Pennsylvania is nearing its budget deadline. The battle will likely stretch long into the summer

HARRISBURG, Pa. — Financial crises threaten to force service cuts at the state's two largest transit agencies. A deadlock in Congress could vastly reduce federal aid. Opinions are divided on whether legalization of recreational marijuana is possible.

State lawmakers, under intense pressure, face those dilemmas as Pennsylvania's budget deadline looms.

Complicating the picture further are proposals to tax and regulate the tens of thousands of skill games that have popped up all over the state.

With eight days to go before the state's current spending plan expires, Senate Republican Majority Leader Joe Pittman has said it appears almost certain no budget deal will be in place by June 30.

The three top leaders who will have to agree to the final deal — Pittman, of Indiana County, Democratic Rep. Matt Bradford of Montgomery County, and Gov. Josh Shapiro — could be negotiating well into the summer.

Despite that, Shapiro, who is up for reelection next year and is often mentioned as a potential 2028 Democratic presidential candidate, sounded confident late last week that compromise would pave the way to a deal.

"We are each going to have to give a little bit, and we're going to make progress, and we're going to get it done," the governor said.

He kickstarted the process in February with the unveiling of a $51.5 billion spending proposal for the 2025-26 fiscal year. Since then, developments in Pennsylvania and beyond have added even more strain to the budget process.

Transit funding, one of the biggest public friction points tied to the budget, has both Pittsburgh Regional Transit and the Philadelphia region's SEPTA staring down major service cuts if they don't get more state money.

State Sen. Jay Costa, D-Forest Hills, said he believes a recently passed House bill that carries out Shapiro's plan to put $293 million more into transit systems statewide may be palatable to Republicans, because it includes an unrelated plan to put $500 million into road and bridge work.

Muddling matters for state lawmakers is the ongoing spending battle in Washington, D.C. Republicans control Congress and the White House, and they are locked in a high-stakes, intraparty struggle over a massive federal reconciliation bill that could dramatically scale back the tens of billions of dollars in federal aid that Pennsylvania counts on every year.

The final congressional deal will have an especially significant impact on the state Department of Human Services, which relies heavily on federal spending. At $21.2 billion, the department represents the single biggest piece of Shapiro's spending proposal.

For the second-largest chunk of state spending — the Department of Education, at $19.8 billion — Shapiro sounded a positive tone Thursday by noting that last year's negotiation produced a deal to send hundreds of millions of dollars to the state's most underfunded schools. That deal was achieved in the pressurized aftermath of a court decision that found the state's K-12 funding system unconstitutional.

But Pittman on Wednesday brought up what he called an "old wound" from 2023. Then, Shapiro vetoed money for a voucher-style scholarship program that would have allowed students from low-performing public schools to switch to private ones, a concept Republicans still support.

Legalization of recreational marijuana, which has occurred in five states that border Pennsylvania, was penciled into Shapiro's proposal as a way to generate more than $500 million in revenue.

A legalization bill passed the House but was rejected by a Senate committee, and Shapiro and Pittman have disagreed on whether a deal is possible this budget cycle.

The state's booming skill games industry, which has seen slot-machine-like consoles installed in convenience stores and bars across the state, has emerged as another point of contention as lawmakers struggle to agree on how to regulate and tax it.

Following a truism

Overriding the entire spending debate, however, is a simple, family-budget truism: Make sure more money is coming in than going out.

In Pennsylvania, that's not happening by a long shot. Pittman says Pennsylvania's annual spending now is $3 billion more than its revenue. He has described as a non-starter any overall plan that doesn't substantially reduce that figure.

Both Pittman and Senate President Pro Tempore Kim Ward, R-Westmoreland, have used the word "crisis" to describe the state's financial planning challenge. Ward has publicly broached the concept of creating a six-month budget just to get the state past the period of federal financial uncertainty.

Pittman said the tactic might be necessary later but is not needed right now. Shapiro said both he and Bradford, the House Democratic majority leader, are against a six-month approach.

Within the GOP in Washington, Medicaid funding has emerged as a key fault line. House and Senate Republicans have fought over how much to cut from a health insurance program on which more than 70 million people rely.

The House Republican plan would push nearly 8 million people out of Medicaid, and, because of tax cuts and other provisions, increase deficits by $2.8 trillion over 10 years, according to the Congressional Budget Office.

In the U.S. Senate, Republicans are pushing for even steeper cuts to the government insurance program, but other changes in their version could increase the deficits more than the House version. That prospect has led several conservative representatives to threaten to vote against the legislation.

Republicans' thin majority in the U.S. House means that just three GOP defections could doom the bill.

Pennsylvania relies on tens of billions in federal funding a year, mostly to cover Medicaid costs for about 3 million residents, including almost 40% of all children. With the scope of funding in question, state lawmakers have struggled to come up with a spending plan without knowing the status of a crucial source of revenue.

In Harrisburg, a spokeswoman for Bradford, Beth Rementer, said House Democrats have been doing their share to reach a budget deal. She said Democrats, who hold a 102-101 majority, have passed bills on budget-related issues including transit and marijuana.

"We have been waiting patiently to see what the Senate can pass — preferably before or not long after June 30," Rementer said.

Pittman said on Wednesday that negotiators had not agreed on a framework for a deal, and he saw no practical way to meet the June 30 constitutional deadline. But, he said, that's not a huge problem.

"We have not met the June 30 deadline periodically. And so we have seen this movie before," Pittman said.

Practically speaking, the lack of a current state budget will not significantly affect state spending for many weeks after June 30.

In 2023 — the year of the blowup over voucher-scholarships — the main budget bill was signed Aug. 3. Some categories of spending that year were not released until related bills were passed in December.

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