HARRISBURG – After completing a detailed analysis of Governor Shapiro’s 2025-26 budget plan, Senate Appropriations Committee Scott Martin (R-Lancaster) raised serious concerns about shortfalls in future years that would burden taxpayers with significant new costs and higher taxes in the years ahead.
“Pennsylvanians deserve a budget that is honest with taxpayers about the impact of its proposed spending and policies. They need to know not just what it means today, but also tomorrow and a few years down the road,” Martin said. “In all my time working in government, I have never seen a budget plan that is so wildly inaccurate in terms of predicting future spending and revenues.”
Martin detailed $27 billion worth of concerns over the next five years under Governor Shapiro’s plan. The shortfalls fall into five categories:
- Unrealistic new revenues — $12.1 billion.
- Suppressing future human services costs — $6.3 billion.
- Overstating baseline revenue growth — $5.1 billion.
- Program eliminations — $2.8 billion.
- Tax credit revisions — $1 billion.
Unrealistic New Revenue — $12.1 billion
Martin said one of the largest problems in the governor’s plan stems from exaggerating how much revenue the state would actually realize from new taxes during the five-year planning period. These include, but are not limited to:
- $1.3 billion from legalizing adult use marijuana, which is double the amount the Shapiro Administration projected from a similar proposal last year.
- A $6.6 billion increase in skill game revenue above the Shapiro Administration’s projections from a similar proposal last year. Even when accounting for the different tax rates between the proposals, the new estimate is five times higher than the previous year’s estimate.
- $3.7 billion in additional net revenue projected from the CNIT phasedown acceleration when coupled with combined reporting.
Suppressing Future Medicaid Costs — $6.3 billion
The average annual increase in DHS’s budget recently has been around $1 billion annually. This year, the proposed increase in Governor Shapiro’s budget proposal is $2 billion for FY 2025-26.
However, Governor Shapiro’s budget only shows annual increases of around $330 million on average after the next fiscal year. This grossly understates the actual growth in costs over the next five years and paints a deeply inaccurate picture of the amount of spending that can take place in next year’s budget, Martin said.
Overstating Baseline Revenue Growth — $5.1 billion
There is a large difference between the Administration’s estimates and the Independent Fiscal Office’s (IFO) estimates of how much revenue is expected to be collected under existing law. In each of the planning years beyond FY 2025-26, the Administration is expecting baseline growth approximately $1 billion higher on average than the IFO’s estimates.
Program Eliminations — $2.8 billion
The governor’s budget strips funding for programs that he fully expects the General Assembly to restore, removing the expenditures during the entire five-year planning period. Many of these $570 million in cuts are longstanding Commonwealth commitments, Martin said.
Unaccounted for Tax Credits — $1 billion
Shapiro has proposed repurposing unused tax credits, primarily to support his energy plan. Because the existing credits have not been used, repurposing them will result in lost revenue that needs to be factored into our revenue estimates.
In the weeks ahead, the Senate Appropriations Committee will hold a series of hearings to closely examine the spending plan to determine how it can be improved. The hearings will begin February 18 and run through March 6.
CONTACT: Jason Thompson