Gov. Josh Shapiro proposes $53.2 billion state budget focusing on affordability, development, and raising Pennsylvania’s minimum wage
Shapiro’s pitch is likely to set him up for another budget fight with Senate Republicans, who control the chamber and have promised fiscal restraint as their top priority.
HARRISBURG — Gov. Josh Shapiro on Tuesday unveiled a $53.2 billion state budget proposal with a focus on affordability and attracting development in Pennsylvania, in what — if approved by the state’s divided legislature — would be a 6.2% increase over last year’s budget.
Shapiro’s $53.2 billion pitch is likely setting him up for another fight during the election year with Senate Republicans, who control the chamber and have promised fiscal restraint as their top priority and are unlikely to approve a major spending increase. Shapiro’s budget proposal would spend $4.6 billion more than the state is projected to bring in in the 2026-27 fiscal year, requiring the state to pull most of new spending from Pennsylvania’s Rainy Day Fund that currently tops more than $7 billion.
Last year, Shapiro and House Democrats took 135 days to reach an agreement with Senate Republicans, in what became an at-times ugly battle that underscored the state’s rural-urban divide.
Shapiro on Tuesday said he wants to avoid another lengthy stalled budget, which forced schools, counties and nonprofits to take out billions in loans to stay afloat during the four-month-long impasse.
He invited leaders of all four caucuses — Senate Democrats, Senate Republicans, House Democrats, and House Republicans — to meet on Wednesday to start budget talks much sooner than prior years. They all agreed to attend, he added.
“We all recognize it took too long last year and that had real impacts on Pennsylvanians, but we learned some valuable lessons through that process,” Shapiro said in his address lasting an hour and 24 minutes. “We learned that we all need to be at the table, and that we all need to be at the table sooner.”
Shapiro — and most lawmakers in the General Assembly — are up for reelection this year. In previous midterm election years, the impending election pressure has sped up negotiations, as legislators want to bring home results to their constituents before they return to the campaign trail.
Shapiro proposed the 6.2% increase in year-over-year spending, which equates to a $2.7 billion total increase in spending over the 2025-26 budget. Approximately $1 billion of that would fulfill increased federal Medicaid obligations, another $1 billion would be for new initiatives proposed by the governor, and $700 million would go to other funding increases, according to a Shapiro administration official.
Shapiro’s budget pitch also includes a proposal to generate nearly $2 billion in new revenue, largely from the taxation and legalization of recreational marijuana and regulation of skill games — suggestions he put forward last year, but which failed to gain traction within the legislature. He will propose taxing adult-use cannabis at 20%, with more than $650 million in projected revenue from the sale of licenses in the first year.
“We’re putting our communities at risk and losing out on billions of dollars in revenue by doing nothing on both,” Shapiro said. “Everyone knows we need to get this done. So let’s come together and finally get it over the finish line.”
Shapiro has proposed the legalization and taxation of recreational marijuana during each of his prior three budget proposals. Last year, he pitched a 20% tax on the sale of legal weed that he estimated would bring in $535.6 million in its first year. This year, Shapiro projects it would bring in $729.4 million in the first year — a 36% increase in projection, without changing the proposed tax rate. A Shapiro administration official said Tuesday that the projection increase is due to an increase in interest from marijuana companies who want to buy a license to do business in Pennsylvania.
State Treasurer Stacy Garrity, a Republican likely to challenge Shapiro in November, said Shapiro’s proposal for new revenue “doesn’t come nearly close enough” to bridge the budget deficit.
“You should never use your Rainy Day Fund to plug a budget hole, because what comes the year after?” Garrity said.
The proposal does not include any broad tax increase on state residents. But it does feature the governor’s latest appeal for a $15 minimum wage that he pitched as an overall cost savings for Pennsylvanians, as fewer people would be reliant on government programs.
The budget includes an additional $565 million for public schools toward the state’s new adequacy funding and tax equity formulas, in the latest installment of a nine-year plan to ensure students get an equitable education no matter their ZIP code.
Additionally, Shapiro used his budget address to roll out plans for reducing energy and housing costs across Pennsylvania. He announced new standards for data center development alongside a new program designed to bring infrastructure projects — including energy generation and housing — to the state. To help address the rising cost of housing, Shapiro called for a cap on rental application fees and strengthened tenants’ rights.
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Shapiro’s budget proposal also took aim at attempts from President Donald Trump’s administration to cut funding to social services programs and grants to state and local governments. Unveiling his Federal Response Fund, Shapiro called for a $100 million budget stabilization reserve fund that can be used to offset those blows.
This is a developing story and will be updated.