June 12, 2025
By Marc Stier
We are almost at the middle of June, the time when the political leaders of our state begin to get serious about enacting the budget for the fiscal year that begins on July 1. So, this is a good time to focus on what Pennsylvanians want to see fiscal year 2025–26 look like.
We at the Pennsylvania Policy Center and our partners in the Pennsylvanians Together advocacy campaign have three priorities. We believe that the Pennsylvania budget will not be complete without enacting Governor Shapiro’s plan for K–12 education, his plan to support public transit, and an increase to the minimum wage that puts the state on a short path to $15 per hour.
K–12 Education
Pennsylvania remains under a court order—as well as a moral imperative— to adequately and equitably fund K–12 education. And according to the formula, that the legislature itself devised and adopted last year, the state still needs to add $4 billion in “adequacy funding” to achieve that goal.
We cannot do that all in one year. Not only are the funds not easily available but school districts can only absorb so much new funding. But after decades in which too many of our kids have been denied the education they deserve, we must make every effort to reach adequacy as soon as possible.
To begin with, the General Assembly should enact the bold education budget proposed by Governor Shapiro, which includes
- a $526 million increase in adequacy funding to take the next step to meet our constitutional and moral responsibility to give every student an adequate and equitable education.
- a $75 million increase in basic education funding to help school districts deal with higher costs.
- a $40 million increase in special education funding.
- a $378 million savings to school districts by adopting cyber charter reform.
Some school districts appear to be concerned that the Governor’s basic education funding increase was relatively small this year relative to inflation. We remind them that they are very much the beneficiaries of the cyber charter reforms that the Governor proposes. Taken along with additions to basic education funding, the cyber charter reforms would more than protect school districts from additional costs due to inflation.
Minimum Wage
The first is setting the state on a short path to a $15-per-hour minimum wage. We should be at $15 per hour already. Every state around us has raised its minimum wage far above the national level of $7.25 at which we are stuck. Most of them are either at $15 per hour or will soon get there. And both workers and the economy of our neighboring states have benefitted from a higher minimum wage.
A $15 minimum wage would help individual workers and their families by
- raising the wages of 865,000 Pennsylvania workers.
- giving Pennsylvania workers an average yearly raise of $2,154.
- providing most of the benefits overwhelmingly to adults (84%), to women (60%), and to many parents of children under 19 (28%).
- benefiting a substantial percentage of both urban (21%) and rural (25%) workers.
It would help our economy and state by
- adding $938 million in wages, almost all of which would be spent in our local economy.
- generating $65 million in new tax revenues while reducing some state costs for social safety net benefits.
And as studies we have referenced for years show—including one by the Federal Reserve Bank of New York—a higher minimum wage does not reduce jobs but increases them by generating more economic activity.
A sound minimum wage policy for Pennsylvania would
- put us on a short path to a statewide $15 minimum wage.
- create a yearly cost of living increase.
- allow counties and cities to raise the minimum wage above the state level if they deem it beneficial.
- eliminate the tipped minimum wage, ending a practice that not only lowers wages but encourages the exploitation and harassment of workers.
- give the state more resources to regulate and prosecute wage theft.
Public Transit
When people talk about public transit they immediately think of the two largest transit agencies in Pennsylvania, Southeast Pennsylvania Transit Authority (SEPTA) in Philadelphia and its collar counties and Pittsburgh Regional Transit (PRT). And that is not unreasonable. SEPTA and PRT are absolutely vital to the two economic engines of our state. Should they be forced to carry out the cuts they say are necessary in the absence of new state funding, these two regions will face a serious economic downturn and drag the state’s economy down with them. Among other things, state revenues would fall precipitously.
Yet as important as SEPTA and PRT are, there are forms of public transit in every of Pennsylvania’s 67 counties with more than 40 major local and regional public transit agencies in the state. These agencies move millions of riders each day, taking them to work, to go to school, and to shop. They keep tens of thousands of cars off our streets, roads, and highways, reducing congestion and commute times—and reducing the greenhouse gases that produce climate change. They are a vital lifeline for the roughly 30% of Pennsylvania adults who do not drive and would lose their access to work and the necessities of life without public transit. And they are vital to the businesses that rely on these workers.
Governor Shapiro has proposed roughly $300 million in public transit funding by diverting a small share of sales tax revenue for this purpose. Frankly, such an investment is simply unquestionable. The failure to provide this amount would be catastrophic for the state’s economy, costing far more than this level of funding.
Our view is that it’s time for the General Assembly to do far more than provide this minimal amount. It’s time to adopt the bold ideas in the Transit for All PA platform along with some of the progressive funding mechanisms for public transit that is part of that agenda.
Revenue
The objection to these proposals, put forward almost entirely by Republicans, is that the state does not have the revenue to pay for them.
We believe this claim should be rejected on multiple grounds.
First, we estimate that the state will have at least $11 billion in its coffers at the start of the fiscal year, including both the Rainy Day Fund and the General Fund surplus. This is more than enough to fund the proposals discussed here as well as the rest of the budget.
Second, the levels of spending we recommend for K–12 education and public transit are simply necessities. Again, we have a constitutional as well as moral obligation to adequately and equitably fund education. The economic consequences of not preserving public transit in the state are greater than the minimal level of funding the Governor proposes. And, of course, raising the minimum wage raises revenues and reduces expenditures.
Third, there are revenue option available to the state that the governor has proposed are already being discussed. As a matter of public philosophy, we don’t’ approve of relying on revenue from legalizing and taxing games of chance, because those taxes are highly regressive. But we have gone so far down this road already, and video games of chance are already so prevalent and unregulated, that we think that a reasonable tax on them is justified. Such a tax would raise about $700 million a year.
And fourth, a year after Senate Republicans passed a $3 billion per year cut in the Personal Income and other taxes—and keep talking about accelerating corporate tax cuts, it is somewhat disingenuous for them to say we have no ability to pay for constitutionally mandated funding for K-12 education or necessary funding for public transit.
And we remind both parties, that when it comes to revenue for the state of Pennsylvania, the first order of business is to do no harm. There is absolutely no justification for accelerating corporate tax cuts that are unnecessary to the economic success of our state and dangerous to our fiscal health.
Having said all this, we are aware that the state is likely to face a fiscal cliff in just over two years as our huge surpluses dwindle to cover the gap between current year revenues and current year expenditures. In the past, we have called for the General Assembly to start addressing this issue by raising some revenues in a progressive fashion, both to put off the fiscal cliff and to make our upside-down tax system fairer.
Frankly, neither party has been willing to address this issue. We intend to do so in a series of papers we’ll release this summer. But when both parties have simply ignored this issue and adopted budgets the last two years that spend down our surplus, neither of them can claim the moral high ground and assert that the state should not meet its most pressing obligations this year by continuing this practice. These certainly include K–12 education and public transit funding.