Did Pennsylvania Pass a Budget: Schools, Tax Credit, and RGGI

Yes. Pennsylvania did pass a state budget for the 2025-26 fiscal year, but it arrived 135 days late. Governor Josh Shapiro signed the $50.1 billion spending plan on November 12, 2025, ending an impasse that had frozen most discretionary state payments since the July 1 fiscal-year deadline.¹ A new standoff is now shaping up around the 2026-27 budget, which was still unresolved as of late June 2026.²

Why the 2025-26 Budget Was Four Months Late

Pennsylvania’s constitution requires a balanced budget by June 30, the day before the fiscal year begins.³ When that deadline passed in 2025 without a deal, the commonwealth entered a budget impasse: revenue kept flowing in, but most discretionary payments out to schools, counties, and grant-funded programs stopped.⁴

The fight was about how much the state should spend. Shapiro’s February 2025 address called for roughly $51.4 billion. House Democrats passed a $50.6 billion plan in July that the Republican-controlled Senate never took up.⁵ Senate Republicans countered in August at $47.6 billion, essentially flat with the prior year.⁶ By October the two chambers were still nearly $2.5 billion apart.⁷

Underneath the topline number, negotiators were stuck on how to fund public transit, whether to raise new revenue from recreational marijuana and skill games, and how far to push education spending in response to a 2023 court ruling that found the state’s school funding system unconstitutional.⁵

Late budgets aren’t new in Harrisburg. The state passed 13 late budgets in the 20 years before 2023, and Governor Tom Wolf presided over a record nine-month impasse in 2015-16.⁸ What made 2025 different was the absence of any stopgap funding measure. By late October, Pennsylvania was the only state in the country without either a completed budget or a temporary funding plan.⁹

Who Got Hurt While Lawmakers Argued

Schools waited on money. The Pennsylvania State Education Association estimated that districts were owed $5.3 billion in delayed state payments by November, with the poorest communities squeezed hardest.⁷

Nonprofits and human services providers were hit just as hard. A survey of 228 organizations found that 244,000 Pennsylvanians experienced service reductions or disruptions, and providers collectively drew $128.5 million from emergency credit lines and reserves to keep operating. Eighty-four percent of them eventually exhausted those funds, layoffs and hour cuts nearly tripled between August and November, and some organizations closed permanently.¹⁰

Transit came close to the edge. SEPTA warned of a 20% service cut in August. The Shapiro administration averted it by approving SEPTA’s request to redirect up to $394 million in capital assistance funds toward daily operations, buying about two years of runway rather than solving the underlying funding problem.¹¹

What the Signed 2025-26 Budget Actually Does

The compromise landed at $50.09 billion and passed both chambers with bipartisan support. It raised no taxes, left the roughly $7 billion Rainy Day Fund untouched, and preserved about $8 billion in total state reserves. The package was enacted through four bills: HB 416, HB 749, SB 315, and SB 160.¹

Schools

Education got most of the new money. The budget put $565 million into the state’s adequacy formula (the mechanism built to comply with the 2023 school funding ruling) and added $105 million to Basic Education Funding, for what the administration described as over $900 million in new pre-K through 12th-grade funding.¹ Other allocations included $125 million for school building improvements, $100 million for school safety and mental health, a $40 million increase for special education, and $30 million for student teacher stipends.¹²

The budget also rewrote how cyber charter schools are funded. It expanded the expenses districts can deduct from tuition payments and removed cyber charter students from the enrollment counts used to set per-pupil spending — changes lawmakers estimated would return roughly $178 million to public school districts. New rules require weekly student wellness checks, twice-annual residency verification, and a judge’s approval before habitually truant students can transfer to a cyber charter mid-year. Cyber charter advocates put the funding loss closer to $300 million and said it could force half of the state’s 14 cyber charters to close within two years.¹³

A New Tax Credit for Working Families

The Working Pennsylvanians Tax Credit is a state-level earned income tax credit worth 10% of the federal EITC. It applies to 2025 tax returns, is worth up to about $800, and is fully refundable if it exceeds your tax liability. Anyone who qualifies for the federal EITC qualifies for the state credit, which is funded at $193 million.¹⁴¹⁵ The budget also continued a scheduled reduction in the Corporate Net Income Tax rate.

Withdrawal From RGGI

Written into the fiscal code bill was Pennsylvania’s withdrawal from the Regional Greenhouse Gas Initiative, the multi-state cap-and-trade program for power plant carbon emissions that Governor Wolf had joined by executive order in 2019. The withdrawal passed 189-14 in the House and 43-6 in the Senate, and the day after Shapiro signed the budget, the commonwealth moved to dismiss pending RGGI appeals at the state Supreme Court.¹⁶¹⁷ Environmental groups condemned the move; the Sierra Club’s Pennsylvania director called it “unconscionable,” and Conservation Voters of Pennsylvania estimated the state had already forgone more than $1 billion in allowance revenue.¹⁸

Other Line Items

The budget put $50 million toward 2026 events including the FIFA World Cup, the NFL Draft in Pittsburgh, the MLB All-Star Game, and America250. It included $61 million for violence intervention and prevention, $21 million to raise wages for direct care workers, $25 million for child care staff recruitment and retention, and funding for additional State Police cadet classes. The Disaster Emergency Fund was doubled from $20 million to $40 million.¹²¹

Where the 2026-27 Budget Stands Now

Shapiro’s February 2026 proposal for the coming fiscal year is $53.3 billion, a 5.4% increase over the enacted 2025-26 plan. It includes another $526 million for school adequacy funding, $50 million more each for basic and special education, a $15 minimum wage, and recreational marijuana legalization that the administration projects would eventually generate more than $200 million a year in tax revenue.¹⁹

The Independent Fiscal Office projects a $5.6 billion deficit without new revenue, and the administration has said it would need roughly $4 billion from the Rainy Day Fund and other reserves to balance the books. The IFO has warned that under current policies, both the general fund surplus and the Rainy Day Fund could be depleted within the next fiscal year or two.²⁰²¹

Senate Republicans are pushing back the same way they did last year. Senate President Pro Tempore Kim Ward said the proposal “spends more than we take in,” and Appropriations Chair Scott Martin warned it would lead to “billions of dollars in new taxes next year.”²²

Two potential revenue sources remain unsettled. On June 10, 2026, the Senate rejected a bill to create an independent Cannabis Control Board, 23-27, and the Law and Justice Committee had earlier voted down a House-passed legalization bill.²³²⁴ On June 15, 2026, the Pennsylvania Supreme Court ruled that skill games are slot machines subject to existing gambling laws and gave the legislature 120 days to pass a regulatory framework. Shapiro wants a 52% tax his administration says could generate up to $2.1 billion a year; the IFO estimates closer to $1.2 billion; Senate Republicans have floated rates as low as 16%.²⁵

As of late June 2026, the House has passed a general appropriations bill and Shapiro has signed nine individual agency funding measures, but no comprehensive deal has been reached. Legislative leaders are in bipartisan talks and have said they intend to meet the June 30 deadline, or at least come closer to it than they did in 2025.²

1
Pennsylvania Governor’s Office. Gov. Shapiro Signs 2025-26 Budget Into Law
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City & State PA. 2026-27 Pennsylvania State Budget Tracker
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PA House Appropriations Committee. The Budget Process
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Pennsylvania Department of Labor & Industry. Budget Impasse Q&A
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Spotlight PA. Shapiro Offers Compromise Budget Proposal
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Spotlight PA. PA Budget Impasse Hits 100 Days
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City & State PA. 2025-26 Pennsylvania State Budget Tracker
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Spotlight PA. A History of PA Budget Impasses
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Spotlight PA. Nonprofits Take On Debt as Budget Impasse Drags On
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PANO. 2025-26 PA Budget Impasse Nonprofit Community Impact
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Pennsylvania Governor’s Office. Shapiro Admin Approves SEPTA Capital Funding for Operations
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Senator Vincent Hughes. 2025-26 State Budget
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Spotlight PA. PA Cyber Charter Schools Face Funding Cuts
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Pennsylvania Department of Revenue. Working Pennsylvanians Tax Credit (WPTC)
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Spotlight PA. Working Families Tax Credit Details
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Spotlight PA. RGGI Climate Program Abandoned in PA Budget Deal
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K&L Gates. Pennsylvania Budget Institutes New Permitting Reforms, Abrogates Pennsylvania RGGI Rule
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Sierra Club Pennsylvania. Pennsylvania Leaders Trade Away Climate Progress in Budget Deal
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City & State PA. 9 Things to Know About Shapiro’s $53.3B Budget Proposal
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Spotlight PA. Rainy Day Fund and Structural Deficit
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Independent Fiscal Office. Long-Term Budget Outlook Update
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Senator Scott Martin. Senate Republican Leaders Voice Concern About Spending Levels
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PennLive. Bill to Restructure Marijuana Regulation Fails in Floor Vote
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Spotlight PA. Cannabis Legalization Efforts in PA
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Spotlight PA. Skill Games Tax and Regulation Proposals