Notice

Governor Shapiro Signs 2026-27 Commonwealth Budget into Law

On Sunday July 12, 2026, Governor Josh Shapiro signed the 2026-27 Commonwealth Budget into law. After last year’s budget impasse that dragged on into November 2025, almost 5 months past the June 30th deadline, Pennsylvania lawmakers avoided a long impasse by approving a $50.8 billion General Fund budget package. In a flurry of weekend activity, lawmakers in the Pennsylvania House and Senate advanced a budget that did not levy any new taxes or draw from the state’s Rainy-Day Fund, something lawmakers had worried could happen due to the state’s structural budget deficit. The spending plan was approved by the state House and Senate with only a handful of opposing votes.

Notably absent in the budget package was the lack of inclusion of a deal to tax and regulate skill game machines, which the Pennsylvania Supreme Court recently ruled are illegal gambling machines. Also absent from this budget package was additional funding to Pennsylvania’s mass transit agencies, an increase in Pennsylvania’s minimum wage, and the legalization and taxation of recreational marijuana.
“I’m proud to say that if you go back and look at the goals, we set way back in 2023 – funding our schools, making communities safer, growing our economy,” stated Governor Shapiro, “four years later, this budget reflects those priorities.”

The Governor during the budget bill signing touted an additional $565 million to provide the third installment of adequacy and equity funding for public education, addressing the Pennsylvania Commonwealth Court decision which ruled the way Pennsylvania was funding public education was unconstitutional. The Governor also celebrated a $16.2 million increase for the Pennsylvania State Police, to fund 4 additional cadet classes, a K-5 Recess Requirement for all Public Schools, and a cost-of-living adjustment for retired public-school employees, state employees, and municipal police and firefighters.
“The Senate Republican Caucus worked hard to protect the wallets of Pennsylvanians by avoiding tax hikes and identifying more than $4.5 billion in unused funds to repurpose,” said Senate President Pro Tempore Kim Ward (R-Westmoreland).

Most important to the Senate Republican caucus was keeping the Rainy-Day Fund intact by limiting spending by finding cost savings in unused funds in programs across the bureaucracy. The Senate Republican Caucus also championed efforts to include an additional $12 million for rape crisis centers, $10 million in new funding for Grow PA, a program previously created by Senate Republicans to provide grants of up to $5,000 for students who pursue postsecondary education training for careers in high-demand industries in Pennsylvania, and a $10 million increase for Career and Technical Education.

The House Democratic Caucus championed many of the proposals celebrated by Governor Shapiro including the public education funding increase, a continuation of the Working Pennsylvanians Tax Credit, increases for Medical Assistance and mental health programs, as well as the pension cost-of-living adjustment for retired teachers, state workers, police officers, and firefighters.

Throughout the hundreds of pages of budget documents, there were many spending and policy changes impacting your boroughs including:
 

• $20 million (No increase from 2025-2026 budget) for the Main Streets Matter Program;
• $16.2 million investment to train four additional PSP cadet classes;
• A one-time transfer of $20 million from the General Fund to the Hazardous Sites Cleanup Program, protecting Pennsylvanians from the most dangerous toxic waste sites throughout the Commonwealth;
• A pension ad hoc cost-of-living adjustment (COLA) for municipal police and paid firefighters funded by revenue that would otherwise be used by the Statewide LSA grant program, which is funded primarily by iGaming revenue. The annual amortized costs ($41.2 million) of the COLAs will be fully funded by the Commonwealth beginning on August 1, 2026. Municipal governments will receive reimbursement from the Commonwealth for the additional expenses incurred by the increased costs to municipal police and firefighter pensions. Officers and firefighters who retired between 5-10 years ago will receive an additional $75 per month, retirees of 10-20 years will receive an additional $150 per month, and retirees of over 20 years will receive an additional $300 per month. For fiscal year 2026-27, the requirements of this COLA could have a negative fiscal impact on municipal pension system, as the benefits commence in fiscal year 2026-27 but the reimbursements from the Commonwealth start in fiscal year 2027-28. For municipalities, some of this impact may be lessened if the Auditor General uses funds in the Municipal Aid Fund to address cash flow issues. For the next 10 years, beginning in fiscal year 2027/28, the transfers from the Department of Revenue will cover the certified costs of the supplemental annuities and special ad hoc postretirement adjustment;
• An additional $4.35 million for Local Municipal Relief under DCED;
• $775 million over the next two fiscal years for shovel-ready projects to repair state-owned roads across Pennsylvania, including $500 million this fiscal year and $275 million next fiscal year;
• Requires PennDOT to utilize $5 million for grants to municipalities for the installation and maintenance of traffic signal technologies;
• Extends the expiration date for the PennDOT multimodal local match waiver through December 31, 2027;
• A requirement that data centers, with a peak capacity demand of more than 10 megawatts, must submit annual reports to the Department of Environmental Protection (DEP) related to their energy and water usage for the preceding year. The reports required to be submitted no later than July 1, 2027, and each July 1 thereafter.

For more information on the 2026-2027 Pennsylvania State Budget, please reach out to PSAB Senior Director of Government Affairs, Ron Grutza at rgrutza@boroughs.org, or Director of Policy & Legislative Affairs, Logan Stover at lstover@boroughs.org.