion in state revenue and reserves for the next fiscal year, told reporters Wednesday that leaders are still far away from striking a budget deal. However, Pittman said, they hope to reach consensus well before Pennsylvanians start feeling the impact of a late state budget agreement.

To do that, Pittman and House Majority Leader Matt Bradford (D., Montgomery) will need to strike a deal that is acceptable to them — and their caucuses. Democratic Gov. Josh Shapiro is also at the negotiation table, pushing his own $51.5 billion budget proposal he pitched earlier this year that would make critical investments in healthcare, education, and more. Shapiro has crisscrossed the state over the last five months, promoting his budget pitch.

» READ MORE: Balancing a national profile and a new Trump term, Gov. Josh Shapiro’s budget pitch toes the line

It’s not uncommon for state lawmakers to miss the June 30 budget deadline — the end of the fiscal year — before coming to a consensus in the following weeks or months. However, the longer a state budget agreement is at an impasse, the more likely it is that school districts, local governments, and nonprofits providing government services will need to take out loans to stay afloat until the state funding is released.

“We have seen this movie before, and on July 1, the sun will come up, and I don’t think the good people of Pennsylvania will see any notable difference in their daily lives,” Pittman added. “And frankly, there is a runway and an opportunity in the several days and weeks after June 30 to put a product together without any discernible impact.”

At least one top Republican, Senate President Pro Tempore Kim Ward (R., Westmoreland), has floated the idea of approving a six-month stopgap budget, as more than 40% of the state’s total annual spending figure, or about $53 billion in anticipated money, comes from federal funding, which remains uncertain.

Pennsylvania lawmakers last approved a short-term budget in 2020, as the federal government navigated the early days of the COVID-19 pandemic, with funding mostly remaining flat until lawmakers had a better idea of their fiscal outlook.

It’s still unclear how much Pennsylvania will receive from the federal government this year, as the U.S. Senate begins to debate President Donald Trump’s “One Big Beautiful Bill” proposal, his cornerstone mega-bill to cut taxes and government spending.

Pittman and Shapiro, however, both said a six-month budget is not on the table right now. Shapiro was more adamant than his GOP colleague.

“We’re not gonna do a six-month budget,” Shapiro said. “We have a responsibility to make some tough choices.”

The estimated $5.5 billion budget deficit is a result of state spending set to outpace the revenue it brings in this year, according to the Pennsylvania Independent Fiscal Office. The state IFO previously estimated that the state would outspend its revenue by $4.5 billion, before updating its projections in February based on Shapiro’s budget proposal.

Shapiro proposed a number of new revenue generators as part of his February budget pitch to make up about $1.4 billion of that budget hole, in addition to using approximately $3 billion in revenue surpluses from the current fiscal year. The rest, more than $1 billion, would come from the state’s more than $7.4 billion in reserves — mostly saved up from an injection of federal funds during the pandemic that lawmakers have dipped into to make investments, while saving the lion’s share and compounding interest.

Pennsylvania’s Rainy Day fund has flourished, leading Democrats and Shapiro to advocate that the state invest its savings in programs that would generate growth in the state, instead of sitting on it.

Republicans, for their part, have pushed for discretion and holding onto the funds until an actual “rainy day.”

And top GOP officials, including Ward and some rank-and-file GOP senators, have rejected using any of the state’s reserves as part of balancing this year’s budget.

Pittman, the top GOP negotiator at the table, said he views it differently.

“We would prefer to have it as untouchable,” he added, noting the work it took to build up the savings, as well as the bond rating and dividend benefits it has earned the state.

“So while it may not be untouchable, it’s certainly a last resort in trying to figure out how to balance the budget,” Pittman said.

For the first time in several years, education is not the big fight at the table, Shapiro noted Wednesday. The state’s new public education funding formula was enacted last year after an appellate court ruled the state’s previous funding system was unconstitutional, with new dollars passing through specific adequacy targets and equitably preparing students for their futures, regardless of their zip codes.

The new formula is likely to be implemented by lawmakers in the state budget the same as last year, with funding increases built in. That allows the legislative leaders to avoid the ever-thorny education conversation, and to focus on other budget priorities, Shapiro added.

What will hold up the budget, Pittman said, comes down to a handful of issues: how to fund Medicaid’s exploding costs in Pennsylvania, regulating slot machine look-alikes called skill games that have proliferated around the state, and Democrats’ priority of funding mass transit. Recreational marijuana is off the table, he added.

» READ MORE: Not just SEPTA: Public transit is in trouble all across Pennsylvania, including in GOP districts

On Wednesday, Pittman still had not budged on his criticisms of mass transit, and repeated conditions that would need to be met before supporting a funding increase: dollar-for-dollar investment in state infrastructure, SEPTA fare increases, and local governments’ increase in funding in SEPTA’s service area.

“Funding transit is something that we can live without in our caucus,” Pittman added.