Shapiro signs into law $50 billion spending plan to end budget stalemate

Billions of dollars for Pennsylvania’s public schools and social services will soon start flowing after months of delay, as lawmakers on Wednesday took up a roughly $50 billion spending plan to break the state’s budget impasse.

Democratic Gov. Josh Shapiro signed the budget bills on Wednesday afternoon.

A key concession to help seal a deal meant Democrats agreeing to Republican demands to back off any effort to make Pennsylvania the only major fossil fuel-producing state to force power plant owners to pay for their planet-warming greenhouse gas emissions.

Republicans called it a major policy victory for the energy economy in the nation’s No. 2 natural gas-producing state.

Democrats won’t get the amount of money that Shapiro originally sought in his initial budget proposal, but the deal — after weeks of closed-door negotiations — is expected to deliver substantial new sums to public schools and an earned income tax credit for lower earners, as Democrats had sought.

It will also bring relief that the stalemate is over.

“The win is that we’re going to, hopefully before the end of the day, have a funding plan for the commonwealth and that’s a win for everybody who’s been waiting on state resources,” said House Appropriations Committee Chairman Jordan Harris, D-Philadelphia, told reporters in a Capitol hallway Wednesday morning.

The advancing votes in the politically divided Legislature arrive weeks after counties, school districts and social service agencies are warning of mounting layoffs, borrowing costs and growing damage to the state’s safety net.

School districts, rape crisis agencies and county-run social services have gone without state aid since July 1, when the state lost some of its spending authority without a signed state budget in force.

The bill not only restores critical school funding, but also increases overall spending by $565 million for schools across the state.

An additional $175 million will be saved for Pennsylvania’s public schools due to reforms to the cyber charter schools system, Shapiro said.

“If parents want to send their children to a cyber school, that’s fine — but we shouldn’t be overfunding them at the expense of our public schools,” Shapiro said.

Tax cuts

Shapiro announced several tax cuts in the new budget deal.

The Corporate Net Income Tax rate will now by 7.49%, which is down from the 9.99% rate that was in place in 2022, Shapiro said.

In addition, the deal includes a Working Pennsylvanians tax credit, which amounts to a percentage of the Federal Earned Income Tax Credit, Shapiro said.

Almost 1 MILLION PENNSYLVANIANS will get new "Working Pennsylvanians Tax Credit:”@GovernorShapiro: "We will create a Working Pennsylvanians tax credit that will put about $193 million dollars back in the pockets of hard-working folks trying to take care of themselves and their… pic.twitter.com/mqQtM9MhNW— Pennsylvania Governor's Office (@PAGovOffice) November 12, 2025

“So, for instance, a single mom with three kids, who makes less than $61,000 a year, could get up to $805 back on her taxes next year,” Shapiro said.

The tax credit will give back a total of $193 million to Pennsylvanians and will impact 940,000 residents, Shapiro said.

Carbon cap-and-trade program scrapped

The agreement to back off the carbon dioxide cap-and-trade program on power plants comes six years after then-Gov. Tom Wolf made joining the Regional Greenhouse Gas Initiative the centerpiece of his plan to fight climate change.

The plan made Pennsylvania — the nation’s second-largest natural gas producer — the only major fossil fuel-producing state to undertake a carbon cap-and-trade program. It has been held up in court and never went into effect.

It was popular with environmental groups and renewable energy advocates, but it was opposed by Republicans, fossil fuel interests and the labor unions that work on pipelines, refineries and power plants.

No new funds for mass transit

While lawmakers touted the potential end to the state’s budget stalemate, it’s worth a note to mention what’s not in it. While there are increases in spending for roadway repairs and improvements along with traffic signals, the bill package made no mention of new funding for mass transit systems throughout the state.

Gov. Shapiro had fought, earlier this year, for lawmakers to help SEPTA stem a longstanding $213 million budget gap.

This budget deal would seemingly not address that concern at all with no mention of public transit spending made in documents officials shared on Wednesday.

Under the $50.1 billion budget deal, new authorized spending would rise by about $2.5 billion, or 5%.

Practically all of the overall spending increase would go toward Medicaid and public schools.

Billions in surplus cash will be required for the plan to balance, the second straight year that Pennsylvania is running a multibillion-dollar budget deficit.

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