Money for K-12, recreational weed, and minimum wage: Gov. Shapiro delivers an ambitious $48.34 billion state budget

HARRISBURG — Gov. Josh Shapiro unveiled an ambitious $48.3 billion spending plan Tuesday that attempts to tackle decades of deferred investment in education and proposes no new tax increases.

The cornerstone of the governor’s budget proposal is a major funding increase for the state’s public school and higher education systems. He proposed a nearly $1.1 billion increase in funding for K-12 public schools that includes $872 million in the next fiscal year as a down-payment to address decades of chronic underfunding and inequity. Shapiro also pitched a new system for higher education that would combine state-owned schools and community colleges under one governing body, among other efforts to make getting a college degree more affordable in Pennsylvania.

“No one here should be OK with an unconstitutional education system for our kids, or the status quo on higher ed, where we rank 49th in the nation in state investment,” Shapiro said.

Former governors from both parties have tried to fix Pennsylvania’s perennial issues. But a state appellate court ruling that Pennsylvania’s public school funding system is unconstitutional, the struggling enrollment in state-funded higher education institutions, and continued population declines put the onus on Shapiro to pitch major overhauls to how things are currently done with a 6.2% increase over last year’s budget. And education advocates lauded his plans.

But making those ideas a reality — with a divided General Assembly and after a months-long budget standoff last year — will test Shapiro’s ability to broker bipartisan deals. The House, where Democrats hold a narrow majority, and the Republican-controlled Senate must approve a spending plan for Shapiro to sign by the time the next fiscal year starts in July.

Senate Republicans were quick to criticize the proposal Tuesday, with one top Senate Republican calling it unrealistic and another calling it “absolutely fiscally irresponsible.”

“As I listened to that budget, [it was] a bunch of unicorns and rainbows without any real explanation of how we’re going to implement it and how we’re going to pay for it,” said Senate President Pro Tempore Kim Ward (R., Westmoreland).

Shapiro’s proposed spending increase — which is more aspirational than his first budget pitch — comes as the state sits on a $14 billion surplus in its coffers. He said he wants to begin dipping into those cash reserves, just as the state’s expenses are expected to outpace revenues starting in the next budget cycle.

“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,’” he said.

But Senate Majority Leader Joe Pittman (R., Indiana) cast doubt on that idea. “If he wants to get rid of our surplus in our Rainy Day fund, we should then return it to the people who gave it to us in the first place. And that’s the taxpayers,” Pittman said.

House Democrats, meanwhile, expressed support for the governor’s budget pitch — especially on education.

“You’re going to hear people talk about how much this costs,” said Rep. Jordan Harris (D., Phila.), who chairs the House’s powerful appropriations committee. “The cost is too great for us not to do it.”

In a departure from tradition, Shapiro delivered the address — his second since taking office — to a joint session of the legislature from the Capitol rotunda, while the House chamber undergoes repairs.

He delivered his hour-and-a-half speech from the middle of the rotunda’s staircase and wore a blue tie with red spots. For viewers sitting at a distance or watching a video feed, the colors combined to a shade of purple. Whether intended or not, it symbolized Pennsylvania’s purple political landscape and split state government.

And Shapiro will be scrutinized on whether he can reach bipartisan agreements necessary to make sweeping changes and solve some of the state’s most intractable issues — such as fairly funding each of its school districts.

Shapiro pitched hundreds of millions of dollars in investments to increase reimbursement rates for people with intellectual disabilities and autism and $500 million in bonds to grow top industries in the state. He also wants to pour millions of dollars into violence prevention, farming, and public transportation, among other areas.

Shapiro’s budget proposal laid the groundwork for significant debates about increasing the minimum wage to $15 an hour and legalizing recreational marijuana — two major Democratic priorities. Legislative leaders said they’re ready to go to bat for those issues this budget season, but they’re likely to face Republican opposition.

A Shapiro administration official said the state would generate $76 million from recreational marijuana sales taxed at 20% in its second year, $160 million by the third year, and $230 million by its fourth.

On minimum wage, Democrats seemed to draw a line in the sand: “We are finally going to raise the minimum wage here in Pennsylvania,” said Senate Minority Leader Jay Costa (D., Allegheny). “We will not leave here in June, or shortly thereafter, unless we raise the minimum wage.” (Senate Republicans said they’re interested in raising the minimum wage but would not put a number on it Tuesday.)

Shapiro also wants to regulate skill games, slot-machine lookalikes that are unregulated and untaxed by the state. They have proliferated in corner stores, bars, and more, and proponents of the machines say they give much-needed additional revenue to small businesses across the state. The main manufacturer of these machines has been pushing for regulation, though it wants to be taxed at a lesser rate than traditional slot machines. Many casinos and video-gaming terminal hosts want to ban the machines all together.

Shapiro proposed taxing these skill games at 42%, which would generate an additional $150.4 million in revenue.

Now, the hard work begins. Lawmakers will consider Shapiro’s proposal in weeks of budget hearings, before heading to closed-door meetings to reach a final budget deal by June 30.

“It’s time to solve these pressing problems, to meet this moment responsibly and with bipartisan compromise,” Shapiro said.