HARRISBURG — More than a week ago, Gov. Josh Shapiro took off the table what he called the biggest obstacle to a finished Pennsylvania budget.
His administration funded SEPTA for the next two years, flexing infrastructure dollars to cover operating expenses for the distressed Philadelphia-area system. The move — temporarily — ended fraught talks over how to boost long-term funding for transit systems, something they say is desperately needed.
“It is time,” Shapiro told reporters, “to close this out.”
But even with the transit conundrum kicked down the road, the budget isn’t done.
As the impasse moves toward a third month, consequences are mounting. Schools and nonprofits have been forced to take out lines of credit and cut programs as the state continues to miss payments.
A spokesperson for Shapiro, Manuel Bonder, said in a statement that the governor “has been working hard to bring leaders from the Senate and the House to the table to find common ground,” and that “he’s been clear that lawmakers need to show up to work, do their jobs, and put a budget on his desk.”
The reasons why state lawmakers still haven’t agreed on a final budget are varied. But chiefly, all major players — Shapiro, the Democrats who control the state House, and the Republicans who control the state Senate — want the final deal to include at least some of their priorities.
State Senate Republicans feel they’re still being asked for too much spending, and need concessions to get their members on board. And state House Democrats, who feel they’ve already conceded a lot by backing off on recurring transit funding, don’t want to walk away empty-handed.
Neither side appears ready to make the next move.
Republicans must overcome internal spending conflicts
Republicans have said throughout this budget cycle that they’re concerned about spending levels. While the state is flush with cash reserves built up due to federal pandemic aid, Pennsylvania’s annual revenues have historically not covered its expenses.
In February, Shapiro pitched spending $51.4 billion, a proposal that included an additional $290 million to the state’s public transit agencies. Last month, he privately pitched legislative leaders a $49.9 billion budget. (He confirmed such a number was still on the table as recently as last week.)
But spending alone won’t make or break a deal for state Senate Republicans, Majority Leader Joe Pittman (R., Indiana) told Spotlight PA on Wednesday. His caucus needs something else.
“Whether it's Medicaid reform or making sure that the SNAP program is run as efficiently as possible, [these] are the types of things that I believe that we should be thinking about,” Pittman said, adding that Republicans have also “always had an interest in permitting reform and other policies that help advance economic opportunity.”
“The spend number really is just one piece of the overall equation,” he said.
An additional incentive would also help Republican leaders get their more conservative members to vote for a budget that raises spending.
Republicans’ current 27-23 margin in the upper chamber means they can only afford to lose one vote in their caucus before their bills are dead. And that caucus includes a small but vocal contingent of conservatives who think the $49.9 billion that Shapiro recently pitched is too high.
State Sen. Dawn Keefer (R., York) told Spotlight PA that the legislature approved “a mutual overspend last year, and there was a lot of slush.”
With that on her mind, she added, “there’s no reason” lawmakers should agree to more than last year’s $47.6 billion plan.
In a statement earlier this month, the Pennsylvania Freedom Caucus — the state chapter of a national group that backs conservative state legislators — outlined what its members say must be in a final budget deal. (Keefer is among this group.)
That includes formally pulling Pennsylvania out of an interstate cap-and-trade program called the Regional Greenhouse Gas Initiative and “substantive school choice.” State Senate Republicans have pushed to create a taxpayer-funded voucher program for private and parochial schools.
The state Senate’s Republican caucus is also still grappling with internal divisions over a source of additional revenue that could help Pennsylvania balance its budget: regulating and taxing slot-like skill games.
Shapiro pitched a plan earlier this year, and GOP leaders in the state Senate indicated they wanted a deal.
Those discussions seemingly imploded after clashes between those leaders and a key skill games company over the rate of taxation and the right regulations, leading to accusations of intimidation on both sides.
However, two lobbyists told Spotlight PA a deal could remerge as budget talks continue to drag on, and Pittman said this week he thinks “it's a real opportunity that remains.”
He also acknowledged that his most conservative members will need to compromise.
“Philosophically, I respect where those members of [the Freedom] caucus are coming from, but I also have to underscore that if the House Republicans were the majority, for example, or we had a Republican governor, the tenets that they have put forward would certainly be much more achievable than they are in the current political lineup,” he said.
But Pittman added that Democrats will also need to consider GOP priorities.
“The fact that they have removed [transit] from the budget conversations doesn't mean that we necessarily remove our priorities as well.”
Democrats won’t say yes to the status quo
Sending more state money to struggling transit agencies became Democrats’ No. 1 issue as SEPTA warned of dire service cuts should lawmakers fail to reach a deal.
They didn’t, and SEPTA moved forward with cuts. But in early September, a judge ordered the system to reverse course.
That led Shapiro and SEPTA leaders to decide to stop budget-related negotiations and use executive action to authorize the use of capital funding, which normally funds things like new trolleys or station repairs, according to a source with knowledge of the discussions. (The Philadelphia Inquirer reported the same via four sources.)
Some rank-and-file Democrats were unhappy with the choice. With transit sidelined, increasing state spending on education, housing, or Medicaid — or notching policy wins on issues like a minimum wage increase or reforming how cyber charter schools are funded — have become much more important for the caucus, three Democratic legislators said.
“For many people, [transit] was a top priority in this budget. And it’s a failure,” one legislative Democrat said. “There’s no way to think about it differently.”
“We have to make sure we are getting wins,” another Democratic state legislator told Spotlight PA. “We cannot accept a budget that is status quo or less, especially given the fact that we folded on transit.”
(All were granted anonymity to speak candidly about sensitive negotiations.)
Democrats have a one-vote majority in the state House. That means leaders can’t afford to alienate any member of their caucus unless they can guarantee Republican support.
Elizabeth Rementer, a spokesperson for the caucus, said it has “demonstrated time and time again that we want to work together and compromise with Senate Republicans to pass legislation that moves Pennsylvania forward, from finally adequately funding our schools to permitting reform and much more in between.”
She added, “Unfortunately, during this budget cycle, Senate Republicans have not been willing to come to the table with the realization that any solution will take bipartisan support both in their chamber and the legislature.”
A lack of trust and divided government
Indisputably, one thing is in short supply in Harrisburg — trust. And that can also be a barrier to finalizing a deal.
“You have to trust that the other chamber is going to put the vote up on the board,” a senior lobbyist said, “and carry through on the deal.”
In particular, the specter of 2023’s particularly rocky budget cycle is haunting talks, according to two lobbyists who’ve observed past and present negotiations.
That year, state Senate Republicans included in a budget bill funding for a new voucher program to send public school students to private or parochial institutions. Shapiro had expressed support for such a plan during his campaign for governor, but ultimately vetoed the provision under pressure from House Democrats.
Republicans, who accused Shapiro of betrayal and said they’d only agreed to higher spending because of the voucher inclusion, delayed fully finishing the budget for months.
Some lawmakers also told Spotlight PA that they feel politics is playing too strong a role in this year’s process.
In 2024, half of the seats in the state Senate and all state House seats were on the ballot. Republicans maintained control of the upper chamber, while also sweeping statewide row offices, though Democrats were able to hold on to their majority in the state House.
That divided result failed to give either party a clear mandate.
“We're in a divided government politically. We're in a divided government geographically,” Pittman said. “And that was a decision the electorate made in the last election.”
Shapiro will be on the ballot next year, a fact that observers have noted several times when discussing the impasse. State House and Senate seats will also be on the line in 2026, giving both parties another opportunity to seek majority control.
Shapiro referenced next year’s elections when discussing the runway the special transit funding gives SEPTA, saying it provides “two years to see if we can change minds or change some of the people in the state Senate.”
Lawmakers from both major parties have accused the other side of playing politics during this debate.
State Sen. Frank Farry (R., Bucks), who was targeted by political ads over his approach to funding SEPTA, told Spotlight PA that “part of the success here is relationships,” but it hurts relationships when people “stand at press conferences and throw bombs.”