Disputes over education spending, cash reserves emerge as Pa. budget deadline approaches

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HARRISBURG — With three weeks until the June 30 deadline to pass a new spending plan, Pennsylvania lawmakers appear split over how much of the state’s multi-billion surplus to invest in public services — a fundamental divide that must be resolved to move forward on the budget.

The Democratic-controlled state House this week passed an expanded version of Gov. Josh Shapiro’s budget plan that adds hundreds of millions of dollars to the state’s education system. It faced immediate opposition from Republicans who control the state Senate.

This disconnect over spending isn’t the only potential hurdle looming as budget talks heat up.

It’s too early to tell if lawmakers will finish a deal by June 30, but some have noted that blowing the statutory deadline isn’t a major issue in the short term.

The state has a legal obligation to pay its workers and continue their benefits during budget impasses, and is broadly able to keep the government running and delay payments if there’s no deal. Schools and other state-funded social services would likely start to feel a pinch come August or September.

State Senate Majority Leader Joe Pittman (R., Indiana) downplayed the deadline in April, saying his priority was designing “a responsible product.”

School spending vs. rainy day savings

Earlier this year, Shapiro, a Democrat, proposed a $44.4 billion budget plan that includes $1 billion in new education spending. Democrats, newly in control of the state House, advanced legislation this week that adds $900 million to Shapiro’s proposal mostly on education spending — including $225 million for the state’s 100 poorest districts.

They have argued such an investment is necessary to respond to a Commonwealth Court ruling that found Pennsylvania’s school funding system is unconstitutionally inequitable.

The bill advanced by state House Democrats also transfers $450 million in state tax revenue into two new restricted accounts or so-called “special funds”: $250 million for school building construction and $200 million for a year-old state program to help fund home repair projects.

Democrats justified the increased spending by pointing to this year’s slightly higher-than-expected tax revenue as well as the roughly $12 billion the state has stashed in cash reserves and its rainy day fund.

“House Democrats show you what we got. We show you what we believe in. We show you what we think is important. We show you what we think we should be investing in,” state House Appropriations Committee Chair Jordan Harris (D., Philadelphia) said during a debate on the chamber’s floor.

The plan passed the narrowly divided state House in a party-line, 102-101 vote and is now before the Republican-controlled state Senate.

In a statement, state Senate Republican spokesperson Kate Flessner said the Democrats’ proposal “raises substantial concerns.”

“The Senate Republican Caucus is committed to working to put in place a responsible spending plan that will help strengthen Pennsylvania now and in future years,” she added.

Both Shapiro’s and state House Democrats’ plans continue a number of pandemic-era social programs without raising new revenue. Republicans in both chambers have argued that the plans will drain the state’s cash reserves too quickly while the commonwealth faces an uncertain economic future.

“On the federal level, they have said for some time that a recession was coming,” state House Minority Leader Bryan Cutler (R., Lancaster) said during the House’s floor debate this week. “At some point, they will be right. And if you’ve spent all the money before the recession gets here, you’re gonna have tough discussions and tough decisions to make.”

Republicans have also tried to play up a split between state House Democrats and their governor, saying in floor remarks and statements that Democrats had turned their back on Shapiro by passing their own plan.

After the plan passed, Shapiro’s office released a statement saying he “commends the new House Democratic majority for taking this important step forward and adding to our shared priorities as we work to pass a commonsense budget.”

The governor also appeared in a closed-door meeting with state House Democrats before the vote, multiple sources told Spotlight PA, giving a “pep talk.” He congratulated the caucus for advancing its agenda in recent weeks, highlighting bills that would implement LGBTQ non-discrimination protections and strengthen the state’s gun laws.

A perennial university debate looms

An early potential stumbling block is the fate of $606 million in aid for four state-related universities — an appropriation that slowed talks last year. This money has historically subsidized tuition for in-state students at Lincoln University, Penn State, Temple University, and the University of Pittsburgh.

In a recent press release, the Pennsylvania Freedom Caucus, a group of conservative state House lawmakers modeled after the Congressional Freedom Caucus, threatened to hold up the slice of money slated for Penn State for political reasons.

Members highlighted a passage on Penn State Health’s website which notes its children’s hospital “provides puberty-blocking medications, cares for people with differences of sexual development and cares for patients who are younger than 10 years old.”

It’s unclear if the Freedom Caucus has enough votes to hold up Penn State’s budget allocation.

Under the state constitution, funding for private or state-affiliated institutions, like Penn State, requires a two-thirds vote rather than a simple majority to be approved. That means just 68 nos could block their funding.

This relatively low bar means the so-called “non-preferred” appropriations often turn into a political bargaining chip during budget negotiations for dissident rank-and-filers.

The Freedom Caucus has at least 16 members listed on its website, but also asserts that “total representation may not be shown as some members are anonymous.”

A handful of conservative Republicans, many of whom have since joined the Freedom Caucus, threatened to vote against funding for Penn Medicine in 2021, mostly for a veterinary school, because of the medical system’s COVID-19 vaccine policy.

Republican opposition to vaccine mandates also influenced Penn State University’s decision to strongly recommend, rather than require, the vaccine. And last year’s budget was delayed partially over fetal tissue research at the University of Pittsburgh.

The Freedom Caucus claimed in its statement that Penn State Health prescribes puberty blockers to children under the age of 10 — something the organization said is misleading.

In an emailed statement, Penn State Health said such medications are only prescribed to treat premature puberty in children under 10, not gender dysphoria.

“Penn State Health adheres to the international guidelines that do not support irreversible changes to children as it relates to gender dysphoria care, and there are no plans to change this position,” the statement added.

Penn State University and Penn State Health are separate entities; the former is a state-related university system, and the latter is a nonprofit hospital chain associated with Penn State’s medical school.

Not every state House Republican agrees with the Freedom Caucus’ effort. State Rep. Tom Mehaffie (R., Dauphin), whose district includes two Penn State Health hospitals, including the children’s hospital, said that while he doesn’t agree with all of the system’s decisions, he thought the connection between the school and hospital was strained.

“Pitt, Penn State, who’s next?” Mehaffie told Spotlight PA. “It’s a witch hunt.”

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