Will Shapiro Address the $3.6 Billion Elephant in the Room?

Watch Gov. Josh Shapiro closely during his annual budget address on Tuesday. The governor will lay out his vision for the upcoming year – undoubtedly full of big ideas and pretentious rhetoric.

This deficit isn’t new; the governor has ignored and expanded it. During Shapiro’s last budget address, he didn’t even mention the word “deficit.” Instead, he proposed a 7.1% increase in General Fund spending – a level well above the Taxpayer Protection Act (TPA) index that ties growth in state spending to the rates of inflation and population growth. For the four of the past five years, state spending grew faster than the TPA index.

The next five years don’t look so great, either. The Independent Fiscal Office (IFO) anticipates expenses to outpace revenue and zero out the General Fund balance in 2026. By 2030, Pennsylvania’s state revenue will increase by about 11%, while state spending on just a handful of the most expensive programs – like Medicaid and Pre-K–12 education – could grow by as much as 37%. Based on projections, the IFO estimates that the deficit will balloon to $6.7 billion by 2030.

Shapiro calls this spending an “investment,” referring to increased subsidies as “a downpayment.” But that euphemism only distracts from how he’s spending your money because Shapiro’s deficit spending will require a tax hike on working families.

The ball is in Shapiro’s court. He must break from his free-spending habits and rein in out-of-control spending to protect families and make Pennsylvania competitive again.

The governor must advance structural reforms that make programs more sustainable. Work requirements would ensure healthy working-age adults move off welfare and find greater independence. Increasing eligibility reviews would ensure that Medicaid and other programs serve the truly needy.

Shapiro should lead on education by refocusing funding on students instead of buildings and personnel. Lifeline Scholarships, which Shapiro endorsed on the campaign trail but hasn’t delivered on, would give children from low-performing schools a better educational opportunity for a fraction of the price. The proposed scholarships would save state taxpayer dollars. More importantly, Lifeline Scholarships would provide the most vulnerable students an opportunity for a better future.

Shapiro has numerous options to save the commonwealth cash and make Pennsylvania “open for businesses”: privatizing government-run liquor sales, ending the taxpayer-funded bailout of mass transit agencies, slashing the 164,000 regulations hindering economic growth, and reducing about $1.5 billion spent on ineffective corporate welfare—just to name a few.

Pennsylvanians need a multi-pronged approach that controls the growth of government spending, reforms costly and ineffective state programs, and adopts economic policies that make Pennsylvania a more attractive place to live and work.Pennsylvanians need a leader to deliver this vision.

Unfortunately, our governor hasn’t stepped up. Shapiro has yet to deliver on his campaign pledges, especially on tax reductions, regulatory relief, and educational choice. Shapiro’s endorsement and subsequent veto of Lifeline Scholarships was certainly the most egregious of his numerous broken promises.

The governor’s inaction isn’t sustainable. Without a serious reckoning to address overspending and adopt major policy reforms, steep tax hikes for hardworking Pennsylvanians loom on the horizon.

But even if Shapiro doesn’t want to take the lead on fiscal responsibility and economic freedom, his ambitions and political reality may force him into a corner. A massive tax hike in 2026 doesn’t jive with his reelection hopes or his aspirations for higher office.

Pennsylvania taxpayers should pay close attention to Shapiro’s proposals. Pennsylvanians must demand that the governor explain how he plans to fix a budget deficit, protect families from tax hikes, and improve Pennsylvania’s economic outlook.

Nathan Benefield is the Chief Policy Officer of the Commonwealth Foundation, Pennsylvania’s free-market think tank.