Growing budget fight in divided Legislature could test Pennsylvania’s Democratic governor

Pennsylvania state lawmakers returned to session Monday for a weekslong slog to the budget deadline, as House Democrats advanced a spending plan that could test whether Gov. Josh Shapiro can manage a politically divided Legislature in his freshman year.

It could also set the tone for how the Democratic governor will boost his agenda while balancing the demands of an entrenched Senate Republican majority with those of a one-vote House Democratic majority that took power this year.

Within hours, House Democrats unveiled and passed a spending plan that goes well beyond what Shapiro requested for the year starting July 1, insisting on more money for public schools and saying strong recent tax collections can support it.

It passed on a party-line vote, 102-101, on Monday evening.

During floor debate, House Majority Leader Matt Bradford, D-Montgomery, called it "modest in its reach, but balanced and affordable." House Minority Leader Bryan Cutler, R-Lancaster, warned that it will lead to "financial calamity."

It is likely to get a chilly reception in the Republican-controlled Senate, however. There, GOP leaders had already been skeptical of Shapiro's more modest spending proposal, citing forecasts of slowing tax collections, budget deficits and possibly a recession.

But a landmark court decision — and some $13 billion in state reserves — have emboldened Democratic lawmakers to demand far more money for public schools out of this year's spending plan to fix decades of what they view as a debilitating and discriminatory funding scheme.

"That has to be a central theme in whatever we do on June 30," said Sen. Vince Hughes of Philadelphia, the ranking Democrat on the Appropriations Committee.

The House Democratic plan would increase spending by almost $1.4 billion above Shapiro’s proposal, about half of it for public schools.

All told, it would boost spending for the 2023-24 fiscal year through the state’s main bank account to $45 billion, or a 5% increase over this year’s approved budget. The increase would be 8% when including an additional $1.3 billion in new proposed spending through off-budget accounts.

The plan envisions no increases in income or sales taxes, the state’s two main revenue sources, and most of the new money in it would go to education, health care and social services. Like Shapiro's plan, it relies on roughly $2 billion in reserves to balance.

For his part, Shapiro has sought to manage Democrats’ expectations, suggesting that he will come up with a farther-reaching school funding increase next year.

In his budget plan in March, Shapiro proposed roughly $1 billion in new money for public schools, including grants for mental health needs, security improvements and removing environmental hazards.

However, many Democrats said it did not go far enough and public school advocates say the poorest school districts should get billions of dollars more to live up to the spirit of the court decision.

In a statement Monday, Shapiro praised House Democrats "for taking this important step forward and adding to our shared priorities."

"Now, as this process moves on to the Senate, we look forward to continuing to work with Republicans and Democrats alike to bring people together and deliver a budget that addresses the most pressing issues facing our Commonwealth," Shapiro's office said.

Senate Republicans were waiting to see what passed the House before they begin discussing it with Shapiro or Democrats.

For now, Republicans have not developed their own plan and are warning against relying too heavily on reserves to balance the budget.

A legislative agency, the Independent Fiscal Office, projects that Pennsylvania is returning to its long-term pattern of deficits now that federal pandemic aid has been spent and inflation-juiced tax collections subside.

"Anyone talking about spending a lot more than we're generating in revenue right now is not something our caucus and our body will support," said Senate Appropriations Committee Chairman Scott Martin, R-Lancaster.

Since Shapiro released his more modest budget plan, tax collections outpaced expectations and the state accumulated more savings in health care programs from federal pandemic aid.

House Appropriations Committee Chairman Jordan Harris, D-Philadelphia, said the state is fiscally stable enough to address long-overlooked needs.

"The numbers that I want to focus on are all the missed opportunities we’ve had over the years by not investing the money that should be invested in the programs that we know benefit Pennsylvanians," Harris said.