Gov. Josh Shapiro delivered his annual budget address last Tuesday, outlining a $53.3 billion proposal for the Fiscal Year 2026-27 beginning July 1, 2026, that emphasizes education, workforce development, infrastructure, and economic growth, while also raising significant questions about Pennsylvania’s long-term fiscal sustainability and business competitiveness.
The governor’s address is the opening step in a long budget process that often helps shape the Commonwealth’s economic direction. As lawmakers begin their review, the Chamber remains focused on policies that strengthen Pennsylvania’s ability to attract investment, create jobs, and compete with other states that continue to move quickly to improve their business climates. You can find our official statement on this year’s budget proposal here.
CLICK HERE for our section-by-section rundown of elements of the governor’s budget plan particularly relevant to employers and Pennsylvania’s economy.
The governor’s proposal would increase state spending by $2.72 billion, or 5.4 percent over the current fiscal year, and relies heavily on one-time revenue sources and assumed revenues from proposals that have yet to be approved by the General Assembly. Most notably, the plan draws $4.6 billion from the state’s Rainy Day Fund and assumes roughly $2 billion from proposals to tax skill games and legalize recreational marijuana — both of which have failed to gain legislative approval in prior sessions.
In his address, the governor pointed to recent investments in education, public safety, and economic development, citing job creation and private-sector investment as signs of progress. At the same time, the proposal arrives as Pennsylvania faces a growing structural deficit.
The latest projections from the Independent Fiscal Office show operating shortfalls beginning in the upcoming fiscal year and widening significantly over the next five years, intensifying debate over spending growth, reserves, and future tax pressures.
Several elements of the proposal are likely to draw bipartisan interest, particularly continued investments in workforce development. The proposal includes additional funding for career and technical education, apprenticeships, and STEM initiatives, building on nearly 50 percent growth in these programs over the last three years. The plan also includes new funding for School-to-Work partnerships, incumbent worker training, internships, and child-care employee recruitment and retention bonuses.
The plan emphasizes innovation and economic development through investments in life sciences, robotics, manufacturing, agriculture, energy, and technology. A centerpiece of that strategy is Innovate in PA 2.0, a proposed $100 million initiative funded through the sale of Insurance Premium Tax Credits, aimed at expanding access to venture capital and supporting the commercialization of research in high-growth industries.
The governor’s proposal also calls for a new Pennsylvania Program for Critical Infrastructure Investment, funded through general obligation bonds, to support large-scale projects statewide, including bringing new energy generation onto the grid, housing development, and upgrades to school and municipal facilities. The governor also renewed calls for additional permitting reforms and outlined a series of energy policy proposals that would reshape project siting, utility regulation, and market standards, all of which will factor heavily into discussions around reliability, affordability, and future investment.
The governor also outlined new standards for state support of large-scale projects such as data centers. The Governor’s Responsible Infrastructure Development (GRID) standards encompass four principles: protecting energy and water resources; transparency and community engagement; delivering local jobs and community benefits; and responsible growth with accountability.
On the tax front, the budget maintains the scheduled phase-down of the Corporate Net Income Tax rate under current law and preserves the planned increase in net operating loss deductions to 60 percent in 2027 for losses incurred after 2024.
However, the proposal also includes significant changes to business taxation, including the adoption of mandatory unitary combined reporting, which the PA Chamber has warned will increase compliance costs and make Pennsylvania less competitive for multi-state employers.
Notably, the governor’s plan proposes a new government-mandated minimum wage increase beginning in 2027 and the creation of a False Claims Act allowing private lawsuits involving public funds.
Additionally, the governor’s call for increased transportation funding relies largely on existing mechanisms, with no new dedicated funding sources proposed for public transit. The plan also continues using Motor License Fund dollars to support State Police operations, delaying the previously planned phase-out for a second year.
The governor’s proposal now moves to the General Assembly, where House and Senate Appropriations committees will begin weeks of hearings to examine agency budgets, revenue assumptions, and policy proposals. As the process unfolds, the PA Chamber will continue to engage with policymakers to ensure Pennsylvania builds on recent progress and avoids steps that could undermine the Commonwealth’s competitiveness.