On Tuesday, February 3, 2026 Governor Josh Shapiro gave his fourth State Budget Proposal to the General Assembly for Fiscal Year 2026-2027. This budget provides for a $53.26 billion investment, which is a $2.7 billion increase from his proposal last year, building on the previous achievements of his Administration and responding to funding cuts from the Trump Administration. 

While Governor Shapiro’s budget makes significant investments to services across the board, his primary themes focus on public safety, stable transportation funding, private sector partnerships and workforce development, investments in artificial intelligence, housing and energy infrastructure improvements, and education. Additionally, he called for the legislature to pass legislation to legalize adult-use cannabis, which will generate $200 million in tax revenue, $10 million of which will go directly to restorative justice efforts. He also called for the General Assembly to raise the minimum wage to $15 per hour and implement regulation and taxation of skill games, which will generate $2 billion in tax revenue. All of these measures will continue to make Pennsylvania competitive among neighboring states, while growing the local economy. 

This budget calls for a transfer of $100 million from the Budget Stabilization Reserve Fund to create a Federal Response Fund. The purpose of this initiative is to allow the Commonwealth to respond quickly to federal funding cuts that impact critical services for Pennsylvanians, such as SNAP benefits, healthcare coverage, and education. 

While the budget proposal calls for a large increase in investment in services, the Governor made it clear in his statement that it will not increase any taxes for Pennsylvanians. 

House and Senate Democrats expressed unified support for Governor Shapiro's budget proposal, emphasizing its focus on affordability, infrastructure investment, and support for working Pennsylvanians. Leaders highlighted priorities including education funding, housing and infrastructure investments, public transit, and raising the minimum wage. Senator Vincent Hughes noted that the, “...proposal featured no tax increases.” Democrats rejected Republican concerns about spending and structural deficits, arguing the budget reflects a people-focused approach to addressing rising costs of living and strengthening the Commonwealth’s long term economic stability. 

House and Senate Republicans criticized Governor Shapiro's proposed budget, arguing that spending levels are too high and risk worsening the Commonwealth’s structural deficit. Senate Majority Leader Joe Pittman began by acknowledging that shared goals “Gov. Shapiro discussed, such as cutting taxes, energy, public safety, reducing crime, cutting bureaucratic red tape and permitting reform, are similar to what House and Senate Republicans have proposed in previous years.” Republican leaders focused on the need for fiscal responsibility, long-term sustainability, and concern over reliance on borrowing and potential use of the Rainy Day Fund, claiming that the current proposal could burden future administrations.

Governor Shapiro spent much of the last three years focused on improving the agriculture industry in Pennsylvania. The Administration’s most significant impact is from the Agriculture Innovation Grant Program, the first of its kind in the United States that funds projects that advance efficiency, sustainability, and renewable energy on farms. His budget proposal calls for a $9 million increase to the program, which includes $7 million for base grants and $2 million for a county biodigester pilot program.

Also of note, the State Food Purchase line item was flat funded at $30.6 million, despite rising food costs and increasing food insecurity within the Commonwealth.

The budget proposal focused on the need for investment in and regulation of both artificial intelligence and data centers. The Governor stated that Pennsylvania has the opportunity to be a national leader in the development of the AI industry. 

The primary proposal in the budget is the advancement of the Governor’s Responsible Infrastructure Development (GRID) standards. This program focuses on four principles for large-scale data centers to ensure companies are held accountable. Only projects that abide by these four principles will receive support from the Commonwealth with expedited permitting and access to tax credit incentives. 

Additionally, the Administration is developing guidance and regulations for AI usage, specifically where it applies to minors and older adults.

Given past investments in the arts and culture industry, this budget proposal does not offer significant investments to these services. The Grants to Arts line item was requested to be flat-funded this year at $9.5 million. 

The Governor emphasized his Administration’s efforts to mitigate the shortage of quality childcare since he took office. He proposed an additional $10 million investment for recruitment and retention grants, totaling $35 million. Additionally, the budget proposes an increase of $7.5 million for Pre-K Counts and $2 million for Head Start State Supplemental. 

The budget also makes significant investments to protect children through child welfare advancements. He proposed an increase of $658,000 to ChildLine, the 24-Hour hotline that focuses on the safety of children. He called on the General Assembly to update the Childcare Protective Services Act to not discriminate against low-income households who are struggling to provide for their children, and to update Pennsylvania’s civil statute of limitations for child sexual abuse.

The budget proposes the creation of a Pennsylvania False Claims Act to better protect consumers and ensure public benefits are received by those who truly need it. This program will aim to protect against and to prosecute fraud and abuse in Medicaid and ensure fiscal responsibility with tax dollars. 

Governor Shapiro has made it his priority to grow the Pennsylvania economy and make the Commonwealth a competitive workforce. His budget introduces the Innovate in PA 2.0 initiative, which invests $100 million from the Insurance Premium Tax Credits to expand venture capital access, clinical trials, university research, and seed regional venture studios. This program aims to make Pennsylvania a leader in the biotech and life sciences industries. 

The budget also prioritizes the need to make sure Pennsylvania’s workforce is prepared and equipped with the skills to support the needs of employers. These investments include the following increases to current programs: 

In addition to increasing investments to current programs, Shapiro also proposed the creation of new programs to further support the workforce at all stages of their life, including: 

Education funding has been at the forefront of Governor Shapiro’s policy priorities. This budget makes additional investments to ensure Pennsylvania public schools are in compliance with court-mandated funding levels. The budget creates the following investment to public schools: 

In addition to the financial investment proposed, the Governor has expressed his support for a bell-to-bell cell phone ban, and directed the State Board of Education to provide guidelines for schools to implement scheduled daily recess and breaks for students. 

Higher Education funding and support is also outlined in the budget proposal, with a transfer of $30 million in performance-based funding for State-Related universities, including the Pennsylvania State University, the University of Pittsburgh, and Temple University. There is also a specific investment of $1.1 million to Lincoln University, which is the nation’s first degree-granting HBCU. The Governor also proposed an increase of $5.9 million to the Pennsylvania State Grant program through the Pennsylvania Higher Education Assistance Agency, which will continue to fund the Grow PA scholarships. 

While in office, Governor Shapiro has worked to keep energy prices down and take action against companies trying to exploit consumers, including his recent lawsuit against PJM, which saved 67 million consumers millions of dollars. He also convened major utility companies operating in Pennsylvania and got them to agree to set transparent prices, ban deceptive contracts, eliminate junk fees, and expand Chapter 14 protections for low-income residents. 

Additionally, he called for the Pennsylvania Utility Commission to scrutinize utility spending so that consumers are being charged fairly. Shapiro has also created the Special Counsel for Energy Affordability to examine utility rate requests. The Governor has called on the General Assembly to pass his “Lightning Plan” which reforms permitting laws, updates the Alternative Energy Portfolio Standards, and creates new energy generation projects. 

The Shapiro Administration has worked to strengthen the permitting and licensing process in Pennsylvania to make government work at the speed of business. The Department of Environmental Protection launched the Streamlining Permits for Economic Expansion and Development (SPEED) program, which aims to make the permitting process more efficient and increase transparency through an online tracker. The budget proposes a $3.7 million increase to the Commonwealth Office of Digital Experience (CODE PA), to expand and sustain these programs. The budget also makes an effort to advance licensing reforms by removing outdated requirements and changing underutilized licenses to certifications. 

The budget makes significant investments in mental and behavioral health services. It proposes dedicated state funding of $10 million to support the Commonwealth’s mental health crisis hotline, 988. Additionally, it offered $5 million to sustain walk-in crisis stabilization centers, and invested $3.2 million in the Community Hospital Integration Projects Program (CHIPP). 

The Keystones of Health demonstration project within the Pennsylvania Department of Human Services also received additional investments in the proposed budget. It called for $900,000 for food and nutrition programs, and $1 million to connect medically compromised individuals with stable housing.   

The Administration has previously made significant investments to increase the supply of affordable housing in the Commonwealth by expanding the Pennsylvania Housing Affordability and Rehabilitation Enhancement Fund (PHARE), implementing a statewide Right-to-Counsel initiative, and authorizing the creation of a Housing Action Plan, the results of which will be released shortly. 

During the budget address, Shapiro called on the legislature to pass legislation that would:

The budget makes a new investment of $1 billion to create the Pennsylvania Program for Critical Infrastructure Investments. Supported through general bonds, this initiative aims to fund large, transformative projects in the Commonwealth, such as new energy generation, increasing the housing supply, and upgrading school and municipal facilities. 

The Shapiro Administration urged the legislature to update the Older Adult Protective Services Act. The reforms would include the expansion of reporting practices, outlining financial exploitation as a crime, and the creation of older adult fatality review teams. 

The budget proposes a $3 million investment for Aging Our Way, PA to modernize PA Link, $850,000 to expand the ongoing Comprehensive Agency Performance Evaluation (CAPE), and $150,000 to modernize reporting systems. It also includes a $5 million increase to PACE/PACENET.

Public safety and violence intervention and prevention has been a priority for the Shapiro Administration. The Violence Intervention and Prevention (VIP) program within the Pennsylvania Commission on Crime and Delinquency (PCCD) is proposed to receive an increase of $5.2 million, and the Building Opportunities through Out of School Time (BOOST) grant is proposed to receive a $1 million increase. 

The budget also addresses the need to support first responders and police. There is a $30 million increase in competitive grants for fire companies to improve facilities and services, and a proposed $16.2 million investment for cadet classes and eliminating the state trooper cap. 

The Pennsylvania Economic Development for a Growing Economy (PA EDGE) was previously updated by the Administration to ensure that businesses could take advantage of tax credits, incentivizing them to create jobs and grow the economy in Pennsylvania. The budget proposes the amendments to existing tax credits to increase their impact to businesses and communities in Pennsylvania. 

Over the past two years, the Shapiro Administration has secured nearly $57.5 million to support 2026 celebrations in Pennsylvania, as the state prepares to welcome millions of visitors for America’s 250th Birthday, the NCAA’s March Madness tournament, the FIFA World Cup, the MLB All-Star Game, the 2026 NFL Draft, and much more. The budget proposal fully funds the Tourism Office to continue to support operations for 2026 and beyond. 

Governor Shapiro has been vocal in his support for mass transit funding which supports nearly one million riders daily and drives economic growth in Pennsylvania. The budget proposes a transfer of an additional 1.75 percent of Sales and Use Tax revenues to the Pennsylvania Transportation Trust Fund, which will provide more than $300 million in recurring funding annually for mass transit services.