On Feb. 2, Gov. Josh Shapiro delivered his annual budget presentation to both chambers of the General Assembly. The proposal anticipates general fund revenues of $48.3 billion, while expenditures would climb to a staggering $53.3 billion. That would represent a year-over-year spending increase of more than 6 percent and leave a $4.5 billion gap to be filled by the state’s $7.8 billion rainy-day fund. Once new spending begins, it is seldom reduced, likely derailing future attempts to balance the budget.
The projected revenue also relies on two revenue sources which have been pitched before but failed to materialize through the divided General Assembly: legalizing recreational marijuana and taxing and regulating skill games.
Legalizing adult-use cannabis would be projected to bring in a total of $729.4 million from a 20 percent excise tax, license and fee revenue and additional sales and use tax collections. Given the “one-time” nature of much of the license and fee revenue, future collections would only total about $200 million annually; this would leave another $500 million that would need to be accounted for in future budgets.
A 52 percent tax rate on skill games with a limit of 40,000 machines statewide would be expected to haul in $765.9 million, including license and fee revenues. An alternative proposal that would establish a $500-per-terminal monthly fee, a 50,000-machine limit and bring in about $300 million annually has been floated in both chambers but neither bill has made it out of committee.
Mass-transit funding was also, once again, included in the budget proposal, in the form of a 1.75 percent shift ($300 million) from general sales and use tax money. As the Allegheny Institute has repeatedly reminded, most recently in Policy Brief Vol. 26, No. 5, more state subsidies should not even be considered for PRT until its outrageous costs are addressed.
Education spending maintains the $565 million toward the adequacy supplement to address a 2023 court case which ruled Pennsylvania’s system for K-12 education funding is unconstitutional. Total education spending would eclipse $21.2 billion, roughly 40 percent of the $53.3 billion budget proposal. The other major category of spending – health and human services – comes in around $22.5 billion, just over 42 percent.
The governor’s first budget proposal for the 2023-24 fiscal year included a spending proposal of $44.4 billion. Had that proposal been adopted, the $53.3 billion the governor is asking for this year would have represented close to a 20 percent increase in the span of four years.
If Pennsylvania was growing and thriving as the governor claimed in his address, perhaps the commonwealth would not need to turn to more sin taxes to generate revenue. Likewise, if excessive spending was reined in, the commonwealth would not need to rely on significant revenue increases and/or raiding the rainy-day fund to keep pace.
