HARRISBURG, Pa. — A Pennsylvania budget season unlike any other has arrived in Harrisburg, and the pile of challenges facing negotiators ahead of the June 30 deadline appears immense.

A new administration in Washington, D.C., is orchestrating massive reductions in programs with federal-to-state money flows. Mass transit faces a financial crisis. Pennsylvania's own finances — pumped up for several years by federal pandemic assistance — now show billions of dollars more going out than coming in.

And, a top Republican told the Post-Gazette there's no chance in this budget cycle for Gov. Josh Shapiro's concept of deriving half a billion dollars in new revenue from legalized marijuana.

Shapiro, a Democrat entering his third budget negotiation, speaks of the process in positive yet pragmatic terms. He constantly reminds the public that Republicans control the state Senate and Democrats the state House.

Hence, no bill will become law without both parties' blessings.

"I am the eternal optimist. I mean, I am a governor with a divided Legislature. I was the only governor in the country last year with a divided Legislature. I think there's two now," he told a gathering in Philadelphia recently.

On the worsening transit dilemma and other budget issues, Shapiro added, "We are going to keep working at it until we can get a deal done."

He unveiled a $51.5 billion spending proposal in February that included several sources of new revenue. One was the anticipated legalization of recreational marijuana, a move Shapiro projected could generate $536 million in new revenue.

The House passed a bill last month to carry out legalization, but it was rejected by a Senate committee. Last week, the key Republican on the other side of the negotiating table, Senate Majority Leader Joe Pittman of Indiana County, gave a one-word answer when asked whether a marijuana deal could happen this budget cycle: "No."

Late Thursday, Pittman, fellow Republican Senate President Pro Tempore Kim Ward of Westmoreland County, and Republican Appropriations Committee Chairman Scott Martin of Lancaster County put out a statement that said Shapiro's proposed budget showed a spending increase of $3.6 billion from the current year "and does not include a realistic path to close the state's multibillion-dollar structural deficit."

That, they said, could ultimately lead to tax increases.

Top Democrats, meanwhile, were talking about the worsening transit situation.

The Pittsburgh region is at the heart of the impending crisis. Shapiro has proposed a $292.5 million increase for transit statewide, and said the fallout will be "devastating" if the increase is not approved.

Pittsburgh Regional Transit has said it could eliminate 41 of 100 bus routes in Allegheny County without more state money. The agency may also enact substantial fare increases and cut back services for riders with disabilities.

At the same time, potential massive cuts to service are on the table at the state's largest system, the Philadelphia region's SEPTA.

With "Transit Moves Us" signs pumping in the air during a transit rally outside the Capitol in Harrisburg last week, Democratic Rep. Aerion Abney of Allegheny County praised mass transit as a service for the public good.

"I want to remind folks that doing nothing on transit is actually going to cost us something," Abney said. "We call it in Harrisburg 'the do-nothing tax.' And the reality of the fact is, there are real-world consequences to the everyday quality of life of people, there are real-world side effects to not adequately funding mass transit."

Another challenging area for negotiators will be education.

Shapiro has proposed a $606 million increase for K-12 schools. It's the proposed second installment in a contemplated multiyear series of increases, following a 2023 court decision that found the state's school funding system unconstitutional.

Looming behind every segment of the budget conversation will be the new dynamic between Harrisburg and Washington, following the arrival of the new administration of President Donald Trump in January.

This will be the first Shapiro budget during Trump's presidency, and Shapiro — mentioned frequently by pundits as a potential presidential candidate in 2028 — has filed multiple lawsuits against the new administration.

"These guys don't know how to govern," Shapiro said during the Philadelphia appearance. The Trump administration, he said, has generated "chaos at every level."

At that appearance, he announced he had filed a federal lawsuit against the administration in a dispute over funding a federal-state program that pays farms to grow food for food banks.

His administration also has been saying that the high-profile federal reconciliation bill currently under consideration in the U.S. Senate and supported by the Trump administration would cause more than 300,000 Pennsylvanians to lose access to Medicaid.

Medicaid funding makes up a significant part of the proposed $21.2 billion Shapiro has proposed for 2025-26 for the state Department of Human Services, the largest single slice of the spending plan.

Pittman noted the Human Services allotment represented a Medicaid-driven increase of $2 billion over the current year's spending.

"We can't sustain that," he said in the interview. "If we have a $2 billion bill to pay in Medicaid, there is no room for anything else. So we have to figure out how we are going to tackle that Medicaid spend number. And we are prepared to have conversations about utilization, prior authorization and making sure it's an efficient service that is being delivered to the Commonwealth."

An example of this, Pittman said, is Medicaid spending on Ozempic and other "GLP-1" medications that have become wildly popular. During a budget hearing in February, Human Services Secretary Valerie Arkoosh testified that prescribing of the drugs for people who did not have chronic conditions like diabetes was helping to fuel the soaring state bill for Medicaid.

Arkoosh said her agency would propose a "much more robust" prior authorization system for Medicaid patients with obesity. On Wednesday, Pittman said, "I hope everybody is in agreement, we have to got to contain the utilization of Ozempic."

Besides marijuana legalization, Shapiro's proposed budget also includes $369 million in revenue from another new source, the regulation and taxing of so-called skill games. So far, no deal has been announced. Shapiro said about 70,000 of these games are in use in unregulated fashion in clubs, bars, convenience stores and other venues statewide.

State lottery officials have said the unregulated games cut into their revenue, which helps pay for programs for seniors. Stephanie Weyant, a deputy executive director at the Pennsylvania Lottery, testified during budget hearings that year-over-year sales of traditional lottery games recently declined by $240 million.

Weyant said the lottery industry has been seeing declines in general, but declines in Pennsylvania have been more severe "we believe because of the saturated and very competitive gaming market."

In Harrisburg, the minority leaders in the two chambers — speaking in separate interviews — were not pessimistic about the upcoming process.

"We are having conversations," said Sen. Jay Costa of Allegheny County, the top Democrat in the Senate. "I speak regularly with my colleagues on the other side of the aisle."

Rep. Jesse Topper of Bedford County, the top Republican in the House, said things right now are at their usual place, several weeks before the budget deadline. The sides are laying out positions.

"It is too early to start putting specifics out there," Topper said.

Shapiro's first budget, 2023-24, was signed Aug. 3, 2023, but some associated bills were left undone until mid-December, halting the flow of money to community colleges and libraries. Last year, things were more harmonious, and Shapiro signed the main budget bill on July 11.

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