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Pennsylvania lawmakers approved and Gov. Josh Shapiro signed a $50.8 billion budget plan Sunday that does not raise taxes or drain the state's Rainy Day Fund while shaving billions off the $53 billion plan proposed by Shapiro in February.
"From day one, my Administration has been laser-focused on delivering results for the people of Pennsylvania -- and what we're doing is working," said Governor Shapiro. "In a divided legislature, we've proven time and again that Democrats and Republicans can come together to get stuff done for the good people of Pennsylvania."
The deal comes just eight months after Shapiro signed the 2025-26 budget due to a prolonged budget impasse that ended only after Shapiro agreed to abandon efforts to have Pennsylvania join the Regional Greenhouse Gas Initiative, also known as RGGI. Most observers, though, had predicted lawmakers would be eager this year to quickly negotiate a deal to close out budget negotiations in order to avoid having to deal with an impasse with the mid-term elections looming in the fall.
Legislative leaders characterized the deal as a "reasonable compromise" due to the state's divided government with Republicans holding the majority in the Senate and Democrats holding the House and the governor's mansion.
"It can be very difficult when there are two diametrically opposed visions for how to move the Commonwealth forward. And yet, year after year, we must come together, work through as many differences as we can and come up with the product," Rep. Jesse Topper, R-Bedford, the minority floor leader, said in remarks ahead of the final vote in the House. "It is the best product that this makeup of the General Assembly could come up with at this time."
Republicans said that the move to exit RGGI is already paying off as energy investment has increased in the state. The state ended 2025-26 with $1.1 billion more in revenue thant officials had projected.
House Majority Leader Matt Bradford, D-Montgomery, said that the economic growth is due to Shapiro's leadership.
"The policies of this administration -- even with this divided government that sometimes is more dysfunctional than either of us would like -- are paying dividends. Pennsylvania is moving forward when other states are not," he said.
While the budget was approved with broad support in both chambers, critics say the deal punts on a variety of controversial issues, including whether to legalize and tax skill games in the wake of a state Supreme Court ruling that found the devices are illegal slot machines.
The deal also does not include proposals sought by progressives to enact a tax on digital advertising and proposals with bipartisan support to end a sales tax exemption for the purchase of equipment for data centers. The tax exemption is projected to cost the state $155 million in lost revenue in 2025-26 and is projected to cost the state $188 million in 2026-27. As more data centers proposals are unveiled the price tag of the tax credit is expected to grow rapidly and could hit $500 million by 2030-31, according to state projections.
Shapiro has also repeatedly urged lawmakers to legalize adult recreational use of marijuana to capture tax revenue from Pennsylvanians who are now crossing state lines to buy cannabis products in neighboring states. Marijuana legalization bills have stalled in the Senate.
Sen. Katie Muth, D-Montgomery, said that if lawmakers had included any of these revenue-generating plans lawmakers would have had more funding to expand programs and services.
"We would not have to pass another, mostly flat-funded and cost-to-carry budget," she said.
School funding in budget
The budget provides $8.32 billion in basic education funding, a $58 million boost over the prior year, along with $565 million directed at closing the adequacy gap at the heart of a 2023 court decision that found the state's system of funding schools unconstitutionally short-changed students in poorer school districts. Proponents say the adequacy funding amounts to about one-third of the amount needed to fully close the gap between spending in wealthier school districts and those with less financial resources.
The state budget also includes $40 million for stipends for student teachers, a $10 million increase over last year's funding and $5 million more than Shapiro had proposed. Student teachers had previously been unpaid during their semester-long in-class assignments and supporters maintained that stipends would allow more students to enter teaching. However, underfunding of the program has meant that many student teachers still did not get stipends.
The budget adds trade programs to the GROW PA scholarship program aimed at rewarding college students who pursue careers in high-demand fields and agree to remain in Pennsylvania after graduation.
The legislation also increases the maximum annual household income to be eligible for a scholarship from $200,000 to $208,000 and establishes a maximum scholarship award of not less than $3,000, according to a fiscal note completed by the House Appropriations Committee.