Shapiro proposes $51.5 billion budget; Philly schools would get an additional $200 million; GOP leaders call it a ‘fantasy’

HARRISBURG — Gov. Josh Shapiro proposed on Tuesday a $51.5 billion state budget in his annual address, calling for major investments in health care and education, while focusing on government efficiency as the state approaches a hefty budget shortfall.

Pennsylvania is set to spend $4.5 billion more than it brings in in revenue this year. Shapiro pitched that the state should address the deficit by creating several new revenue streams, including the taxation of recreational marijuana and so-called skill games, as well as tapping into its surpluses and an additional $1.6 billion from the state’s Rainy Day Fund — money set aside for emergencies that has thrived in recent years from federal pandemic relief.

“We have the resources we need to make smart investments now and maintain a responsible balance in reserve,” Shapiro said to a joint session of the state House and Senate in a 90-minute, impassioned speech to lawmakers with mentions of the Philadelphia Eagles, Berks County’s Taylor Swift and famed groundhog Punxatawney Phil.

Gov. Shapiro’s budget plan continues to ramp up investment in Pennsylvania’s underfunded K-12 schools, adding more than $500 million to a formula unveiled last year that gives big boosts to poorer communities.

If ultimately adopted by the Legislature, the proposal announced by Shapiro Tuesday would mark the second installment of the state’s $4.5 billion plan to fix its school funding system, ruled unconstitutional last year by a Commonwealth Court judge.

While Shapiro touted his commitment to that plan — noting that the Pennsylvania Constitution promises all students access to a “thorough and efficient system of education” — his budget wouldn’t deliver the same level of increases that all public schools saw last year, which drew objections from some public education advocates.

After Republicans cast Gov. Josh Shapiro’s third budget proposal as irresponsible and impossible to fund, House and Senate Democrats praised the first-term governor as taking a measured approach to build on the successes they’ve already achieved.

Democratic leaders said in a news conference following Shapiro’s speech that Shapiro offered a focused way forward for the state that makes strategic investments in areas for growth, such as increasing public education funding, an expedited corporate net income tax reduction, and more. 

“We will meet Republicans halfway,” said House Majority Leader Matt Bradford (D., Montgomery), noting that his caucus would be ready to support skill games or marijuana legalization when the Senate sent them a bill.

Three of the state-related universities would get their first state funding increase in several years under a budget proposed by Gov. Shapiro.

But it would be distributed based on yet-to-be-developed, performance-based funding criteria. Under the proposal, Pennsylvania State University, Temple University, and the University of Pittsburgh would receive $60 million allotted through a formula to be developed by a new council that began meeting late last year.

The increase represents just under a 10% boost in funding for three of the so-called state-related schools, which currently receive about $610 million. Representatives for Penn State and Temple did not immediately respond to requests for comment on the increase.

Gov. Josh Shapiro on Tuesday proposed a $51.5 billion state budget, calling for major investments in education and health care.

And as Pennsylvania faces a $4.5 billion budget gap, Shapiro also pitched that the state should create new revenue streams — such as legalizing recreational marijuana and regulating skill games — as well as tapping into $1.6 billion from the state’s Rainy Day Fund.

Republicans, meanwhile, slammed Shapiro’s proposal, criticizing him for overspending in the face of a looming deficit.

Philadelphia schools would get an additional $200 million in state money for the 2025-26 school year if the funding proposal floated by Gov. Josh Shapiro Tuesday passes.

Sounds great to Superintendent Tony B. Watlington Sr., he said in a statement.

“We thank the governor for his support and look forward to working with him and the legislature to make this proposal a reality and ensure all of our students, regardless of where they live in Pennsylvania, have access to a high-quality, public education that prepares them to imagine and realize any future they desire,” Watlington said.

Leaders in the GOP-controlled Senate were quick to criticize Shapiro’s budget for overspending in the face of a looming budget deficit.

“It is great politics to be all things to all people, but it’s not good governance,” said Senate Majority Leader Joe Pittman, (R-Indiana).

Shapiro’s $51.5 billion budget proposes increasing the state’s overall spending by 8%, and pulling funds from Pennsylvania’s rainy day fund — which Republicans viewed as reckless. Shapiro’s budget predicted massive windfalls from legalizing marijuana and taxing gaming machines, numbers Republicans dismissed as far over-inflated. State Sen. Scott Martin (R-Lancaster), the chair of the Senate Appropriations Committee, called the budget “fantasy.”

After roughly 90 minutes, Shapiro concluded his speech by waxing poetic about Pennsylvania’s traditions – leading with the decades long practice of letting a groundhog tell us if it’s still winter.

Shapiro attended Groundhog Day celebrations in Punxsutawney on Sunday as tens of thousands of people gathered to learn if Phil “our official state meteorologist" would see his shadow.

“I know some folks think we’re all crazy for standing in the freezing cold waiting for Phil. But I gotta tell you, I love Groundhog Day,” Shapiro said. “I go every year. And the greatest part is seeing tens of thousands of joyful people come together from all walks of life.”

Shapiro highlighted a six-part plan and $70 million in new funding to expand affordable housing across Pennsylvania, as the cost of homes and rent has increased exponentially across the state and nation.

“To meet the need for housing this year alone, we need more than 100,000 new homes and apartments,” he said.

Shapiro’s plan includes $10 million to help first-time home buyers with closing costs, moving people out of the rental market. Shapiro also proposed an additional $10 million towards the state’s existing program that funds the development of affordable housing units and $50 million in funds to repair homes.

Gov. Josh Shapiro noted during his budget address Tuesday that Pennsylvania is the second largest producer of natural gas in the nation, behind only Texas.

But he said the state needs to modernize its approach to energy.

Shapiro explained that his new “Lightning Plan … takes bold steps to increase energy production, explore pathways to renewable sources, and grow our economy.”

Once again Shapiro urged the General Assembly to more than double the minimum wage to $15 per hour.

“The floor of our wage structure in Pennsylvania is too damn low,” Shapiro said.

For more than a decade Pennsylvania’s minimum wage has sat at the national minimum of $7.25 per hour despite several attempts by Shapiro and his predecessors to change that. While Democrats have long supported the wage increase the proposal has faced resistance from Republicans, who currently control the state Senate.

Arguing it would spur economic growth, Shapiro said his budget will speed up planned corporate income tax cuts by two years.

He argued for the implementation of a simpler tax code – eliminating outdated taxes that have been on the books since the Civil War and closing loopholes.

Under the current tax code, Shapiro said, 11% of businesses use the “Delaware loophole” to avoid paying state income taxes by registering in states, like Delaware, with no corporate income tax.

Shapiro urged further funding for life sciences and agriculture as he touted Pennsylvania’s work to avoid the impacts of the avian flu, which has spread in flocks across the country .

The state's first case of the quickly spreading disease was detected earlier this year in a commercial flock in the Lehigh Valley.

Shapiro praised the state’s Hi-Path recover fund devoted to supporting poultry farmers said the state’s Department of Agriculture is “all-hands-on-deck” to reduce the spread.

Arguing it would bring $1.3 billion into the state budget over the next five years Shapiro called on the General Assembly to send a bill legalizing recreational marijuana to his desk this year.

Cannabis is currently legal for medical uses in most of the country, including Pennsylvania. But Shapiro argued the commonwealth should join the 24 states that have expanded that legalization to adult recreational use.

Under the current law, he argued, Pennsylvanians who want marijuana were accessing it in other states or through an unregulated black market. The result, he said, made Pennsylvania less competitive.

Gov. Josh Shapiro proposed nearly $65 million in funding Tuesday toward Pennsylvania’s commemoration of the 250th anniversary of America in 2026, also known as the Semiquincentennial.

In his annual budget address to a joint session of the state House and Senate, Shapiro urged lawmakers to provide millions needed to ensure that Pennsylvania, the state where the country was founded, is properly prepared for the national milestone.

Shapiro advocated for $36.5 million to help plan next year’s major events connected to the Semiquincentennial, including six FIFA World Cup matches, the MLB All-Star Game, and early rounds of NCAA’s March Madness tournament, all scheduled for Philadelphia — and the NFL Draft set for Pittsburgh. That funding would be allocated to the Tourism Promotion Fund, Shapiro said.“My budget ensures those epic events have the resources they need,” he said in a prepared text of his remarks. “Because all eyes will be on Pennsylvania as we celebrate America’s 250th birthday in 2026 and welcome millions to where it all began.”

Shapiro has been reluctant to criticize President Donald Trump since he took office last month – instead showing a willingness to work with the controversial president.

But Trump’s name, and the Republican trifecta holding the Oval Office, the House and the Senate, was invoked early in Shapiro’s address. Shapiro didn’t take a swing at the president but instead noted a juxtaposition between federal and state politics. He told Republicans to hold the applause as he mentioned Trump’s inauguration.

While Republicans have taken over the federal government, Shapiro noted that Pennsylvania voters reelected a GOP state Senate and Democratic state House by the same margins that they did in 2022.

Gov. Josh Shapiro returned to the Pennsylvania House chamber on Tuesday to deliver a $51.5 billion budget pitch before a joint session of the General Assembly.

Delivering his third budget address, Shapiro was warmly welcomed with applause from fellow Democrats, while most Republicans stood to acknowledge him.

As Shapiro delivered his speech in the ornate House chamber, Democrats frequently stood to applaud his budget proposal and past accomplishments, while many Republicans sat quietly. Some GOP House members played “budget bingo” with some of Shapiro’s common sayings.

Gov. Shapiro's budget continues the effort launched last year to ramp up investment in Pennsylvania's underfunded K-12 schools, with a more than $500 million increase proposed to be distributed through the state's new adequacy formula.

But in other areas, Shapiro is proposing lesser increases than what schools received last year. The governor's plan includes a $75 million increase in basic education funding, under a formula that benefits schools statewide. Last year, schools got a $285 million increase in basic education funding.

For special education, Shapiro's plan includes a $40 million increase, compared to last year's increase of $100 million.

Shapiro began his 2025 budget address by acknowledging celebration and tragedy in Philadelphia.

In nearly the same breath, Shapiro both celebrated the Eagles' second visit to the Super Bowl in two years and acknowledged the tragic plane crash that took seven lives in Northeast Philly last weekend.

“Right now in Northeast Philly, people are walking around in the Eagles green, excited about the Super Bowl while at the same time trying to process the horror of what happened on Cottman Avenue on Friday night,” Shapiro said.

Gov. Josh Shapiro was greeted by applause Tuesday as he was escorted into the Pennsylvania House of Representatives to deliver his third budget address to a joint session of the General Assembly.

Several guests were present in the chamber and gallery for the address including Philadelphia Mayor Cherelle Parker, City Council President Kenyatta Johnson and Councilman Curtis Jones Jr.

Shapiro greeted lawmakers and state officials with handshakes and hugs before launching into his address.

SEPTA estimates it would receive about $161 million in new state money for operating expenses under Gov. Josh Shapiro’s proposal on Tuesday for a 1.75% increase in the sales-and-use tax revenue allocated to public transit.

Overall, the increased sales tax share would add $292.5 million annually for mass transit across the state, the administration says, an amount estimated to grow to $330 million by the 2029-30 fiscal year.

The proposed budget also includes $750 million in additional PennDot funding over five years, earmarked for repairs to highways and bridges. The revenue would come from the Motor License Fund, now that the State Police has left it.

Gov. Josh Shapiro is expected to make his new “Lightning Plan” a focus of his budget address Tuesday, but the devil will be in the details for his attempt to modernize the state’s approaches to energy.

Pennsylvania ranks 45th in the nation in production of renewable energy and a paltry 3%, according to Yale Climate Connections, run by the Yale Center for Environmental Communication. That comes as other big energy producing states use much more renewable energy, such as Texas, which gets 26% of its electricity from wind and solar.

To remedy that, Shapiro has a goal of achieving 35% clean energy 2035. To help achieve that, he would institute a cap on carbon and invest in reducing electricity costs. He would use tax credits and other methods to provide incentives for renewable energy, including battery storage. He would setup a board to help streamline energy projects. Currently, Pennsylvania is one of only 12 states without such a board to handle siting decisions for key energy projects.

Skill games are slot-machine look-alikes that have proliferated around the state in convenience stores, bars, so-called smoke shops, and fraternal organizations. But they are unregulated and untaxed, meaning Pennsylvania has no oversight and does not profit from their business — as opposed to slot machines, which are highly regulated and casinos pay the state a 54% tax to operate them.

Last year, Shapiro pitched that Pennsylvania should regulate and tax the machines at 42%, which his office estimated would bring in an additional $150 million in tax revenue to the state in its first year and continue to grow from there.

But negotiations stalled among Republicans in the state Senate on how the state should regulate the machines, and GOP leaders have recently expressed new interest in finally reaching a deal on how to tax and regulate them as part of this year’s budget negotiations.

Different year, same dilemma.

SEPTA and other state transit systems are bleeding financially, and for two years, Gov. Josh Shapiro and majority Senate Republicans have failed to reach a deal to get new state money for public transportation.

Shapiro, a Democrat, is expected on Tuesday to again highlight the need for a solution in his annual budget speech.

Gov. Josh Shapiro will again pitch in his annual budget address Tuesday that Pennsylvania should legalize recreational marijuana and tap into tax revenue like almost all of its neighboring states.

But legalizing recreational marijuana still faces major hurdles in Pennsylvania, where the GOP-controlled state Senate is not sold on the idea.

Senate Majority Leader Joe Pittman (R., Indiana) said in an interview earlier this month that Senate Republicans still have logistic reservations about marijuana’s federal classification as a Schedule I drug alongside heroin, as well as whether state government could support a recreational program.

Gov. Josh Shapiro will deliver his third budget address on Tuesday to a joint session of the state House and Senate, as the state faces an impending budget shortfall.

Shapiro, a Democrat in his first term who will again need to negotiate a state budget with a split legislature, is expected to build on a comprehensive plan for the state’s energy industry that he previewed last week. He is also expected to advocate for increased investments across the board for education, public safety, and more, while also pitching new revenue generators and to dip into the state’s billions in savings to help fill a $4.5 billion deficit on the horizon.

Energy, energy, energy

Gov. Josh Shapiro, a Democrat from Abington Township now halfway through his first term leading the nation’s fifth-most-populous state, spent his first two years taking on perennial issues in Pennsylvania, such as the state’s unconstitutional funding system for public education, stagnating higher education institutions, and a long-sought increase to the state’s property tax and rent rebate program for seniors.

But his time as a major swing-state governor — and rumored national ambitions — thrust him into the national spotlight last year as a front-runner to be Vice President Kamala Harris’ running mate ahead of the presidential election. And his first two years leading Pennsylvania have come with challenges; he is one of few governors in the country with a GOP-controlled Senate and a narrow Democratic majority in the state House, requiring both parties to agree on any legislation. He will face the same legislative makeup in the second half of his term, just as he gears up for his reelection campaign in 2026.

“I’m only two years in,” Shapiro said in an interview last month. “I’m hungrier than ever. We’ve got more ideas than ever, and we know that we can work with Democrats and Republicans alike to advance our commonsense agenda.”