Pennsylvania Perspective Special Edition: Gov. Shapiro Signs FY25 Budget

Shortly before midnight on Thursday, July 11 — and nearly two weeks past the June 30 deadline — Governor Josh Shapiro signed the $47.6 billion FY25 Pennsylvania state budget following extensive negotiations among legislators in Harrisburg. The budget represents a more than 6% increase over last year’s and includes significant changes to higher education and K-12 public school funding, as well as key investments in economic development, public safety, health care, human services, and infrastructure, without raising sales or income tax rates. Budget highlights are included below.

Public K-12 Education

The budget includes a more than $1 billion increase in spending for K-12 public schools, aiming to provide equitable and adequate education across all districts. While the total investment in education is less than what Gov. Shapiro initially requested and below what advocates deemed necessary for substantial change, the increased funding is seen as a critical step towards addressing long-term underfunding. The budget also includes reforms to the cyber charter school tuition, which is expected to provide $34.5 million in savings to school districts in the 2024-25 academic year.

K-12 education investments in the budget include:

• $225 million through the basic education fair funding formula
• $100 million for Special Education Funding
• $100 million for student mental health and physical safety
• $30 million for Career & Technical Education (CTE) programming and equipment
• $685 million in new subsidies including:
  • $493 million adequacy supplement
  • $32 million tax equity supplement
  • $60 million hold harmless relief supplement
  • $100 million for cyber charter reimbursement
• $100 million for Public School Facility Improvement Grant Program
• $15 million increase for Pre-K Counts
• $33 million for Early Intervention
• $7 million for Dual Enrollment
• $75 million increase to the cap on Educational Tax Credit programs

Higher Education

The budget introduces several new higher education policies, including the establishment of the Grow Pennsylvania Scholarship Program, which will offer $5,000 grants to Pennsylvania residents who commit to working in the state post-graduation, and the creation of the Grow Pennsylvania Merit Scholarship Program, which will allow nonresident students at the Pennsylvania State System of Higher Education (PASSHE) to pay in-state tuition if they agree to work in Pennsylvania after graduation. The budget also establishes a Performance Based Funding Council to recommend fund distribution for major state universities, mandates transparency in student fees, and creates a Dual Credit Innovation Grant Program.

Funding increases include:

• $35.1 million for PASSHE
• $85 million for facilities transition
• $15.7 million for community colleges
• $20 million for student teacher stipend
• $54 million increase to maintain the maximum State Grant level
• $25 million for Grow PA Scholarships
• $36 million for Ready to Succeed Scholarships

Economic Development

The budget includes investment in several key components of the Shapiro Administration’s Economic Development Strategy, including:

• $500 million for site development, including the Pennsylvania Strategic Investments to Enhance Sites (PA SITES) program
• $20 million for the Main Street Matters program
• $20 million for historically disadvantaged businesses
• $15 million for tourism marketing

Public Safety

• $16 million for four new cadet classes for the Pennsylvania State Police
• $45 million for community-based violence reduction programs through the Pennsylvania Commission on Crime & Delinquency (PCCD), including a $5 million increase for the Violence Intervention and Prevention (VIP) program
• $11 million creation of a statewide Building Opportunity through Out of School Time (BOOST) program
• $5 million increase for the Nonprofit Security Grant Fund through PCCD
• $2.5 million for domestic violence services through the state Department of Human Services (DHS)
• Establishes the Office of Gun Violence Prevention within PCCD to collaborate on community safety initiatives

Public Transit & Infrastructure

• $80.5 million one-time boost to transit agencies statewide
• $80.5 million for road and bridge repairs

Healthcare & Senior Care

• $34.5 million to support rural hospitals
• $75 million in nursing home care
• $2.95 million for Aging Our Way, PA initiatives

Housing

• An increase to the Pennsylvania Housing Affordability & Rehabilitation Enhancement Fund (PHARE) funding cap to $100 million per year by 2026
• $5 million increase for the Homeless Assistance Program
• $2.5 million in new funding for access to counsel for those facing eviction proceedings
• $2.5 million to create a Local Government Emergency Housing Support program

Environmental Initiatives

• $50 million for waterway cleaning
• $11 million to cap abandoned wells
• $10.5 million for state Department of Environmental Protection permitting reforms

Tax Code Changes

The budget also included several key tax code changes aimed at stimulating economic growth and supporting businesses, including:

• Increased corporate tax benefits
  • Raised limit on carrying forward prior years’ operating losses for corporations
  • Corporate net income tax rate reduced to 7.99% in 2025
• Housing & property incentives
  • $40 million boost to state tax credit for affordable housing
  • New tax credits for rehabilitating distressed properties
• New tax credit for employers who assist employees with childcare costs
• New credits and deductions for:
  • Student loan interest
  • College savings
  • Certain expenses for medical marijuana organizations

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