The PA Chamber works hard to achieve pro-business legislative victories on behalf of our members. Sometimes those wins are what doesn’t become law. That was true during this year’s budget negotiations, which included pro-business wins and excluded certain proposals that would have been harmful to economic growth.

On July 5th, the PA House voted to concur on a state budget bill the Senate passed the week before. The House vote came after Gov. Shapiro released a statement vowing to line-item veto a $100 million educational scholarship program negotiated by Senate Republicans and his administration. Due to this disagreement, legislative leaders have not signed the budget bill, a necessary step before it goes to the governor for his signature to become law. Additionally, lawmakers have not advanced ancillary bills, such as a Fiscal Code or funding for state-related universities, that accompany the state budget.

As the impasse continues, below is a rundown of what was included in the $45.5 billion budget legislation approved by both the House and Senate.

Budget Breakdown

The budget bill is $400 million less than was proposed by Gov. Josh Shapiro in March and $1.5 billion less than what the House passed in early June. And, the plan makes a $500 million deposit into the Rainy-Day fund, raising it to more than $5.6 billion. Most importantly, it doesn’t raise taxes on business or individual taxpayers – which is always a win for the state’s employers and local economies.

Taxes

The budget plan continues the planned phase-down of the Corporate Net Income Tax, with the next reduction moving the rate to 8.49 percent in January 2024, continuing on a schedule to reach 4.99 by 2031.

The Department of Revenue will receive an increase of more than $17 million for Technology and Process Modernization to complete system upgrades.

The bill would also expand eligibility and maximum rebates under the Property Tax Rent Rebate Program for seniors and persons with disabilities.

 

Education Funding

This year’s budget continues to fund basic education funding to historic levels – adding another $800 million in new K-12 public education dollars. This includes:

• $567 million more for basic education subsidies.
• $100 million more for “Level Up” supplements for low-income school districts.
• $50 million more for special education.

The budget also includes $125 million for school safety grants and $100 million for student mental health.

The Senate-passed budget contains $100 million for Pennsylvania Awards for Student Success (PASS) scholarships, which is the line item the governor has since said he will veto and is essentially holding the process up.

According to Senate Republicans, the budget includes a $150 million increase for the PA Chamber-backed, popular Education Improvement Tax Credit (EITC) program that allows business leaders to provide scholarships to students for tax credits; however, this will need to be enacted in subsequent legislation.

Infrastructure

The budget bill continues the phase-out of State Police funding from the Motor License Fund with a goal to fully phase down by 2026-27. The reduction this year will be $125 million.

It provides $1.7 million within the Department of Environmental Protection (DEP) to support improvements to the permitting process.

It allocates $112 million in royalties from oil and gas drilling on state game lands for State Park and Forest Infrastructure Projects, double the amount that was allocated last year.

 

Workforce

The budget bill increases the Department of State’s operating budget by $3.2 million, which includes funding for occupational boards dedicating funds to licensure system modernization and upgrades.

It would provide a nearly 50 percent increase in Child Care Services to help low-income families afford childcare.

It includes increases for existing workforce development programs, including a $14 million, or 13.3 percent, increase for career and technical education and a $3 million increase to the apprenticeship training program through the Department of Labor and Industry (L&I).

It would also provide a $3 million appropriation to the Foundations in Industry program through the Department of Community and Economic Development (DCED) to increase apprenticeship and pre-apprenticeship programs.

It also includes a $3.5 million appropriation to the Schools-to-Work program through L&I will support partnerships between career and technical education students and employers.

 

What’s Not In the Budget Bill

Sometimes budget victories are just as much about what’s not in a final budget bill– and this year was no exception. Earlier this year, talk of a minimum wage increase to $15 an hour with an increase in the tipped wage credit was being discussed that would have increased labor costs to as high as 300 percent on some employers. This mandate, which would have crushed thousands of small businesses, didn’t make it into the final budget deal. Another floated proposal that wasn’t included was the legalization of recreational marijuana, which the PA Chamber has pushed back against as employers continue to grapple with labor challenges.

 

Our Final Take

 

While there remain several items on our session priority list, we look forward to continuing our work with lawmakers when they return in September. We remain optimistic that by focusing on bipartisan collaboration, keeping the line of communication open, and prioritizing our members’ top issues, we’ll move the ball forward on these important items for the business community.