On July 11, 2024 the PA House and Senate took a series of votes to finalize the state budget for the 2024-25 fiscal year. Below, find key highlights from the budget agreement and elements important to the business community:
Total Spend
- Total General Fund spending of $47.6 billion for Fiscal Year 2024-25, representing a six percent increase in state spending over last year.
- Spends $740 million less than what Gov. Shapiro proposed in February.
- Makes a $740 million deposit into the Rainy-Day Fund, bringing the fund to over $7 billion.
Tax Changes
- Maintains the current phase-down schedule of the Corporate Net Income Tax (CNI), from 8.49 percent to 7.99 percent in 2025.
- Makes improvements to Pennsylvania’s treatment of Net Operating Losses moving forward by gradually increasing the amount companies are able to deduct using losses incurred after Jan. 1 2025. Prospective Net Operating Loss deductions will gradually increase, reaching 80 percent in 2029. Net Operating Losses incurred prior to Jan. 1, 2025 may still be used to offset tax liabilities by up to 40 percent.
- Clarifies that any goodwill filed by banks with the Federal Deposit Insurance Corporation (FDIC) is excluded from the bank shares tax calculation. This resolves an issue where the Department of Revenue has denied goodwill deductions that involve combinations of bank holding companies which result in the combination of subsidiary banks.
- Creates a tax credit for employer contributions to employees’ 529 tuition savings accounts.
- Creates a tax credit for employer contributions toward employees’ child care costs.
Permitting Reform and SITES
- Creates the Streamlining Permits for Economic Expansion and Development (SPEED) Program providing an option for third-party review of certain air, earth disturbance and water permit applications, establishing permit review timelines by DEP and conservation districts, as well as a permit tracking system.
- Includes $400 million for the PA Strategic Investments to Enhance Sites (PA SITES) program, to fund site development and infrastructure to create shovel ready sites.
Energy and Infrastructure
- Establishes a comprehensive regulatory framework for the deployment of carbon capture technology, which holds great potential to be added to Pennsylvania’s diverse energy portfolio. Establishing a legal and regulatory framework for carbon dioxide capture, utilization and sequestration is vital to ensuring the deployment of billions of dollars in private capital, as well as potentially leverage federal infrastructure funding, to innovate in low-carbon manufacturing, agricultural and energy production projects.
- Uses $80.5 million of the current surplus to make a one-time investment multimodal infrastructure projects through PennDOT.
- Continues the phase-out of State Police funding from the Motor License Fund with a goal to fully phase down by 2026-27.
- Implements a $200 user fee for electric vehicles that will scale up over time to ensure their contributions towards road and bridge infrastructure maintenance.
- Includes $400 million for the PA Strategic Investments to Enhance Sites (PA SITES) program, to fund site development and infrastructure to create shovel ready sites.
K-12 Education
- Adds roughly $1 billion in new K-12 public education funding. This includes:
- $285 million to be driven out in the Basic Education Funding Formula.
- A $100 million increase in special education spending.
- $100 million for school facility upgrades.
- A $526 million dollar increase in the Ready-to-Learn Block Grant.
- $493.8 million of which will be driven out in a newly established “adequacy formula.”
- $32.2 million will be granted to district with “high tax effort.”
- Increases the allocation for the Educational Improvement Tax Credit by $70 million, from $470 million to $540 million. This includes:
- A $50 million dollar increase for scholarship organizations.
- $20 million more for educational improvement organizations.
- Additionally, the Opportunity Scholarship Tax Credit will see a $5 million increase Uses $80.5 million of the current surplus to make a one-time investment multimodal infrastructure projects through PennDOT.
Higher Education
- Establishes a Performance-Based Funding Council to create a formula for state subsidies to Pennsylvania’s research universities: Pitt, Penn State, and Temple.
- Creates the Grow Pennsylvania Scholarship Program: $5,000 grants for Pennsylvania students who meet degree requirements and work in an in-demand occupation in the state after graduation.
- Creates the Grow Pennsylvania Merit Scholarship Program: Offers in-state tuition to out-of-state students who commit to working in Pennsylvania in an in-demand occupation after graduation.
- Creates a new State Board of Education with the authority to:
- Mandate broad data collection.
- Develop procedures for an institution of higher education to follow when the institution proposes taking action to discontinue operations
- Includes new mandatory tuition and fee disclosure requirements for all institutions.
Workforce
- Increases the Commonwealth’s investment in career and technical education by 21%, increases the investment in CTE Equipment grants, and makes it easier for qualified individuals to become a career & technical educator.
- Incentivizes employers to reimburse employees for childcare expenses by creating the Employer Childcare Contribution Tax Credit to ease the burden of child care that strains the PA workforce
- Expands the Pennsylvania Housing Affordability and Rehabilitation Enhancement (PHARE) fund to expand the availability of workforce housing in Pennsylvania.
- Uses $80.5 million of the current surplus to make a one-time investment in transit operations, which is essential for many individuals to get to work.
Alcohol Sales
- Allows private sector establishments to sell Ready to Drink beverages (RTDs), which are growing in popularity but currently may only be sold in state stores, denying local convenience stores and supermarkets the ability to respond to their customers and sell these products.