Pennsylvania Gov. Josh Shapiro on Tuesday presented his proposed $51.47 billion budget for 2025-2026, a 7.5-percent increase over the current fiscal year, and it isn’t faring well with Republican lawmakers and various business and policy groups across the commonwealth.
“This budget proposal is a huge disappointment and fails to adequately serve Pennsylvanians,” said PA Rep. Josh Bashline (R-Clarion/Armstrong). “Listening to the governor’s requests during today’s budget address, he wants to continue his mission of spending aimlessly without any accountability.”
In his address, Shapiro outlined a budget proposal that he said focused on maintaining fiscal responsibility; improving workforce development; reducing costs for health care, housing, and energy; making investments in economic development; and continuing bipartisan efforts to support Pennsylvania students.
The proposal relies upon a $1.6 billion transfer from the state Rainy Day Fund to balance the governor’s budget, and proposes new revenue and tax modifications to generate revenue to balance the spending plan, including legalizing adult-use cannabis ($536 million); legalizing, taxing, and regulating skill games/gaming ($368 million); reducing the Corporate Net Income tax rate ($264 million); increasing the minimum wage to $15/hour ($51 million); and reforming the Financial Institutions Tax ($97 million).
Without new money, the state is slated to use up its sizable budget reserves and its Rainy Day Fund by the end of FY 2026-2027, according to the Independent Fiscal Office.
“Pennsylvania is on the rise. We’re moving at the speed of business,” the governor said during his address. “We’ve made wise investments that are beginning to pay off and we still have billions in surplus at a time when neighboring states are facing deficits.”
That’s not exactly true, according to Nathan Benefield, chief policy officer at the Commonwealth Foundation, a think tank based in Harrisburg, Pa., that supports fiscally conservative and libertarian public policies.
“The only things ‘on the rise’ in Pennsylvania are new taxes, energy costs, and the budget deficit,” Benefield posted on X this afternoon. “Shapiro’s proposal rehashes the same failed policies of the past, combined with proposals he knows are dead on arrival.
“Shapiro is gaslighting Pennsylvanians. The state doesn’t have a surplus, it has a massive deficit,” Benefield said. “He proposed exacerbating that deficit calling for extreme spending that will impose new taxes on working Pennsylvanians.”
In fact, Pennsylvania Rep. Brad Roae (R-Crawford/Erie) said if Shapiro’s budget proposal is enacted, it would spend the rest of the commonwealth’s General Fund surplus and put a dent in the Rainy Day Fund, resulting in a huge tax increase in future years.
“Once spending is increased on a particular line item, it is very difficult to decrease it,” Roae said. “We should be focused on cutting and efficiencies, not spending willy-nilly.”
Energy plans
One section of the proposed budget, entitled Cutting Costs for Pennsylvanians, includes Shapiro’s plan for “Producing More Energy, Lowering Electricity Costs, and Building a More Reliable, Affordable Energy Sector.”
This subsection reiterates his recently released energy plan — known as the Lightning Plan — which includes initiatives he says would save Pennsylvania energy customers $664 million by 2040, while generating $11.4 billion in investment in clean, reliable energy sources.
The proposals, Shapiro said, will supercharge energy development in the commonwealth and help energy projects get built and approved faster than ever before.
Marcellus Shale Coalition (MSC) President Jim Welty said Gov. Shapiro correctly recognizes the importance of Pennsylvania energy to the state’s economy and quality of life, saying that while the governor cited several examples where Pennsylvania trails its neighbors in performance, energy development — specifically natural gas and power generation — is a notable exception.
“To lead on energy requires our elected officials … to embrace and support our sector’s outsized contributions to our commonwealth,” Welty said. “Leadership also requires advancing policies that encourage responsible domestic natural gas production and use, which is overwhelmingly supported by Pennsylvania voters.”
Welty also pointed out that while MSC appreciates Shapiro’s renewed focus on permitting and regulatory reform, proposals such as the Pennsylvania Reliable Energy Sustainability Standard (PRESS) and the Pennsylvania Climate Emissions Reduction Act (PACER) would undercut the broad-based benefits of Pennsylvania natural gas.
“Imposing new energy taxes and electricity mandates that intentionally sideline natural gas not only impedes our ability to attract job-creating capital investment, but it drives up energy costs for consumers while threatening power reliability by exacerbating an already fragile electric grid,” he said.
Americans for Prosperity (AFP) Pennsylvania, a libertarian conservative political advocacy group, said the PA government needs to get out of the energy industry altogether, and supports ending the Regional Greenhouse Gas Initiative (RGGI) tax, a carbon tax on power generators that’s part of a multi-state cap-and-trade program. The tax is intended to reduce carbon dioxide emissions from the power sector.
“What’s on the rise in PA is our energy bills,” the group posted. “Under the Wolf/Shapiro RGGI tax we’re seeing higher home heating costs that penalize taxpayers that are struggling to make ends meet. Remove the tax and restore energy abundance in PA!”
Rep. Bashline agreed, saying Shapiro’s “economically damaging energy taxes … will increase consumer costs and drive investment out of the commonwealth. This is a non-negotiable for me.”
The proposed budget isn’t sustainable, Bashline added, and only leaves options to raise taxes or grow the economy. “I choose the latter. We can do this by focusing on energy independence, supporting our first responders, bringing jobs back to Clarion and Armstrong counties, and giving students the ability to choose which schools best suit their needs,” he said.
Economic plans
Another section of Shapiro’s proposed budget focuses on economic development, which includes a subsection for making significant investments in mass transit.
Currently, 7.68 percent of all Sales and Use Tax receipts are deposited into the Public Transportation Trust Fund. His proposed budget would build on that investment by increasing the transfer an additional 1.75 percent. The increase in available funding would inject an additional $292.5 million into mass transit across the state in 2025-26, growing to more than $330 million in 2029-30, according to the governor.
Rep. Roae said Shapiro’s proposal would significantly increase the portion of the sales tax that goes to mass transit, which would benefit Pittsburgh and Philadelphia, but leave rural communities “high and dry.”
Shapiro also wants to streamline tax credits by proposing to eliminate three tax credit programs that are duplicative of other programs and replace them with one tax credit program aimed specifically at creating jobs. The budget repeals the Waterfront Development Tax Credit, the Video Game Development Tax Credit, and the Manufacturing Tax Credit and creates the AdvancePA tax credit, a new $10 million tax credit to provide more flexibility for securing important deals and incentivizing high-paying job creation within the Commonwealth.
At the same time, the governor wants to speed up tax cuts for Pennsylvania businesses by expediting the Corporate Net Income Tax cuts by two years, reducing the current tax rate each year by 0.75 percent resulting in a 4.99 percent tax rate in tax year 2029. In addition, he called for eliminating a tax loophole known as the “Delaware Loophole” that allows some large corporations to skirt paying their taxes in Pennsylvania.
Shapiro’s budget submission today now starts the budget process. After reviewing the budget, the House and Senate appropriations committees will hold public hearings to review it with agency leaders. Once the budget hearings conclude, the legislature begins working on developing a budget for the new fiscal year, which starts July 1.
Shapiro and Democrats said they realize that the work is far from complete.
“We are not wastefully spending; that’s not what we’re doing,” Democratic House Majority Appropriations Chairman Jordan Harris said during a press conference after the governor’s budget address. “We’re saying let’s make targeted and strategic investments that benefit us while also making sure that we are creating a business climate here in Pennsylvania where businesses will want to come.”
During his address, Shapiro acknowledged how politics works, saying he realizes there are some folks in the General Assembly who will feel the need to just be reflexively against whatever he’s for.
“Remember, despite the wave nationally, voters sent the same group back here to keep making progress,” the governor said. “And so I ask you to resist the temptation to put politics above people — and instead let’s continue to work together to solve more problems.”