On Tuesday, February 4, Governor Shapiro presented his FY 2025-26 budget to the Legislature. You can watch the Governor’s full 91-minute budget address to a joint session of the House and Senate here or click here for the Governor’s full remarks as prepared for delivery.

The FY 2025-26 executive budget proposal provides for $51.47 billion in General Fund expenditures which includes a $1.6 billion transfer from the Rainy Day Fund. The proposed expenditures for FY 2025-26 represent an increase of $3.5 billion or 7.4%. Furthermore, the executive budget also continues the utilization of $6 billion in federal funds made available through the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) in FY 2025/26.

In general, tax credits were not part of Governor Shapiro’s speech, however, changes to various tax credit programs were part of his proposed budget. It is important to note that there were no proposed changes to the Film Production Tax Credit program. The Governor’s budget proposal would eliminate the Waterfront Development Tax Credit, the Video Game Development Tax Credit, and the Manufacturing Tax Credit programs and create the AdvancePA Tax Credit. This would be a new $10 million tax credit program designed to provide more flexibility for securing important business development deals and incentivizing high-paying job creation within the Commonwealth.  

The 2025-26 budget proposes several tax credit modifications to ensure businesses can actually take advantage of the credit to create jobs, innovate, and grow the Commonwealth’s economy, including:

· Converting the Local Resource Manufacturing Tax Credit Program to a Reliable Energy Investment Tax Credit – Utilize up to $100 million per year tax credit per facility for 3 years, focusing especially on bringing new, reliable energy sources onto the grid.

· Semiconductor Manufacturing, Biomedical Manufacturing and Research Tax Credit Program – Reduce investment requirement from $200 million to $150 million and lower the permanent jobs requirement from 800 to 100.

· Pennsylvania Milk Processing Tax Credit Program – Provide credits to projects that invest $50 million or create 100 jobs in the production of Class I, II, III, or IV dairy products using Pennsylvania milk, with an extra incentive to those projects using organic milk.

· Regional Clean Hydrogen Tax Credit Program - Allow up to 7 regionally dispersed qualified taxpayers to claim up to $7 million per year and lower thresholds to qualify.

· Sustainable Aviation Fuel – Utilize up to $15 million per year for a taxpayer who makes a $250 million capital investment and create 400 jobs at a facility to produce sustainable aviation fuel (SAF).

The House and Senate Appropriations Committees will soon begin budget hearings in their respective chambers. The Department of Community & Economic Development will be before the House Appropriations Committee on Tuesday, February 18 at 10am and before the Senate Appropriations Committee on Thursday, February 27 at 1pm.

Another important date for your calendar is Tuesday, March 25 as that is the date of the two special elections which will fill the vacant 26^th Senatorial District (Aument retired) and the 35^th House District which is vacant due to Matt Gergely’s passing on Jan 19^th.

The House and Senate return to regular voting session on Monday, March 24.

One last legislative item – on January 22, Senator Bartolotta introduced SB 137. The bill was referred to the Senate Finance Committee. The bill would increase the film tax credit from $100 million to $125 million. It was co-sponsored by Senators Costa, Stefano, Fontana, Hughes, Street and Schwank.