FOR IMMEDIATE RELEASE 7.12.26
CONTACT: Kirstin Snow, Communications Director, snow@pennpolicy.org
Statement from Felicity Williams, Esq., Executive Director, Pennsylvania Policy Center: Pennsylvania’s FY 2026-27 Budget Preserves Important Priorities, But Settles for Scarcity Instead of Building Lasting Affordability
Final compromise budget continues progress toward constitutional public school funding and avoids state-level cuts to essential health care programs, but settles for maintaining the status quo instead of taking the bold action on wages, tax fairness, and long-term fiscal sustainability needed to build lasting affordability.
Harrisburg, PA— Following final passage of Pennsylvania’s Fiscal Year 2026-27 State Budget, Pennsylvania Policy Center Executive Director Felicity A. Williams, Esq. issued the following statement:
Pennsylvania’s FY 2026-27 budget reflects the difficult compromises that come with divided government, a projected structural budget deficit, and an increasingly challenging federal landscape. The final agreement maintains important priorities, particularly continued progress toward constitutionally adequate public school funding and avoiding additional state-level reductions in access to essential health care programs, while relying on one-time budget solutions like a Medicaid managed care payment timing shift to balance this year’s books.
Pennsylvanians continue to face rising costs for life’s basic necessities. Inflation has eroded purchasing power, making many funding increases functionally equivalent to maintaining the status quo. At the same time, federal policy changes have already begun shifting unprecedented costs onto states while Pennsylvanians are already experiencing the consequences through reduced food assistance, higher health insurance costs, and the loss of affordable coverage. Many of the most significant federal provisions have not yet taken effect.
At a moment like this, preserving yesterday’s commitments is not the same as preparing Pennsylvania for tomorrow’s challenges.
Throughout this budget season, Pennsylvania Policy Center has said that affordability is an equation. Lasting affordability requires growing household income, building a fairer tax system, and making the public investments that allow families and communities to thrive. This budget largely continues maintaining important public investments. It does far less to expand access and does nothing to increase household income for minimum wage workers or modernize the Commonwealth’s outdated revenue system.
Preserving Important Priorities
We appreciate Governor Shapiro and members of both parties who remained committed to continuing progress toward addressing Pennsylvania’s unconstitutional public school funding system through a third consecutive adequacy investment. That continued commitment deserves recognition.
But progress is not the same as completion.
Pennsylvania remains approximately $3.3 billion short of fully closing the adequacy gap identified by the Commonwealth Court, and nearly seventy percent of Pennsylvania’s public school students continue to attend school districts that remain inadequately funded. We must continue making annual progress until every student receives the constitutional education they deserve.
Likewise, the budget avoids state-level reductions to Medicaid and other essential health care programs. That is important. More than 160,000 Pennsylvanians have already lost affordable health coverage through Pennie following the expiration of enhanced federal premium tax credits. Those losses have already occurred, and some of the most significant federal Medicaid cost shifts have not yet taken effect. Maintaining existing state programs should be viewed as the floor, not the ceiling, of our ambitions.
What This Budget Leaves Behind
Affordability is about more than preserving existing programs. It is also about whether families have enough income to pay their bills and whether the Commonwealth has a tax system capable of sustaining the investments our communities depend upon.
Once again, this budget fails to increase Pennsylvania’s minimum wage.
More than one million Pennsylvanians earning $15 an hour or less will continue waiting for a meaningful wage increase. Pennsylvania’s minimum wage has remained frozen at $7.25 an hour for seventeen years, even while members of the General Assembly have received legislative cost-of-living adjustments every year during that same period. Families experience affordability every payday. They cannot keep up with rising costs when wages remain frozen.
About one in five Pennsylvania workers earning less than $15 an hour lives in a household receiving SNAP benefits. As more than 200,000 Pennsylvanians lose SNAP because of federal policy changes, raising wages becomes even more important to helping families afford the basics.
The budget also misses another opportunity to modernize Pennsylvania’s tax system.
The Commonwealth entered this budget cycle facing a projected $6.4 billion structural deficit. Yet lawmakers again declined to adopt meaningful recurring revenue, including water’s-edge combined reporting, a commonsense reform already adopted by twenty-eight states and the District of Columbia.
Some of the largest multistate corporations benefit every day from Pennsylvania’s roads, bridges, transit systems, public schools, educated workforce, courts, first responders, and public infrastructure. They rely on the investments made by Pennsylvania taxpayers to conduct business and generate profits. Yet many are still permitted to shift profits on paper to other states, reducing what they owe here while continuing to benefit from everything our Commonwealth provides. Working families cannot shift their paychecks to another state. Small businesses rooted in Pennsylvania cannot move their profits on paper. They contribute to supporting the Commonwealth every day.
Pennsylvania had an opportunity to close that loophole. It chose not to.
The budget also leaves behind other important affordability priorities, including meaningful long-term public transit funding and stronger policies to ensure rapidly expanding data centers contribute fairly to the public infrastructure, energy systems, and communities that make their operations possible.
Fiscal Responsibility Means Looking Ahead
Finally, the Commonwealth missed another opportunity to strengthen its long-term fiscal foundation.
Pennsylvania does not have a spending problem. Pennsylvania has a revenue system that no longer reflects the economy it serves. The Commonwealth cannot continue solving twenty-first century challenges with a twentieth century tax system.
Rather than addressing that structural imbalance through sustainable recurring revenue, this budget again relies on one-time solutions, including prior-year lapses, transfers from special funds, borrowing against future tax credits, and a Medicaid managed care payment timing shift. The Commonwealth still owes those Medicaid managed care payments. They are not reduced or eliminated. They are simply delayed into the next fiscal year, lowering the amount of spending reflected in this year’s budget while increasing the obligations that next year’s budget must address before lawmakers have even begun negotiating.
Combined with other one-time financing mechanisms, these decisions help close this year’s books without solving the structural imbalance that will continue confronting future budgets. Fiscal responsibility means solving structural problems, not repeatedly pushing them into the future.
Pennsylvania is not a poor Commonwealth. We are home to twenty-three billionaires whose collective wealth has grown by $32.6 billion in roughly the past eighteen months. We have world-class universities, extraordinary workers, globally competitive businesses, abundant natural resources, and communities that continue to innovate despite significant challenges.
This budget maintains important priorities, and we appreciate everyone who fought to preserve them. But preserving today’s commitments is no longer enough. Lasting affordability requires growing household income, building a fairer tax system, and continuing to invest in the public services that make opportunity possible.
Pennsylvania had an opportunity this year to begin building that future. Instead, this budget largely settles for maintaining the status quo.
Pennsylvania has the wealth to build lasting affordability. We have the workers, the businesses, the institutions, and the ideas to become one of the most affordable places in America to live, work, and raise a family.
Now we need budgets that match our potential.
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