Feb. 10—HARRISBURG — Gov. Josh Shapiro‘s ambitions for Pennsylvania in the upcoming fiscal year come at a cost, one the commonwealth can seemingly afford — at least in the short term.

As to the long term, the outlook is rocky.

Shapiro’s proposal requests $48.3 billion in general fund spending, the commonwealth’s primary operating account, and $125 billion in total spending across all funds.

That includes increases of $1.1 billion in basic education subsidies for public schools, $282 million for transportation including public transit in Philadelphia and Pittsburgh, $125 million for state-owned colleges and universities and $100 million for gun violence prevention.

Eight-digit increases are also sought for special education, income-eligible home repairs, student aid, fire service and EMS as well as community-based mental health supports.

Shapiro’s plan for the general fund represents a 7.1% increase, exceeding projected revenues by nearly $3.5 billion.

The governor is fully aware.

Shapiro alluded to the deficit in his annual address Tuesday inside the State Capitol Rotunda without using that specific word.

Instead, he turned attention to the state’s robust surplus from which he said now is the time to draw down reserves to further invest in Pennsylvania’s institutions and its people.

Pennsylvania has more than $7 billion in its general fund budgetary reserves, money left unspent at the end of a fiscal year that can roll over from one budget to the next. An additional $6.1 billion is held in the Rainy Day Fund intended for emergencies and economic downturns, with this stash projected to exceed $7.5 billion under the governor’s proposal.

Combined, the commonwealth’s reserves total about $14 billion.

“Consider this: Even if we funded every single one of the initiatives I talked about and contained in my budget, we would still have an $11 billion surplus at the end of June 2025. 11 billion dollars!” Shapiro said during his address.

Legislative Republicans are fully aware.

Their concern is that the reserve funds, built up over just the past few years due in part to federal stimulus funding, will be depleted in short order.

The governor’s own budget reflects this.

By using the budget surplus to cover the projected deficit in his proposal, the total would be cut by more than half to $3.4 billion. It’s projected another $3 billion will be needed to cover a deficit in 2025-26, too, slashing to total to $45.5 million in 2026-27. That year, the proposal indicates the first of three straight years where the Rainy Day Fund, formally known as the Budget Stabilization Reserve Fund, would see drawdowns of $2.9 billion, $2.7 billion and $2.2 billion, respectively.

Should that play out, both reserve accounts would be emptied. However, control of the legislature is divided and Republicans are digging in for another battle likely to extend beyond the June 30 statutory deadline to pass the next budget.

“Enacting this plan means tax increases are coming, there’s just no way around it,” Rep. Tim O’Neal, R-Washington, the House Republican whip, said Tuesday.

The Independent Fiscal Office warned in a November report that state revenues are projected below inflation in the coming five years. Including the current fiscal year, the agency predicts a cumulative structural deficit of more than $16 billion through 2028-29. By then, the Rainy Day Fund will be in the hole, the agency’s analysis shows.

“Excessive spending in one budget year can plant the seeds for tax increases and harmful program cuts in future budgets. The level of spending contained in this proposal is unsustainable in the long term and threatens the financial security of our commonwealth,” state Sen. Lynda Schlegel Culver, R-Northumberland/Montour/Snyder/Columbia/Luzerne, said Tuesday.

House Democratic Leaders reiterated Tuesday that greater investment in public education is necessary following a Commonwealth Court ruling that the current system is unconstitutional. That’s resulted in plans to increase spending and do so in a way that spreads funding more equitably to school districts with low-income and low property values.

“We’re very encouraged that this plan makes key investments without raising taxes or diminishing our healthy surpluses,” a joint statement from the caucus leadership said.

Shapiro made this point during a Friday interview with KYW Newsradio in Philadelphia. The commonwealth’s surplus is reflective of hoarding more taxpayer dollars than what’s needed, he expressed, and he said his spending plan is a way to return those dollars in the way of public investment.

“My budget is balanced, it’s fully paid for and it makes good use of public tax dollars,” Shapiro said.