Governor Shapiro’s Budget—What May Be of Interest to Businesses

Authored by: Eileen Anderson, Director, Government Relations, Manufacturer & Business Association

Governor Shapiro presented his 2023-24 budget on March 7. The $45.8 billion spending proposal is a six percent spending increase over last year. There are no new tax increases in either income or sales tax the state’s two main revenue sources. Senate and House budget hearings to evaluate the proposal will run March 20 through April 14. The goal is to pass a balanced budget by June 30 and have it signed into law by Shapiro. These are spending PROPOSALS. Included are other actions taken early in his administration.

Elimination of a Tax – The state cell phone tax (gross receipts and sales tax) may be eliminated saving Pennsylvanians $124 million every year.

Corporate Net Income Tax Rate – Under a law approved last year, the Corporate Net Income Tax (CNIT) rate will phase down to 8.49 percent this year and to 6.49 percent in 2028. As a candidate Shapiro said that he would like to accelerate the reduction, but no mention was included in his budget.

Minimum Wage – The Governor called for more than doubling the hourly minimum wage from the federal level of $7.25 to $15 an hour by January of 2024.

Office of Transformation and Opportunity – This was established by executive order (EO) and is a one-stop shop to help businesses cut through red tape and streamline operations. It is housed within the Governor’s office and the Economic Development Strategy Group.

Acceleration and streamlining of permitting, licensing, and certification processes (EO) – The order calls for a comprehensive review of how long it takes agencies to process applications and how workers and businesses apply online. It will establish a date whereby applicants for a license, permit or certificate will receive a response. If the date is not met, the agency responsible will refund the applicants’ application fee.

The Manufacturing Innovation Program – This connects Pennsylvania’s colleges and universities with businesses to spur innovation and may increase by 50%. It includes $20 million for the creation of a program to supplement previous federal investments and support for historically disadvantaged businesses.

Worker Shortages – $24.7 million is proposed for job retention and recruitment efforts for frontline personnel such as nurses, teachers, and law enforcement. They will receive three years of tax credits for earning certification in those fields.

The selected occupation approach misses a worker shortage that extends far beyond those occupations as many Pennsylvania industries report hiring challenges.

$23.8 million is dedicated for workforce training, apprenticeships and strengthening skills-building programs.

Child Care – $66.7 million investment in Child Care Works to give more parents access to stable childcare for their kids.

Legalization of Recreational Marijuana – Shapiro included in his budget proposal revenue from marijuana legalization for non-medical use. His proposed 20% tax at the wholesale level would be one of the highest in the country. It will be collected from sales beginning in 2025.

Education – An increase of $567.4 million is proposed.

Student Mental Health – $500 million in mental health over the next five years so schools can fund mental health counselors and services on site

Transportation & Gas Tax – The newly created Public Safety and Protection Fund is a dedicated funding source to reduce the government’s reliance on gas taxes by $100 million per year for the next five years. Background: Gas taxes are the primary funding for the state’s Motor License Fund, along with driver’s license and registration fees. That fund is used to pay for road and bridge improvements, but it also helps cover the cost of state police operations.

Regional Greenhouse Gas Initiative (RGGI) – The budget includes $633 million funding from RGGI. When campaigning, Shapiro stated concerns about RGGI and promised to work with the House and Senate, where both D’s and R’s voted in majorities to block entry into RGGI. This new tax that will increase electricity prices for all.