Pennsylvania Gov. Josh Shapiro on Tuesday proposed a $44.4 billion budget for 2023-24 that invests in the state’s economy by emphasizing workforce development and creating an environment that attracts new businesses.
“Pennsylvania is open for business and we’re going to make our Commonwealth a leader in innovation, job creation, and economic development,” the Democratic governor said in his first budget address to the General Assembly.
Shapiro said his budget proposal is based on “conservative” revenue estimates that are $3 billion lower over the next five years than the Independent Fiscal Office and takes into consideration the state’s Rainy Day Fund and General Fund surplus which are at their highest levels in the state’s history.
But Republican leaders and business groups viewed the budget proposal with skepticism for spending down the state’s Rainy Day Fund in future years. While the Commonwealth currently possesses $5 billion in reserves, the governor’s proposed budget would nearly deplete that fund by 2028.
“While spending money to invest in our Commonwealth is essential, eliminating the savings account established to avoid future tax increases seems nonsensical,” said Greg Moreland, state director for the National Federation of Independent Business (NFIB) in Pennsylvania.
Among the governor’s proposals was continuing the planned decrease in the Corporate Net Income Tax rate to 8.49 percent in 2024, with a path to 4.99 percent. “While the work that you began is critically important, we need to speed up these cuts,” Shapiro told members of the General Assembly.
The governor also proposed investing in the state’s workforce by providing tax incentives for those going into law enforcement, nursing, or teaching through a $2,500 tax rebate every year for the next three years.
The budget proposal makes an investment in workers with an increase of $23.8 million to build partnerships between Career and Technical Education and industries and trades that need highly skilled workers, and another $5 million in secondary career and technical education for increasing computer science and STEM programs statewide.
The governor’s budget also proposes investing $20 million in a Historically Disadvantaged Business Program.
Through his new Office of Transformation and Opportunity, Shapiro said he would ensure licensing and permitting in the state moves “at the speed of business” and that delays at the state level would no longer hold businesses back.
In addition, the budget would invest an extra $1 million for the Manufacturing Innovation Program, which would allow 14 more manufacturers to partner with universities in adopting new technologies and advancing new products and processes.
Shapiro called for the state to be more competitive when it comes to attracting businesses and said Pennsylvania should aim for securing at least one regional hydrogen hub over the next three years.
Additionally, the governor proposed investing $5.75 million in the Department of Environmental Protection (DEP) to improve air quality testing, increasing dam inspections and safeguarding water quality. Shapiro said he has directed DEP to use federal funding to cap an estimated 350,000 orphaned wells across the state, which would reduce up to 8 percent of the state’s methane emissions.
Shapiro also said it was time to raise the state’s minimum wage from $7.25 an hour to $15 an hour on Jan. 1, 2024. And he called to eliminate the state cell phone tax, which would save Pennsylvanians $124 million a year.
While proposals to invest in training the workforce drew bipartisan support, lawmakers underscored that the governor’s budget plan was a beginning point, not the final product. In the coming weeks the appropriations committees in the Democratic-led House and Republican-led Senate will hold hearings on the budget for the fiscal year that begins July 1.
“There are some policy points that give us pause, but other initiatives are refreshing to see, such as working to eliminate DEP permitting backlogs and investments in career and technical education,” Republican Appropriations Chairman Rep. Seth Grove (R-York) said. “However, I am disappointed the governor did not address our structural deficit or include enough program integrity initiatives to reduce fraud.”
Sen. Lisa Boscola (D-Lehigh/Northampton) said she was aligned with the governor on spending on school-to-work and apprenticeship programs, and career technical schools. “These investments make a lot of sense,” she said. But Boscola added that, “We need to be mindful of our spending commitments because while the commonwealth is flush with money today, the outlying years project budget deficits.”
Some in the business community also supported the governor’s proposals to strengthen the state’s competitiveness.
“The Chamber is pleased to see the Governor’s call for investments in Pennsylvania’s education and workforce, public safety, and energy development. We share the Governor’s vision for the Commonwealth as a leader in innovation, job creation, and economic development through a more competitive business tax and regulatory climate,” said Chellie Cameron, president and CEO of the Chamber of Commerce for Greater Philadelphia.
Senate President Pro Tempore Kim Ward (R-Westmoreland) said the budget proposal didn’t go far enough.
Emphasizing that inflation and the economy remain top of mind for Pennsylvanians, Ward said, “There are some glaring items missing from Gov. Shapiro’s budget that prevent Pennsylvania from reaching its full potential by unleashing – not restricting – Pennsylvania’s energy resources and establishing a 21st century education system that focuses on retention by producing the necessary skilled workers to support an innovative economy.”
The Power Pa Jobs Alliance, a coalition of labor, industry, and consumers, criticized Shapiro’s budget and its seeming support of the Regional Greenhouse Gas Initiative (RGGI), a carbon cap-and-trade market-based program that is currently tied up in court. The governor’s budget acknowledges a projected more than $600 million coming from the first year of RGGI auctions.
“Just last week, our grid operator PJM Interconnection warned of future blackouts caused by state and federal policy, like the $800 million per year RGGI tax, which will cause the premature closure of reliable, baseload electric generation from coal and natural gas,” the group said in a statement. “Given candidate Shapiro’s oft-stated skepticism regarding RGGI, and its impacts on blue collar union jobs and low- and fixed-income families struggling to pay historically high energy prices, we were cautiously optimistic Governor Shapiro’s proposed budget would distance himself from his predecessor’s mistakes, not memorialize them.”
Rep. Jim Struzzi (R-Indiana), added, “The governor wants to create 32 RGGI-related jobs but, like his predecessor, has no plan to address the pending job losses in local communities, the inevitable rise in statewide energy prices and recognition of Pennsylvania’s existing natural resources as part of a balanced energy portfolio.”
Ultimately, said Commonwealth Foundation Senior Vice President Nathan Benefield, the budget failed to deliver on some of Shapiro’s campaign promises.
“Lawmakers need to focus on policies to unleash Pennsylvania’s economic potential. Unfortunately, Shapiro’s budget ignores his campaign commitments to cut corporate taxes, and includes a tax on electricity through RGGI, which will hurt working families and employers,” Benefield said.