State Capitol Update
Both the Senate and House will return to session today for the start of peak legislative activity leading up to the June 30 budget deadline. The House has 17 session days scheduled this month. The Senate has 14 session days scheduled.
The state constitution mandates that the General Assembly must pass a balanced budget by June 30 each year. This deadline marks the end of the state’s fiscal year, which begins on July 1. If lawmakers fail to meet this deadline, the state can still pay essential expenses, but other programs can be impacted. Budget impasses are becoming more common with most notability a 100+ day delay occurring in 2023.
The split legislature is currently debating over a $51.4 billion plan proposed by Governor Shapiro which includes a $3.5 billion (7% increase) compared to the current year’s budget. The proposed budget plan would rely on $4.5 billion from a year-end surplus and the Rainy-Day Fund to balance the budget. This would leave an estimated $6.4 billion in the Rainy-Day fund. The state Independent Fiscal Office is predicting an operating deficit of $3.4 billion for this fiscal year. Another key dynamic is a shift in policy by the Trump Administration on how federal funding flows into the states for the 2025-2026 budget and future years. Approximately 1/3 of state funding typically comes from the federal government. Last month, Senate Republicans vowed to no tax increases to cover federal funding cuts. This will play a key factor with the Republican controlled Senate having leverage on the budget process.
Governor Shapiro’s Lightning Plan is also connected to the budget proposal. HB 500 (EDGE Tax Credit) and HB 504 (Community Energy) have passed the House and are now in the Senate. PPA has concerns with HB 500 due to favoring Sustainable Aviation Fuel (SAF) production tax credits over biodiesel and renewable diesel. HB 501 (Pennsylvania Reliable Energy Sustainability Act) is set for a vote in the House Environmental & Natural Resource Protection later today. The PPA is opposed to HB 505 (Rebates To Reduce Household Energy Costs) which would establish electric heat pump rebates. HB 505 has not yet moved within the House Consumer Protection, Technology & Utilities. These bills face an uncertain future in the Republican controlled Senate with the potential of some being considered as a part of a future budget negotiation.
Another aspect of Governor Shapiro’s budget proposal is to create new revenue sources for the state including the regulation and taxation of Skill Games. Senate Bill 756 was recently introduced and cosponsored by the top two Senate Republican leaders (Senator Kim Ward and Senator Joe Pittman) and referred to the Senate Community, Economic & Recreational Development Committee for consideration. The legislation would impose a 35% tax on the distributors of skill games, limit the number of machines to two per location, and establish robust regulatory compliance. In its submission of comments requested by the Senate Committee, PPA expressed its concern with provisions in the bill that would initially limit skill game licenses to those entities that are holders of liquor licenses. PPA argued (view letter here) that this would negatively impact thousands of small convenience stores that have come to rely on the revenue stream generated by the games. PPA urged the Senate to amend the bill to include state lottery licensees as being eligible to obtaining skill game licenses.
The taxation of skill games has become a central focus in the deliberations of the state budget which needs to address a serious deficit. The other potential recipient of skill game taxation could be the state’s mass transit systems. Shapiro included revenue from skill games taxation in his budget proposal, and the Senate Republican leadership began work on a plan. This has ignited serious disagreement within the Senate Republication between supporters of the casino industry (which oppose the games) and supporters of the skill game industry. It is unclear at this writing what direction the legislation will take. Options could include the bill being amended in Committee, or a totally different bill being amended. It could also lead to the incorporation of the taxation and regulatory structure in a budget bill. Much of the outcome will be the result of the impact of constituent contact with Senate offices. The PPA urges our members who are negatively impacted by this proposal to contact their local Senator by using the following call-to-action link.
