Pennsylvania State Capitol building in Harrisburg on July 26, 2023.
Amanda Berg / For Spotlight PA
Pennsylvania State Capitol building in Harrisburg on July 26, 2023.
Amanda Berg / For Spotlight PA
Spotlight PA is an independent, nonpartisan, and nonprofit newsroom producing investigative and public-service journalism that holds power to account and drives positive change in Pennsylvania.
The divided Pennsylvania legislature is still seeking a compromise that would allow it to end the budget stalemate and authorize up to $1.1 billion in additional spending for home repairs, public defense, and more.
Still needed is code legislation to accompany the primary budget bill that Democratic Gov. Josh Shapiro signed in August. Democrats who control the state House and Republicans who control the state Senate have put forth vastly different proposals.
The upper chamber has proposed bare minimum language that would reauthorize a few uncontroversial programs involving the courts and health care.
The lower chamber, meanwhile, has advanced several code bills that would implement a slew of far-reaching policy changes, including slashing corporate taxes, expanding a private school scholarship tax credit, and creating a medical debt relief program.
Both the state House and Senate are back in Harrisburg this week, and have a chance to finish the budget. All three code bills are currently awaiting consideration by the upper chamber.
State Sen. Scott Martin (R., Lancaster), who chairs his chamber’s powerful Appropriations Committee, said Monday that state House Democrats’ bills blend pet projects with uncontroversial and necessary proposals.
He said the bills will “absolutely not” be passed by the upper chamber “as is.”
Here’s a breakdown of what both sides have proposed:
Code bills are omnibus proposals traditionally passed alongside the appropriations legislation to direct how money is disbursed.
The bills amend the state laws that control taxation, spending, education, welfare, and other public services, acting as an instruction manual for the budget plan. They also function as vehicles for lawmakers to make long-sought policy tweaks and fund local projects in one fell swoop amid hectic budget talks.
While Shapiro signed a spending plan in early August, no accompanying code bills have followed. Since then, policymakers have split over whether the legislature needs to pass the bills for the government to function as usual. Democrats have downplayed the need for the bills, while Republicans have stressed their importance.
Amid pushback from state Senate Republicans, Shapiro agreed to hold off on spending about $1 billion from the state’s $44.4 billion plan without additional legislation.
The affected programs include a handful of small but important ones favored by Democrats, including the first-ever state investment in public defenders, money for a recently created state home repair grant program, and extra funding for the state’s 100 poorest school districts.
Those remaining dollars will be spent only if Shapiro signs code legislation, his administration said.
Capitol insiders consider the fiscal code the most important bit of unfinished budget business.
In late August, the state Senate passed a 103-page fiscal code bill that would reauthorize some routine but critical programs while excluding Democratic priorities.
As Spotlight PA previously reported, the bill would release funding for three programs, including increased reimbursements for first responders, which EMS providers argue is a bare-minimum requirement in an underfunded industry.
The bill also includes codes for regular allocations to hospitals and for judicial fees that courts rely on, and for which state authorization had expired at the end of July.
It also would formalize approval of a suite of other programs that had already been moving ahead with their budget spending, and for which the state budget secretary has not said new codes were necessary. These include funding for community colleges, aid to public libraries, and reimbursements for schools to provide universal free breakfast.
State House Democrats amended the state Senate proposal to authorize home repairs and other in-limbo programs, as well as several caucus proposals. Those include:
The fiscal code bill passed the state House 121-82. It also includes funding for the commonwealth’s four state-related universities: Lincoln, Penn State, Pitt, and Temple.
Typically, state funding for these universities, which is used to reduce in-state tuition, requires approval from two-thirds of the legislature. That higher bar stems from a constitutional provision written in the 1870s to prevent state funds from being sent to questionable charities.
Such a bar requires state House Republican support, but the party has mostly opposed the schools’ funding, citing a mix of concerns about accountability and issues such as trans health care and fetal tissue research.
To get around this position, the state House-passed fiscal code would create a grant program for “institutions of higher education”; the language makes only the four schools eligible.
A separate bill that would allocate $642 million to the grant program, a 7% bump for the schools compared to last year, passed the state House 115-88.
State House Democrats have also advanced an original bill that would rewrite the state’s tax laws. The legislation includes several proposals championed by Republicans and business groups, including reducing the state’s corporate income taxes to 4.99% by 2026, rather than 2031 as currently planned. The bill would also double the cap on the operating losses corporations can deduct from their taxes to 80%, matching federal tax law.
The proposal also mandates combined reporting, which applies to companies that are incorporated out-of-state, to capture more of their income in-state for tax purposes. It has been a top Democratic priority for years.
An analysis by state House Democratic staff estimates the proposed changes would cost the state about $1.6 billion in revenue over the next two years.
The inclusion of combined reporting is “a poison pill,” Pennsylvania Chamber of Business and Industry CEO Luke Bernstein said in a statement last week. He encouraged the passage of the bill without combined reporting.
State Senate Majority Leader Joe Pittman (R., Indiana) called the tax bill “intriguing” and a “step in the right direction” in a separate statement. He did not say if he would bring the bill up for a vote.
The Democrats’ tax code would also:
The tax code passed the state House in a party-line 102-101 vote.
As with the fiscal code, Democrats took a simple school code proposal from the upper chamber and expanded it with several priorities.
State Senate Republicans passed a school code in September that would OK using $100 million in federal stimulus money on school mental health programs. It also proposes to change how the state distributes tens of millions of dollars in school safety grants. Republicans’ proposed system, backed by Shapiro, would give more power to the state Commission on Crime and Delinquency, which includes gubernatorial and legislative appointees. It passed unanimously.
State House Democrats amended that bill and nearly doubled its length, adding in several new proposals. Most notably, the bill would expand two state tax credits, EITC and OSTC, that give breaks to individuals or corporations who donate to private school scholarship funds. Those credits, which are GOP priorities, would grow from a combined $400 million to $550 million each year.
The proposal would also require that the Pennsylvania Department of Education collect and release data on scholarship recipients’ and applicants’ household income, disability status, and original school district, among other information — a measure aimed at making the notoriously opaque programs more transparent.
In a report last week, the Independent Fiscal Office, a legislative budget analysis agency, said that it was “unable to determine if the tax credit substantially enhances educational opportunities to all Pennsylvania students due to statutory limits on data that may be collected related to the program.”
The proposed expansion of any of the credits drew the ire of at least one Democratic-aligned group, the state chapter of the American Federation of Teachers, a union that mostly represents educators in urban districts.
In a statement, AFT-PA President Arthur Steinberg called the bill “extremely disappointing.”
“The ongoing effort to divert tax dollars away from transparently administered traditional public schools is supported primarily by the wealthy individuals and corporations who receive tax breaks from these programs and those who benefit from the lack of accountability provided by private and for-profit institutions,” Steinberg said.
The bill would also:
The Democrat’s expanded proposal passed the state House 106-97.
A collection of interviews, photos, and music videos, featuring local musicians who have stopped by the WITF performance studio to share a little discussion and sound. Produced by WITF’s Joe Ulrich.