HARRISBURG — Budget negotiations continue in the Pennsylvania State Capitol and a key figure in finalizing the next spending plan says there is universal understanding among negotiators that a structural deficit must be addressed but differences remain over how to reach resolution and prevent future fiscal calamity.
One thing Pennsylvanians should expect amid the uncertainty surrounding budget talks is that the final product will likely again be delivered post-deadline.
“I will tell you that I see no practical way that a budget will be completed on June 30. It’s just a functional reality,” Sen. Joe Pittman, floor leader for the Senate Republican majority, told Capitol reporters Wednesday.
“There is no framework of a deal, I can tell you that. We are engaged in conversations. Those conversations have not gone nearly as quickly as we would prefer, so we have a lot of work to do,” he said.
The deadline is set in Pennsylvania’s Constitution but has been missed in 16 of the past 26 budgets, an era spanning four gubernatorial administrations and varied legislative control. Lengthy delays can stall discretionary spending but mandatory expenses are required to be met.
Gov. Josh Shapiro proposed a $51.5 billion budget for 2025-26, a plan that the majority House Democratic Caucus is prepared to ship to the Senate. The total represents about a $3.6 billion increase in spending, one the Republican majority in the Senate would be poised to reject.
The deficit within Shapiro’s proposal is approximately $4.5 billion. Under the plan, nearly $2.9 billion in unspent budgetary reserves would be rolled into the budget along with an additional $1.6 billion transfer from Pennsylvania’s “Rainy Day Fund.”
Legislative Republicans have vocally rejected that scenario, pointing to out-year projections in which all reserves and savings are swiftly spent through and compounded deficit exceeds $27 billion by 2030.
Erasing the structural deficit within a single budget isn’t realistic, Pittman said, but actions must be taken immediately to work toward that goal. For Senate Republicans, he said the priority is limiting the growth in spending on Medicaid and enacting a regulatory framework for skill games, instituting public safety controls including age restrictions and enacting a tax structure to generate millions in new revenue.
Senate Republicans are open to charter school reforms, referring to a plan approved by House Democrats, but said resulting savings for public schools must be considered as an increase in basic subsidies. He said school vouchers, proposed as scholarships for students in struggling districts, are also of priority.
“We have some time. Thanks to the surplus that we have built, thanks to the Rainy Day Fund that we have, if we start making some changes now we can do this in a way that’s as least painful as possible. If we kick the can down the road and ignore this, we’re a year or two away from fiscal calamity,” Pittman said. “Until we get our arms around, number one, Medicaid, I’m not sure how we make those next steps.”
Pittman said there must be agreement to improve prior authorization of services and address beneficiary cost-sharing.
Shapiro’s budget seeks an additional $2 billion for Medicaid, largely driven by surging prescriptions for GLP-1 medications like Ozempic, initially meant for treating diabetes but now widely popular for weight loss.
That figure isn’t manageable, Pittman said.
Changes initiated by the Shapiro administration to reduce spending on the medications are pending regulatory approval. According to the Department of Human Services, prior authorization is already necessary for Medicaid beneficiaries. The department seeks updates regarding medical necessity and guidelines for prior authorization to ensure those at highest risk for medical complications have access.
The proposed changes will apply to those using GLP-1s for weight loss, not those prescribed to treat diabetes or pre-diabetes.
The House Democratic majority has been active this session in advancing its priorities. It moved bills to the Senate proposing a tiered increase to the minimum wage, legalizing recreational marijuana and selling it through a system largely owned by the state, energy initiatives reliant on developing and incorporating renewable sources, and boosting the annual spend on public transit systems by a combined $1.5 billion across the coming five years.
“We stand ready to send the Governor’s proposed budget to the Senate. But we also acknowledge in divided government, we must work together to pass a final compromise, and we have been waiting patiently to see what the Senate can pass — preferably before or not long after June 30,” said Elizabeth Rementer, press secretary for House Democratic Majority Leader Matt Bradford.
Each landed with a thud with a Senate majority disinterested in raising the $7.25 hourly minimum to levels proposed by House Democrats — $15 or $12, depending on location — a marijuana plan with limited private sector entry, energy proposals failing to deregulate the use of fossil fuels, and transit spending on systems viewed as failing.
“Funding transit is something that we can live without in our caucus,” Pittman said, though he remained open to some measure of spending in this area as long as road and bridge infrastructure also gets a financial boost.
Senate President Pro Tempore Kim Ward, R-Westmoreland, recently floated the idea of a stop-gap budget, adopting a six-month spending plan amid uncertainties at the state and federal levels. Pittman said that while not ideal, he’d be willing to move in that direction should a budget impasse drag beyond a few weeks.
During an event Wednesday in Lancaster, Shapiro said a stop-gap budget won’t happen, adding that Bradford is on the same page.
Tough choices must be made in finalizing a budget, Shapiro said, and he expressed optimism that legislative Democrats and Republicans would meet the moment.
“I’m heading right back to the Capitol,” Shapiro said when asked about his engagement. “I think we are making good progress. We understand the issues that need to be addressed, I’m not suggesting we’ve agreed on the answers on how we address them. I think we actually, in some ways, have fewer issues on the table based on the progress we made last year, particularly around education, both the number and the funding formula that had always been a fairly sticky issue in negotiations. I think we’re making progress.”