Last week, Pennsylvania lawmakers held a series of budget hearings that offered a detailed look at the Shapiro administration’s proposed spending plan for the 2026-27 fiscal year. Agency leaders appeared before the House and Senate Appropriations Committees to promote the governor’s plan and answer questions about policy direction across transportation, education, energy regulation, workforce development, and the state’s fiscal outlook, among other areas.
The hearings highlighted several policy debates that will likely shape negotiations in the coming months. Below are recaps most relevant to the business community.
Transportation: Transit funding and long-term revenue questions
The Senate Transportation Committee held a two-part budget hearing with the Pennsylvania Department of Transportation (PennDOT) and Secretary Mike Carroll on March 2.
Lawmakers focused on the growing balance in the Public Transportation Trust Fund (PTTF). Members questioned why the fund balance has grown to over $2 billion while transit agencies report significant funding gaps and capital backlogs. Senators cited figures such as SEPTA’s reported $5.1 billion capital backlog and large unspent capital balances.
PennDOT officials countered that those balances reflect how transit capital funding allocation works. Projects are often planned over several years and must meet federal matching, environmental review, and engineering requirements before construction begins. As a result, funds may appear unused even though they are already committed to projects.
The discussion also focused on the project delivery capacity of large transit agencies such as SEPTA and Pittsburgh Regional Transit. Several lawmakers questioned whether transit agencies have the capacity to deliver projects quickly enough to use the funding available.
Beyond transit, lawmakers raised concerns about inflation in construction costs, supply chain pressures, and the long-term sustainability of Pennsylvania’s transportation funding model. PennDOT officials acknowledged that declining gas tax revenue — driven by improved fuel efficiency and the rise of electric vehicles — will likely require structural funding discussions in the future.
Key points for budget negotiations:
- Growing funding needs across PA’s vast multimodal transportation system
- Disparity between PTTF fund balances and real-world service capacity
- The project delivery capacity of major transit agencies
- The long-term sustainability of Pennsylvania’s transportation funding model
Education: School funding ruling and workforce pathways
The House Appropriations Committee held a hearing with Pennsylvania Department of Education Secretary Carrie Rowe and senior department officials on March 3.
The session focused heavily on the Commonwealth Court’s 2023 ruling that declared the Commonwealth’s K-12 funding system unconstitutional.
Department officials said the governor’s proposed increases to the adequacy funding formula are intended to continue addressing the court’s decision. Lawmakers noted that the Court ruled that Pennsylvania’s system for allocating state education funding was unconstitutional, not the overall amount the legislature provides.
Members also discussed the impact of recent education investments. Over the past three years, the state has added more than $3 billion to new education funding. According to department testimony, those funds have helped districts reduce teacher vacancies, expand career and technical education programs, and reduce class sizes.
Career and technical education (CTE) was another major focus. Lawmakers expressed support for a proposed funding increase and discussed ways to modernize CTE pathways. Some members suggested that students who complete coursework earlier should be able to take industry certification exams sooner rather than waiting until their senior year.
The hearing also highlighted the growing demand for student support programs. Officials said about 71,000 children receive early intervention services for developmental disabilities, with enrollment continuing to grow each year. Because services must be provided to all eligible children, those programs remain a significant cost driver in the education budget.
Key points for budget negotiations:
- Legislative compliance with the school funding court ruling
- Expansion of workforce-oriented education, such as CTE
- Managing the growing costs of student support programs
Energy and utilities: Rising electricity prices and regional markets
The Senate Appropriations Committee held a hearing with the Pennsylvania Public Utility Commission (PUC) on March 3. Chairman Stephen DeFrank, Vice Chair Kimberly Barrow, and Commissioner Kathryn Zerfus offered testimony as lawmakers focused on rising electricity prices and the role of regional energy markets.
Much of the discussion centered on PJM’s capacity auctions, which determine payments to power generators to ensure sufficient electricity supply. Recent auctions saw prices increase sharply after years of low costs.
PUC officials said several factors are driving the increase, including rapid electricity demand growth and slower additions of new generation resources to offset the retirement of older power plants.
Lawmakers also discussed the capacity auction price cap negotiated between the Shapiro administration and PJM. While the cap limited further increases, some senators raised concerns that the policy could shift costs among states within the regional grid.
Commissioners also warned that electricity demand in the PJM region is projected to grow faster than in past decades, which will require significant new generation and grid infrastructure in the years ahead.
Key points for budget negotiations:
- Ensuring adequate power to meet growing electricity demand
- Consumer protection for electricity ratepayers
- Difficulty of regulating electricity prices when much of the market operates across multi-state regional grids
Workforce development: Training programs and talent retention
The Senate Appropriations Committee held a hearing focused on workforce development programs and strategies to strengthen Pennsylvania’s talent pipeline on March 4. Pennsylvania Department of Labor & Industry (L&I) Secretary Nancy Walker and Department of Community and Economic Development (DCED) Secretary Rick Siger testified along with other department leaders.
The officials discussed several proposed investments, including increased funding for the employer training program WEDnetPA and a new initiative called Career Connect designed to link employers, universities, and workforce providers. Another proposed initiative would expand programs that introduce middle and high school students to manufacturing careers while providing technical training and credential opportunities.
Lawmakers talked about Pennsylvania’s broader effort to better coordinate workforce, education, and economic development programs across state agencies so they are aligned with employer needs and long‑term economic growth.
Apprenticeships received particular attention as an effective training model because workers earn wages while gaining industry-recognized credentials that lead to long-term employment.
Department leaders highlighted Eli Lilly’s recent investment in the Lehigh Valley as a successful example of coordinated workforce development. Securing this investment required extensive collaboration between state agencies, higher education, and the private sector, officials said.
Officials also discussed workforce programs that support individuals with disabilities through the Office of Vocational Rehabilitation, which requested additional funding to expand employment support services.
Key points for budget negotiations:
- Importance of workforce training in attracting large-scale investments
- Service capacity challenges for certain programs, requiring more state support
- The need for better workforce data to improve program delivery
- How AI and technological change may impact Pennsylvania’s workforce
Budget Office: Fiscal outlook and long-term pressures
The Senate Appropriations Committee held a hearing with leaders from the Pennsylvania Office of the Budget and Department of Revenue on March 4 to review the state’s fiscal outlook and the assumptions behind the governor’s proposed spending plan.
Pennsylvania Budget Secretary Zach Reber and Revenue Secretary Pat Browne testified with other agency officials about the governor’s proposal, which totals roughly $53.3 billion, an increase of $2.7 billion (5.4%) from the Fiscal Year 2025-26 budget.
Much of the discussion centered on the long-term sustainability of Pennsylvania’s finances, tax relief programs, and the move to decouple Pennsylvania from recent changes to federal tax laws. Members raised concerns about budget deficits if spending growth continues to outpace revenue growth in future years.
Budget officials said several major spending areas will place pressure on state finances, including education funding, Medicaid and human services programs. They also acknowledged that the proposed budget relies in part on reserve funds to help maintain balance.
Lawmakers asked about the status of Pennsylvania’s Rainy Day Fund and emphasized that those funds are intended to help stabilize the budget during economic downturns rather than support ongoing spending.
Committee members also raised questions about federal funding and the economic assumptions used in the state’s revenue forecast. Senators questioned whether the administration’s revenue forecasts are realistic, given economic uncertainty and the fact that the governor’s proposed new revenue streams (cannabis legalization, taxation of skill games, and combined reporting) have not been enacted by the legislature.
Key points for budget negotiations:
- Reliability of proposed revenue sources
- Expansion of tax relief programs
- Potential fiscal impact of federal tax changes
- Long-term strategies for maintaining sustainable state revenues.
Looking ahead
These hearings highlighted several issues likely to shape the coming budget negotiations: transportation funding reform, education funding, electricity affordability and reliability, workforce development investments, and Pennsylvania’s long-term fiscal health.
Lawmakers will continue reviewing agency budgets and policy proposals in the weeks ahead as negotiations begin on the final state spending plan.
Other legislative action
Apart from budget hearings, the House Energy Committee last week voted along party lines to advance two separate proposals that could have the effect of inhibiting data center development in Pennsylvania.
House Bill 2150 would impose annual energy and water usage reporting requirements on data centers, which are duplicative and harmful to Pennsylvania’s competitiveness.
The bill singles out one industry, applying exclusively to data centers, even though many other facility types have comparable or greater resource demands. This approach isolates data centers and places Pennsylvania at a competitive disadvantage relative to states actively working to attract these projects.
House Bill 2151 would direct the Pennsylvania Department of Community and Economic Development (DCED) to create a model ordinance for data center project siting.
While there is merit to the concept of a model ordinance, this particular bill risks creating unintended regulatory barriers and potentially weakening Pennsylvania’s competitiveness in data-center site selection. Any successful model ordinance must be developed collaboratively with meaningful input from all stakeholders, including the data center industry, to ensure it reflects industry best practices and supports, rather than constrains, future investment.
Without a proper structure in place for developing model ordinances, the outcome can easily become an unduly restrictive proposal, with overly prescriptive provisions that conflict with operational needs, hinder reliability, or duplicate existing permitting requirements.
The PA Chamber is proposing amendments to H.B. 2151, to ensure the data center industry is represented in the drafting of a model ordinance, to help avoid these unintended consequences.
We opposed these bills (CLICK HERE for our memo), which now advance to the full House.