What to watch for in Gov. Josh Shapiro’s budget proposal

Gov. Josh Shapiro will deliver his 2025 budget address on Tuesday at the state Capitol. This will be the third time Shapiro has addressed a joint session of the General Assembly since taking the oath of office in 2023. 

Shapiro and state lawmakers will likely grapple with a variety of issues this year, from an aging population to a growing long-term deficit. They hope to address political priorities ranging from education and transportation funding to the legalization and regulation of skill games and adult-use cannabis. 

New revenue sources and spending proposals will drive the budget debate between legislators and the governor’s office, and could ultimately put Pennsylvania on a new fiscal path for years to come. 

Here are a few things to keep an eye out for as Shapiro prepares for his budget address:

Skill games and cannabis regulation

Two of the hottest topics in Harrisburg over the past couple of years have been conversations about regulating skill games – video gaming machines seen as competitors to casinos and lotteries – and recreational marijuana. Despite varying levels of support on both sides of the aisle, both cannabis legalization and skill games regulation bills have yet to advance through the state legislature. Shapiro proposed legalizing and taxing both industries in last year’s budget. 

Shapiro is once again expected to advocate for tapping into the revenue potential of both skill games and adult-use cannabis, especially with the state facing a structural budget deficit that the Independent Fiscal Office predicts will grow over the next several years. He’ll have to work with Republican leadership in both chambers, which has been wary of legalizing recreational marijuana, to find a way forward on an effective and efficient spending plan with new tax revenues. 

SEPTA and transportation funds

Shapiro helped the Southeastern Pennsylvania Transportation Authority, more commonly known as SEPTA, stave off financial hardship with a short-term infusion of funds last year, but with the transit agency facing a multimillion-dollar operating deficit, lawmakers and Philadelphia area residents alike are still seeking long-term stability for the Philadelphia region’s public transit agency. Meanwhile, Republican leaders in Harrisburg have suggested that public transit funding should be tied to broader conversations around transportation infrastructure, so Shapiro’s budget address could provide some insight into how he hopes to address this increasingly thorny issue. 

Long-term care and mental health support

Those working in disability services and long-term care were happy to see an increase in state spending last year, but an aging population and growing mental health needs in the state have advocates once again calling for enhanced support. Home care services hope to see an increase in Medicaid reimbursement rates, while county officials seek a $100 million increase in funding for community-based mental health services. These asks come alongside a call by nursing home operators for marginal increases to keep day programs for older adults operating. 

Energy policy 

The Shapiro administration hinted at some major energy-related initiatives being included in the governor’s 2025 budget proposal. Shapiro unveiled a “Lightning Plan” devoted to Pennsylvania’s energy sector in late January. This six-part plan calls for a cap-and-invest program for carbon emissions from the power sector, a revamped “Pennsylvania EDGE” tax credit program, and the creation of a state board dedicated to handling permitting for energy projects, among other wishlist items. Shapiro said in January that he will call for lawmakers to reform the EDGE tax credit program during his budget address on Tuesday. 

Education funding

Last year’s state budget included a 2.9% increase in basic education funding through the state’s Fair Funding Formula and a $100 million increase in special education funding, and Shapiro and Democrats in the General Assembly are expected to continue to make education spending a focal point of this budget cycle. Last year’s state budget featured an increase of more than $1 billion in K-12 education. How lawmakers will continue to address the Commonwealth Court’s 2023 ruling that the state’s public education funding system is unconstitutional will also remain a topic of conversation in this year’s budget cycle.