PA’s Budget Surplus Gone by 2026/27; IFO Reports

Lawmakers passed a $47.6 billion dollar budget on July 11—a $2.7 billion increase from last year. Will the state’s coffers keep up?
Since Pennsylvania’s 2024/25 general fund budget was signed into law, the state’s Independent Fiscal Office (IFO) released a report cautioning a spending deficit in 2 years.
Right now, Pennsylvania has around $14 billion in extra cash— around $6.6 billion in surplus and around $7 billion in rainy day funds.
“They are two separate funds,” said Rep. Seth Grove (R-196), Minority Chair of Appropriations. “One is a balance in the general fund— one time revenue. The other is money that's deliberately transferred [and saved] for economic downturns.”
This year’s budget overspends by around $3 billion.
If spending stays static, the IFO says Pennsylvania’s surplus will be gone by the end of the 2025/26 fiscal year. Without dipping into the rainy day fund, the state is set to overspend by around $1.5 billion that year.
When the budget was passed, Democrats said surplus spending was strategic.
“With the investments that we're making in education and economic development and job creation, I think that will continue. The really positive economic climate that exists in Pennsylvania,” said Sen. Vincent Hughes (D-7), Minority Chair of Appropriations. "I am not fearful about going into deficit. Not at all.”
Grove says the state will have to use rainy day funds, cut spending, raise taxes, or use “gimmicks” to balance the 25/26 budget. In a recent overview, the Representative said Governor Josh Shapiro’s administration had $8 billion in surplus in 2022 when he took office.
“What did the taxpayers actually get out of blowing through $8 billion in two years? Is government running better? Did we solve problems?” asked Grove. "Is homelessness fixed? Our schools educating kids better? Like, where's the performance measures? Where's the data that says all of this money we're spending is actually reaping rewards?”