UPDATED: Gov. Shapiro Signs $50.8 Billion Compromise Budget

By Whitney Downard, Peter Hall, Ian Karbal, & Emily Scolnick  | Pennsylvania Capital-Star

Gov. Josh Shapiro signed a package of bills into law enacting a $50.8 billion state budget for the next year. The spending plan was approved by the state House and Senate earlier Sunday afternoon with only a handful of opposing votes.

“I knew there would have to be compromises in a divided government,” Shapiro said. “There’s a lot more work to do, but once again we’ve proven that here in Pennsylvania we can bring people together to solve problems, to get stuff done, and to build on this foundation that we’ve laid.”

The budget spends roughly $2.4 billion less than Shapiro asked for in his February address, and excludes a number of policies he requested to bring in new revenue, like legalizing recreational cannabis and regulating skill games.

It contains more than $920 million in new state funding for public education spending and will institute new energy policies and a long-sought increase to the pensions of teachers who retired before 2001. But many other policy changes and new revenue streams sought by Democrats and Republicans alike have been omitted.

Legislative leaders from both sides of the aisle described the package of bills that comprises the budget as a product of compromise, with Democrats and Republicans acknowledging concessions. The theme was driven home as three separate senators quoted the Rolling Stones’ song “You Can’t Always Get What You Want” in floor speeches.

“There are things that I think we all can recognize as being very positive, but I’m also sure that there’s things in here that some of us would prefer not be in it, and that would be coming from both sides of the aisle,” said Senate Appropriations Chairman Scott Martin (R-Lancaster), who played a key role in negotiations.

House Speaker Joanna McClinton (D-Philadelphia) said she’s proud to have steered a bipartisan budget with no tax increase that makes substantial investments in schools, public safety, health care and affordable housing. 

In addition to the third installment of $565 million to fund public schools more equitably, the budget would strengthen school safety, expand career and technical education and provide free breakfast to students across the state, McClinton noted.

“At a time when federal actions have made life more difficult through deep program cuts and policies that have driven up costs, in Pennsylvania we continue to deliver for every family, senior, and child,” she said.

There were also defectors in both parties. Progressive Sens. Katie Muth (D-Montgomery) and Nikil Saval (D-Philadelphia) voted against the general appropriations bill. Both acknowledged positive aspects of the proposal, but said it failed to address important policy questions like how Pennsylvania will bring in new revenue, or address issues like public transportation and affordable housing.

“I want to recognize that there is major progress that is made in this budget,” said Saval. “At the same time, I still feel that this budget marks time when we should be devoting ourselves to the full spectrum of issues that our constituents are suffering from at this moment.” 

Muth criticized the compromise for failing to address the state’s structural deficit, and pushed  for a digital advertising tax on some of the nation’s largest companies alongside a skill games tax. 

“If we had pursued proposals in this chamber, we would have more to work with,” she said. “And we would not have to pass another mostly flat-funded and cost-to-carry budget.” 

None of the four Republican Senators who voted against the general appropriations bill, Sens. Doug Mastriano (R-Franklin), Dawn Keefer (R-York) and Scott Hutchinson (R-Venango) and Jarrett Coleman (R-Lehigh) spoke on the measure. 

In the House, Rep. Brad Roae (R-Crawford) called the spending plan “very terribly irresponsible” and warned that its relatively low price tag obscures looming debts by deferring some payments to later years.

Though the current measure doesn’t dip into the nearly $8 billion rainy day fund, he worried that the state was simply “postponing spending” into a future budget. 

“We are going to spend the rainy day fund, whether we spend it this year or … (if) we spend it in a couple years from now,” continued Roae. “There is going to be a tax increase if this budget bill becomes law.”

He was one of 35 Republican House members to vote against the general appropriations bill. The measure was supported by every Democrat in the chamber.

Energy compromise

Energy affordability and hyperscale data center development have been at the forefront of policymaking debate this session, driven by double digit jumps in electricity bills and dozens of data center proposals across the state. 

Lawmakers proposed multiple versions of bills that would give local government officials time to update land use ordinances by giving them the option of pausing new applications to build data centers. None have been approved by both chambers so far. 

Also left on the table in the Senate was Shapiro’s plan to incentivize data center builders to meet benchmarks for energy procurement, community engagement, workforce development and environmental protection. 

While the bill passed the House with strong bipartisan support, it did not receive consideration in the Senate. 

The budget does incorporate a handful of measures that aim to improve transparency of the commonwealth’s electricity market and accountability for big tech companies with data centers in the state.. 

Some energy experts have claimed speculative plans for data centers are responsible for rising costs. Lawmakers responded by passing legislation that requires PJM Interconnection to share its forecasting information with state regulators. That language was added to the state’s fiscal code, which amounts to instructions for state agencies to carry out their duties. 

The code also includes legislation that requires data centers that use more than 10 megawatts of electricity to report their power and water consumption to the state Department of Environmental Protection. 

It also has language requiring electric utilities to assess whether “advanced transmission technologies” could be deployed to maximize the capacity of existing power lines before receiving approval to build new ones. 

With data center developers looking to Pennsylvania’s abundant natural gas supply to power their facilities, the code bill also includes language that updates the regulatory framework for natural gas drilling. 

The legislation’s prime sponsor, Senate Environmental Resources and Energy Committee Chairman Gene Yaw (R-Lycoming) said it would allow development of natural gas resources in the Utica Shale formation, which lies deeper than the Marcellus formation, the primary focus of gas extraction for the last two decades.

Yaw’s legislation requiring gas producers to fully plug wells with cement before abandoning them is also included in the Fiscal Code. 

Passed separately, legislation that would make building a new class of nuclear power plants possible is headed to Shapiro’s desk. House Bill 2017 gives the DEP the discretion to charge lower fees for smaller, safer and faster to build small modular reactors and micro reactors.

Both chambers have also approved Yaw’s plan establishing financial accountability requirements to ensure the owners of solar energy facilities can’t walk away without restoring the land.

More education spending details

The bill to fund Pennsylvania’s hundreds of school districts — including public, charter and cyber charter options — alongside community colleges and trade school programs, was criticized for sending money to underperforming schools. But, it passed the Senate on a 45-5 vote.

“Over the past 10 years, Allentown School District, a district that I represent, has received almost $100 million in additional funding and during that same time period, their performance only gets worse,” said Sen. Jarrett Coleman (R-Lehigh). “Yet, we’re sending them even more money, even more rewards for that declining performance.” 

Allentown was among the dozens/hundreds of school districts to receive extra dollars, known as adequacy funding, after the Commonwealth Court ruled in 2023 that the state funded schools unfairly to the tune of $4.5 billion. 

Senate Minority Leader Jay Costa (D-Allegheny) defended the decision to devote another $565 million toward adequacy funding, which he said reversed years of “historic underfunding.”

That money “(allows) those school districts that were struggling to lift themselves up. Lift themselves up to be able to provide the education experience for the students that was necessary and adequate and equal and fair across this commonwealth,” continued Costa. 

Sen. Nick Miller (D-Lehigh) previously served on the Allentown School Board and described challenges with 150-year-old buildings “filled” with lead and asbestos without air conditioning. 

“We know the impact that that has on a child’s success rate,” added Miller. “These kids deserve this investment. They deserve the opportunity to be successful with programs that prepare them for the workforce of tomorrow.” 

Four other senators, all Republicans, voted against the proposal: Keefer, Hutchinson, Mastriano and Pat Stefano, of Fayette County.

There was no discussion in the House chamber. 

The school code compromise also contained several cyber charter policy reforms that build on and refine major legislative action from the 2025 budget. While Shapiro initially proposed a $75 million funding adjustment for cyber charters, no new funding cuts are in the final version.

Cyber charter leaders previously expressed concerns over last year’s cuts, saying any further changes to their funding would be difficult to overcome, especially for smaller schools. 

Last year’s budget also required families with students enrolled in cyber charters to provide proof of residency twice a year. This year’s school code reduces that to an annual requirement, aligning with proposals introduced by Coleman and Rep. Joe D’Orsie (R-York). 

This year’s update mandates weekly wellness checks for cyber charter students, requiring students to be visible on camera and communicating with a teacher, administrator, or school district representative. 

In addition, the code doubles down on preventing habitually truant students from enrolling in cyber charter schools, a policy first enacted last year. With this year’s update, cyber charters will no longer receive payments from school districts for going against state policy and enrolling habitually truant students. 

Cyber charters typically receive tuition payments directly from school districts for each student they enroll. 

The code outlines new procedures for “educational best interest” hearings for truant students who wish to transfer, during which a judge will consider academic performance, student safety, disciplinary history, and chances of success when deciding if a student may enroll in a cyber charter.

Republican lawmakers and cyber charter leaders have said blocking truant students from enrolling in cyber charters limits families’ access to school choice. 

What’s not in the deal

Missing from the budget were a number of policies sought by Shapiro, such as a $1 billion “critical infrastructure fund” for housing, energy and school projects funded by general obligation bonds, and a proposal to raise the state’s minimum wage to $15.

In his February budget address, Shapiro also asked lawmakers to tax and legalize recreational marijuana and slot machine-like skill games, which he said could bring in millions in new revenue. Neither measure was included in the agreement.

“I think at the end of the day, there are people on both sides of this building that need to make a determination on what they want to do on skill games,” Harris told reporters Saturday. “We stand ready, willing and able to discuss that issue.”

Senate Majority Leader Joe Pittman (R-Indiana) said his caucus was “open to a regulated marketplace,” but that it wasn’t a priority during weekend negotiations. 

“These are slot machines and, if nothing else, they have to be combined with some sort of age-restricted environment,” added Pittman, noting that the legislature can still act after the deadline. “These machines are illegal and in less than 120 days, they will be leaving the marketplace.”

Lawmakers were unable to agree on new sentencing guidelines for second degree murder after the Pennsylvania Supreme Court ruled the existing law requiring mandatory life sentences was unconstitutional. Unless a measure is passed by July 24, the courts will have to decide how to resentence 1,100 people currently serving life sentences on second degree murder charges without legislative input.

Shapiro said he worked with lawmakers in the days before the budget was passed in an attempt to bridge the gap between Senate Republicans, who pushed to institute a 35-year minimum sentence in most second degree murder cases, and House Democrats who wanted to allow judges to be more lenient.

“We’re gonna continue to work on this issue,” Shapiro said. “I’m hopeful that we can get there.”

Democrats also failed to secure a new tax they sought on digital advertisers, which would be levied from major companies like Meta and Google. They estimated the proposal could bring in $500 million annually.

Republicans ultimately agreed to boost state education spending without restructuring the school district funding formulas, which a number of members had pushed for.

The budget also doesn’t address public transit funding. The issue was central to last year’s spending negotiations, and was resolved when lawmakers passed a two year stopgap measure. But transit advocates have warned a more permanent solution is necessary.

Despite the budget failing to address a number of legislative priorities of the governor and legislative leaders, it was passed only a week and a half after the deadline set by the state’s constitution.

That’s a major improvement over last year, when a spending plan wasn’t agreed to until November.

How the remaining policy fights play out in the future will likely be determined by the outcome of November’s election, where Democrats hope to flip enough seats in the Senate to take a majority in both chambers.

Issues like whether to legalize recreational cannabis and how to regulate hyperscale data centers have also already become central to the gubernatorial election, where Shapiro faces a challenge from Republican Treasurer Stacy Garrity.

Original Story:

By Ian Karbal, Emily Scolnick, Peter Hall & Whitney Downard | Pennsylvania Capital-Star

Roughly a week and a half after the constitutionally mandated deadline, state legislators unveiled a $50.8 billion budget Saturday night that included millions of dollars in new funding for public education, new energy policies and a long-sought increase for the pensions of teachers who retired before 2001. 

The general appropriations bill now set for consideration in the full Senate gives a sense of the compromise on spending between Democrats and Republicans in the Pennsylvania General Assembly.

Several “code bills” set to be considered in the House, meanwhile, highlight some of the agreed-to legislative priorities that will be added to the instructions for state agencies to carry out their duties.

Details continued to be released well after 9:30 p.m. and most fiscal leaders declined to comment. Lawmakers in both chambers are expected to meet Sunday to continue work on the spending proposals.

“At the end of the day, I think what you’re seeing moving forward is an investment plan in the commonwealth that you’ll see a significant amount of bipartisan support (for),” said House Appropriations Chairman Jordan Harris (D-Philadelphia). “Folks are ready to let the people of Pennsylvania know what is important to all of us collectively.” 

The 1.4% increase over last year’s spending is $2.4 billion less than what Gov. Josh Shapiro proposed in February. To fund his priorities, Shapiro proposed $2 billion in taxes on skill games — which have now been declared unlawful by the Pennsylvania Supreme Court — and recreational marijuana. The latter is a non-starter for conservative lawmakers, but the court’s ruling means the legislature must act within the next three months to legalize the gaming devices.

In closed-door negotiations with Republican Senate leaders, many of the more controversial or partisan policy proposals, including recreational marijuana, skill games regulation and an increase to the minimum wage, were stripped out of the bill. 

Lawmakers resisted dipping into the state’s nearly $8 billion rainy day fund, which was a priority for GOP leaders. 

Along with overall spending numbers, the bills that comprise the spending plan also include a number of new policies, many that had been sought by lawmakers from either party and agreed to as part of spending negotiations.

But the budget process is not over, and a number of proposals lawmakers had been debating were absent from bills that moved Saturday night.

Things still in limbo

As it stands, the House Democratic majority and Senate Republican majority had not agreed to alter the commonwealth’s tax code, which would institute changes to the commonwealth’s tax policy. 

That leaves in limbo one of Shapiro’s signature policy pushes, the GRID Standards, which set voluntary benchmarks on sustainability and transparency for data center developers that allow them to claim tax cuts and expedited permitting.

It’s also not clear if lawmakers will be able to come to an agreement on new sentencing guidelines for people convicted of second degree murder, which is what’s charged when someone dies during the commission of a felony.

In March, the state Supreme Court ruled that the mandatory life sentence without parole for people charged with felony murder were unconstitutional. They gave the legislature until July 24 to come to an agreement on how courts should sentence future convicts, and how the 1,100 people currently serving those sentences should be resentenced. 

Saturday night, the Senate advanced a bill that would institute a minimum 35 year sentence in almost all cases — an identical proposal to one previously panned by key Democrats and criminal justice advocates. But it’s unclear if House Democrats will agree to it. 

House Judiciary Chairman Tim Briggs (D-Montgomery) told the Capital-Star that Democrats and Republicans have “not been able to get to an agreement” on second-degree murder sentencing policy.

But, Harris told reporters they may “see more” action on the issue  in the coming days.

Lawmakers also seemed to be unable to reach a deal on skill games legislation, one of Shapiro’s proposed avenues to increase state revenue. 

Shortly before the budget deadline, the Pennsylvania Supreme Court ruled skill games unlawful, giving lawmakers a four-month window to legalize the machines before enforcement of the ruling begins in October. How and if to regulate and tax them became a contentious issue for lawmakers as negotiations unfolded. 

The current spending plan deal does not include skill games legislation. Harris told reporters that a deal could still emerge in the coming months.

Public education spending

Education emerged as an early point of consensus, with all parties agreeing to $565 million earmarked for adequacy funding.

When the Commonwealth Court ruled the state’s system of funding public education was unconstitutionally inequitable in 2023, lawmakers came up with what they called an adequacy formula to increase funding by $4.5 billion over nine years, primarily for the state’s poorest school districts.

While a number of Republicans have pushed to overhaul the formula, Democrats have fought to hold closely to the 2024 agreement.

Democrats secured long-sought funding to increase pensions for public school teachers who retired before 2001. That was the year the legislature passed a bill enhancing pensions for public school teachers who retired from that point on. 

Retired police officers and fire fighters, who do not automatically receive such adjustments, also got a cost-of-living adjustment for pensions. The retirees will receive monthly pension adjustments between $75 and $300, depending on how long they’ve been retired.

Leaders also came to an agreement on higher education, advancing spending plans in separate pieces of legislation. Those bills keep the University of Pennsylvania’s funding flat at just over $33 million, while increasing the dollars devoted to state-related universities — which include Penn State, the University of Pittsburgh, Temple University and Lincoln University — by 0.3%, to $615 million. 

The State System of Higher Education, which consists of 10 state-owned universities, voted to increase its tuition for the 2026-27 academic year earlier this week, committing to lowering the rate depending on how much state funding it received. But its initial appropriations request was over $650 million.

Energy and environment

Concern among policymakers and constituents about the impact of hyperscale data centers on the environment and energy supplies produced a fleet of measures to manage their growth and effects on the environment.

Only a handful are included in the fiscal code bill. Those provisions would give regulators greater oversight of electricity demand forecasts, require data center owners to report annually on energy and water use and require utilities to assess the use of advanced transmission technologies before building new power lines. 

The code bill doesn’t include any of a handful of proposals to allow municipalities to declare moratoriums on new applications to build data centers. Those measures were intended to give local officials time to develop and adopt zoning amendments to govern data center construction.

Late on Saturday night, however, the Senate Rules Committee amended and approved Sen. Jarett Coleman’s (R-Lehigh) bill that would give municipalities the option to declare an 18-month moratorium on new land use applications for data centers. The amendment adds an exception for data center projects that will be co-located at the site of a power plant with an agreement to supply electricity to the center. 

Developing better methods for forecasting electricity demand was identified as a priority for the commonwealth’s electric utilities and PJM Interconnection, which operates the grid Pennsylvania shares with 12 other states and Washington, D.C. Some experts have questioned whether the soaring demand forecast in the next decade was being driven by speculative or duplicative proposals for data centers. 

Language in the code would require PJM to share its forecasting information with the Pennsylvania Public Utilities Commission and the Office of the Consumer Advocate, an independent office within the state Attorney General’s Office, focusing on utility issues.

It also would require data centers with a maximum energy use of more than 10 megawatts to report their electricity and water use to the DEP, which would be published on the agency’s website. The provision carries a $10,000 penalty for each day a data center fails to comply.

Another spending plan add-on would require utilities to consider the use of advanced transmission technologies, which can provide long-term savings by reducing the amount of energy lost, when applying to approve new power lines. They can also help utilities wring the most life out of existing infrastructure, the tech’s promoters say.

House Energy Committee Chairperson Elizabeth Fiedler (D-Philadelphia), who was the prime sponsor of the legislation, said it would give state regulators power to require utilities to assess the technologies when applying for approval to build new power lines.

The fiscal code bill includes new provisions for natural gas well drilling and plugging.

It includes language introduced by Sen. Gene Yaw (R-Lycoming) requiring gas producers to obtain permits from the Pennsylvania Department of Environmental Protection to drill wells intended to access gas from the Utica Shale formation, which is deeper than the Marcellus formation.

Yaw said in a news release that the legislation would update a 65-year-old regulatory framework that didn’t account for modern drilling techniques. The updates would reduce delays in permit review, improve well placement and limit unnecessary surface impacts.

It also includes another Yaw bill that directs the DEP to ensure decommissioned wells are fully plugged with cement from the deepest reachable point to the surface. 

Separate from the fiscal code bill, the House Appropriations Committee passed Yaw’s Senate Bill 349, which requires owners of solar energy facilities larger than two megawatts to have a plan and provide financial assurance to decommission the facility.

Pennsylvania Capital-Star is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Pennsylvania Capital-Star maintains editorial independence. Contact Editor Tim Lambert for questions: info@penncapital-star.com.