Deficit Watch: March 2026

Background

Pennsylvania continues to face serious fiscal challenges. The enacted 2025–26 General Fund budget created a $4.6 billion structural deficit. Gov. Josh Shapiro’s 2026–27 budget proposal would increase the deficit to $6.8 billion. Under the current policy and spending growth, long-term forecasts indicate daunting deficit increases in future years.

Revenue Estimates and Collections

• The $6.8 billion deficit equals the difference between net revenue (projected revenues minus refunds) and proposed spending (including one-time transfers). For the 2026–27 budget plan, these are $46.4 billion and $53.3 billion, respectively.
• In February 2026, Pennsylvania collected $2.96 billion in revenue, $35 million below the official revenue estimate. While February collections are below estimate—revenue sums exceed the official estimate for fiscal year (FY) 2025–26. In total, FY-to-date collections are $381.87 million above estimated revenues.
• Shapiro’s 2026–27 budget proposal drastically overestimates the impact of his proposed tax increases. A February analysis by the Pennsylvania Independent Fiscal Office (IFO) calculates Shapiro’s revenue estimates for his marijuana, skill games, and combined reporting proposals exceed IFO estimates by $4.4 billion over the next three fiscal years.

Recommendations

• If left unaddressed, the budget deficit will represent a tax increase of $2,100 per family of four beginning in 2027.
• Lawmakers must act now to reduce the structural deficit to protect working families from tax increases.