With Groundhog Day behind us, it’s clear that six more weeks of winter aren’t the only thing making a return. Budget season is back, too. Pennsylvania has officially kicked off the process for the 2026–27 fiscal year, less than three months after the last budget was signed into law.
On February 3, Governor Josh Shapiro delivered his annual budget address to the General Assembly and Pennsylvanians from across the Commonwealth, outlining his administration’s priorities for the economy, workforce development, education, infrastructure, and emerging opportunities in the energy sector.
At the center of the proposal is a $53.2 billion budget for Fiscal Year 2026–27. That figure represents a 5.4 percent increase, about $2.7 billion, over last year’s budget. To help fund this expansion, the governor is proposing to tap more than half of Pennsylvania’s $8 billion Rainy Day Fund, drawing $4.6 billion from the state’s reserves.
As in past years, the largest share of spending is concentrated in two areas: Medicaid, which accounts for 32 percent of the budget, and education, which makes up 36 percent.
To offset the increased spending, the governor is urging lawmakers to consider several revenue-generating measures, including taxing and regulating skill game terminals, closing the Delaware Loophole, and legalizing recreational marijuana.
The governor’s address also highlighted several major policy priorities. On education, the proposal includes a $925 million increase in K–12 funding, with $50 million specifically dedicated to special education. On Medicaid, the proposal calls for a 15 percent increase in capitation funding for behavioral and physical HealthChoice programs. The budget also calls for raising the minimum wage to $15 per hour for non-tipped workers and $9 per hour for tipped workers. Infrastructure investments feature prominently as well, with a proposed $1 billion Critical Infrastructure Fund aimed at addressing housing affordability, strengthening public safety, and modernizing essential systems statewide. Transportation would see a boost through a Transportation Trust Fund, providing $300 million to support public transit services. In the energy space, the governor is proposing a new Reliable Energy Investment Tax Credit and changes to existing energy tax incentives to encourage further development in Pennsylvania.
One issue that has quickly risen to the forefront of discussion among the administration, lawmakers, and stakeholders alike is data center development and the growing role of artificial intelligence in Pennsylvania’s economy. Governor Shapiro made a point to spotlight this topic during his address, signaling a clear interest in positioning Pennsylvania as a leader in AI innovation.
The administration’s vision relies on leveraging Pennsylvania’s abundant energy resources, prestigious academic research institutions, and skilled workforce to attract data centers and AI-driven investment. At the same time, the governor has acknowledged the real challenges that come with large-scale development — particularly concerning environmental impact, water usage, and community disruption.
To strike a balance between innovation and responsibility, the administration is proposing the Governor’s Responsible Infrastructure Development (GRID) standards designed to protect water resources, promote local job creation, increase transparency, and ensure responsible growth through more efficient and accountable permitting processes.
With a lengthy list of priorities that won’t always attract bipartisan agreement, a looming budget deficit, and a critical election cycle ahead in both the House and Senate, the path to a final budget is unlikely to be smooth. One thing is certain: the road to June 30, 2026, promises to be long — and anything but boring.
Stay tuned as Team Triad continues to be along for the ride!
