On July 12, the House and Senate passed, and Gov. Josh Shapiro signed, the 2026-27 state budget, which provides for $50.8 billion in spending – a 3.7% increase over last year. Notably, the final budget is $1.1 billion less than the governor’s originally proposed spending plan. It doesn’t draw money out of Pennsylvania’s Rainy Day Fund, which currently holds nearly $8 billion, and it doesn’t rely on any new revenue sources. In a statement after the budget’s enactment, the PA Chamber applauded lawmakers for maintaining policies that are working to improve Pennsylvania’s economic competitiveness. A recent CNBC “Top States for Business” ranking showed Pennsylvania moving from 17 to 13 – an incredible 31 spot improvement in nearly a decade. “State budgets are an opportunity to make Pennsylvania more competitive, and we appreciate elements of this budget that continue the Commonwealth’s commitment to improving its business climate,” PA Chamber President and CEO Luke Bernstein said. Bernstein noted that PA Chamber-driven policies like improving Pennsylvania’s tax climate, bipartisan permitting reform, and other pro-growth efforts enacted in recent years have helped attract billions of dollars in private-sector investment across the Commonwealth. He emphasized that maintaining a strong fiscal foundation and advancing policies that encourage business growth will remain critical to Pennsylvania’s long-term competitiveness. “Continuing to reduce the Corporate Net Income Tax rate and increasing Net Operating Loss deduction limits are important reforms that send the right message to employers making long-term investment decisions,” he added. “These policies help position Pennsylvania to compete more effectively for jobs, capital investment, and economic growth.” Other Budget Benefits To support infrastructure improvements, the budget directs PennDOT to invest an additional $775 million from the Motor License Fund over the next two years, including $500 million in Fiscal Year 2026-27. The budget also makes significant investments in education, including: $678 million for K-12 education $10 million for the State-Related University Performance Fund $42.5 million for Grow PA Scholarships A $5.9 million increase for PHEAA Grants for Students, bringing total program funding to $419 million Just as important as what was included in the budget is what was left out. Thanks to the PA Chamber’s Government Affairs team’s stellar advocacy, several policy proposals that would have increased costs or regulatory burdens on employers were not included in the final budget package. These include: No Mandatory Unitary Combined Reporting for Corporate Net Income Tax filings, which would have increased the cost and complexity of tax compliance for many businesses. No Digital Advertising Tax, which would have raised costs for Pennsylvania businesses that market products and services online, disproportionately harming small businesses and consumers. No repeal of the Sales and Use Tax exemption for data center equipment, preserving an important incentive for technology investment and economic development that keeps us competitive with 38 other states. No False Claims Act, which would have exposed healthcare providers to a wave of lawsuits. No Paid Leave Mandate, which would have required billions of dollars in new payroll taxes to fund paid leave benefits. No Minimum Wage increase, avoiding additional cost pressures on small businesses and employers. No overhaul of the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs, preserving educational opportunities for students and maintaining the value of scholarship tax credits. You can read more about the 2026-27 state budget agreement and its impact on Pennsylvania employers in the PA Chamber’s comprehensive budget recap here, and read the PA Chamber’s full budget statement here.