Governor Josh Shapiro presented his 2026-2027 budget proposal in an 84-minute speech before a joint session of the House and Senate on Tuesday.
The budget calls for spending of $53.3 billion, state revenues are estimated at just $48.68 billion, and the shortfall requires the transfer of $4.6 billion from state reserves.
Democrats in the House were in a celebratory mood, while Republicans in the Senate called it a “rinse and repeat” budget that continues to ignore the structural budget deficit. While both sides have openly stated that they do not want another long stalemate like the one that occurred last summer and fall, it is clear that battle lines are being drawn for contentious negotiations.
“While challenges remain, this budget proposes commonsense solutions to protect Pennsylvanians and position our Commonwealth for long-term success,” Shapiro wrote in his budget brief. “With sound fiscal policy, we can build on the progress we have made, strengthen our rainy day fund and ensure a brighter future for the Commonwealth.”
Shapiro once again called for the legalization of recreational marijuana and the regulation of skill games, which could generate an estimated $1.5 billion. He also praised his administration’s ability to act on behalf of Pennsylvania, touting the state’s unemployment rate, which has remained below the national rate for 31 straight months; having more juvenile farmers under the age of 35 than any other state; producing more energy than ever before; securing the largest private sector investment in the Commonwealth’s history in Lucerne and Bucks Counties; and signing the largest life sciences deal in Pennsylvania history.
“The investments we’ve made are paying off — our economy is growing, and we collected $417 million more in revenue than estimated in the first seven months of this fiscal year,” the governor said. “Our bond ratings increased not once, but twice, resulting in over $200 million in savings for taxpayers.
“What we do together brings results.”
He proposed creating a $100 million Federal Response Fund to lend a hand “mitigate any future actions – or inactions – by the federal government that threaten services that Pennsylvanians rely on.”
“You see, Pennsylvanians pay $158 billion in federal taxes every year, and we expect to get something for that money. Not only has the federal government tried to unlawfully withhold funding for public safety, it has also tried to do so by spending dollars to plug abandoned wells, provide health care to rural communities, improve school infrastructure, and even provide food benefits under SNAP.
“They are violating the pact they made with the people of Pennsylvania.”
Other initiatives included the creation of GRID – the Governor’s Standards for Responsible Infrastructure Development – aimed at holding data center developers accountable for adhering to strict standards if “they want our full support.
“First, developers must commit to producing their own energy or fully paying for the new generation they will need, and not burdening home and business owners with additional costs for their development. Second, developers must commit to rigorous standards of transparency and direct community involvement. Third, these projects must employ and train local workers. Fourth, they must commit to the highest standards of environmental protection, especially water.”
Shapiro also called for recent restrictions on AI “companion” chatbots and a ban on the employ of cell phones in schools.
“Students need to spend less time focusing on their phones and more time learning, talking face-to-face with friends and developing key skills they will need later in life,” he said.
The governor also returned to one of his favorite causes, calling again for Pennsylvania to raise its minimum wage of $7.25 an hour, while noting that it has been 7,150 days since the Commonwealth last passed legislation to raise the minimum wage.
By criticizing Senate Republicans for not taking up bills sent to the chamber by the Democrat-controlled House, Shapiro gave the GOP another reason to reconsider.
Citing data that showed a pay raise for 61,000 people who are currently on Medicaid and earn less than $15 an hour, he said the raise “will save the commonwealth $300 million a year in benefit programs like Medicaid.”
“If you’re not going to do it because it’s the right decision… because it would put more families on the table for their children, then do it because it will save us $300 million and reduce our entitlement budget by increasing our workforce and putting more money back into the pockets of our workers.”
“This budget is built on real progress by focusing on the people we serve,” he said Lieutenant Governor Austin Davis. “I have had the honor of meeting Pennsylvanians who are making their communities safer, teaching our youngest students, and fighting to make victims’ voices heard. This budget has their support – investing in after-school programs, community organizations addressing gun violence, early education and child care, and support for crime victims. These investments will give every Pennsylvanian the tools to succeed today and build a stronger future.”
“The governor’s budget speech today was more or less the same: more spending, the promise of new programs that have yet to help Pennsylvania families, all while sending the bill to taxpayers,” said the GOP gubernatorial candidate Stacy Garrity. “In what world does Josh Shapiro think he can finance a $53.3 billion budget when he was unable to cover last year’s $50 billion budget? Governor Shapiro’s budget is the largest in Pennsylvania history and is unsustainable, irresponsible and reckless.”
“This budget does not raise taxes – in fact, it continues to lower them,” Shapiro said. “And it does not require a sweeping tax escalate today, tomorrow, or at any point in the next five years. Look, I know some of you are trying to score political points by claiming this is the case, but making this claim doesn’t make it true.
“Governor Shapiro’s budget proposal is exactly what you would expect given his track record – reckless and unaffordable spending for partisan special interests,” he said Andrew LewisPresident and CEO of the Commonwealth Foundation.
“Instead of addressing key policy changes that will make Pennsylvania more competitive, students more successful and energy cheaper, Gov. Josh Shapiro instead chose to threaten tax increases and raid the state’s Rainy Day Fund to cover mass transit subsidies and bloated bureaucracy.”
“Over the last three years, Democrats have delivered for Pennsylvanians by cutting taxes for families, funding our schools, strengthening public safety and growing our economy,” he said Speaker of the House of Representatives Joanna McClinton (Delaware/Philadelphia). “Governor Shapiro’s budget presented today keeps us on track with smart and thoughtful investments for the future while tackling some of the greatest challenges facing our neighbors.”
“Governor Shapiro understands working people and the struggles they face in Pennsylvania,” he said Angela Ferrittopresident of the Pennsylvania AFL-CIO. “From initiatives and investments in child care and public education to housing affordability and energy, this budget includes investments that help working families thrive in challenging times.”
Shapiro called the leaders of the four caucuses to his office Wednesday to begin the budget negotiation process.
This is a developing story that will be updated throughout the day.
