The big challenges to the state budget next year come from Washington, according to a briefing from Gov. Josh Shapiro’s budget office.

The office issued a traditional mid-year budget briefing on its website for Fiscal Year 2025-26 this week.

The briefing is right on time, but the $50.09 billion dollar state budget it considers was enacted four months late in November due to a political stalemate involving Shapiro and a divided General Assembly.

The document sees slow economic growth in the months ahead and weak job growth with unemployment remaining steady.

It cites uncertainty about the federal government during President Donald Trump’s second term as a risk to state finances. The federal government is the largest employer in Pennsylvania.

The prospect of more federal grant cuts and uncertainty about federal aid in natural disasters under Trump are also listed by the office as challenges.

The enactment of Trump-supported House Resolution 1 last summer poses challenges with big changes for the Supplemental Nutrition Assistance Program (SNAP), a state-run but federally funded program.

Nearly two million Pennsylvanians receive SNAP benefits.

The changes to the food assistance program include revised work requirements for able-bodied adults and reducing the administrative costs picked up by Washington from 50% to 25%.

A new work requirement for recipients of Medicaid starting in 2027 is another concern mentioned.

Impact of late state budget

The use of one-time transfers, diversion of lapsed funds and shifting money from special funds to shape the compromise budget is viewed as a problem by the budget office.

Since the budget was enacted Nov. 12, state government has been busy delivering billions of dollars of delayed payments.

They include $7 billion to vendors and grant recipients, $6.3 billion to reimburse state employees, $5 billion to schools and universities and $1 billion to counties by the end of November.

Zachary Reber took over as state budget secretary last week. He succeeds Uri Monson.

A gloomier outlook

The state Independent Fiscal Office offers a gloomier fiscal picture.

The IFO recently projected that Pennsylvania will face a $5.84 billion budget deficit next fiscal year.

The new budget shifts $670 million from special funds to support the taxpayer-funded General Fund, the IFO said.

SNAP costs will increase $100 million in FY2026-27 and by $300 million in FY2027-28, the IFO said.