Legislative Updates: A Roundup of State and Federal Actions – June 26

Your Chamber advocacy team is working to share legislative updates and continue to advocate for your business in Washington, D.C., Harrisburg, and Philadelphia. We’ve created a round-up of recent activity, including Key Takeaways for Your Business and a Detailed Legislative Update. This represents our best knowledge of the situation as of 9:00 a.m. on Friday, June 26, 2026.

• The state budget deadline is Tuesday, June 30, 2026, but a deal is unlikely to occur on time. Negotiations are ongoing and may extend past the Independence Day holiday, as was the case last year when the budget was resolved four months late.
• The Pennsylvania Supreme Court ruled skill games illegal, but enforcement is paused 120 days, giving the state legislature a narrow window to regulate it and potentially capture $750 million to $1 billion in annual revenue.
• The governor’s $53.3 billion budget proposal relies on $4.6 billion from the Rainy Day Fund, which will be a point of disagreement in negotiations.
• New tech sector taxes are gaining traction, including a potential rollback of the sales tax exemption for data centers and a House-passed digital ad tax.

• The Office of Management and Budget (OMB) has issued a proposed rule that would make substantial changes to the Uniform Guidance governing all federal grant funds. The Chamber is submitting a public comment urging OMB to withdraw or substantially revise proposed changes to the Uniform Guidance that threaten Greater Philadelphia’s research economy and the private investment it attracts.
• The House Transportation & Infrastructure Committee recently released its surface transportation reauthorization proposal. The proposal – the BUILD America 250 Act – significantly scales back investment in the Northeast Corridor, eliminates advance appropriations, and cuts transit funding. The Chamber will continue to monitor the bill’s progress, activity in the Senate, and advocate for Greater Philadelphia’s transportation priorities as the reauthorization process advances.

Budget Deadline Draws Closer

State lawmakers are running out of time to reach a bipartisan deal ahead of the Tuesday, June 30, 2026 budget deadline. Negotiations between party leaders are ongoing, with both sides expressing encouragement and progress; however, there is little indication of an imminent budget deal. It’s still possible that a deal can be in place by the end of the month, but it’s increasingly likely that negotiations may extend past the Independence Day holiday.

Lawmakers are legally obligated to pass a budget by June 30; otherwise, the state’s spending authority lapses. That means local governments, school districts, nonprofits, and others cannot receive funding from the state during the budget lapse. However, state employees and departments can continue to operate since payrolls serve as legally protected spending, relieving the political pressure on lawmakers to pass a budget on time. The budget debate last year extended four months past the deadline until it was resolved.

To reach a budget deal this year, lawmakers must agree on the topline spending amount, which Governor Josh Shapiro had proposed at $53.3 billion – a 5.4% increase over current year spending – much to the criticism of Republicans. To balance the budget amid modest revenue growth projections, the governor’s plan relies on a $4.6 billion withdrawal from the state’s nearly $8 billion Rainy Day Fund, which has been met with resistance by Republican leaders. It will no doubt serve as a central issue to budget negotiations. The Independent Fiscal Office has warned that if targeted revenue does not come within a close margin of spending levels, the state will eventually be forced to consider broad-based tax increases in next year’s budget.

To tighten the margin between revenue and spending, Governor Shapiro and Democrats have also called for approximately $2 billion in new revenue from measures including enacting combined reporting, legalizing adult-use cannabis, taxing skill games, and increasing the state minimum wage to $15 an hour.

Skill Games Challenge

Skill games seem to be the most viable pathway to increased revenue for the state, which still is extremely challenging. The General Assembly has debated the issue for years but has not been able to strike a bipartisan, bicameral solution. However, this year may be different. Earlier this month, the Pennsylvania Supreme Court ruled that skill games are illegal, effectively classifying the roughly 70,000 machines operating in gas stations, bars, and fraternal clubs as unlicensed slot machines. The opinion reverses lower court rulings that had protected the machines, arguing that the element of skill put them in a legal gray area of the state’s gaming law.

However, the decision does not end the use of skill games immediately. Enforcement is stayed 120 days, giving the General Assembly a narrow window to regulate the skill game industry. The revenue impact could be enormous. Estimates for regulated skill games from the Shapiro Administration and the Independent Fiscal Office range between $750 million and $1 billion annually.

Revenue from Data Centers and Tech Companies

The General Assembly may also consider new revenue, which was not included in the governor’s original budget proposal. As the Commonwealth actively competes to attract new data centers, the debate to create new revenue from them is growing. This year’s budget could serve as an early signal to the tech industry relative to Pennsylvania’s economic development posture going forward.

The House approved House Bill 1678, legislation extending the state’s 5% gross receipts tax to firms that sell digital ads, by a vote of 139-63. Significant legality concerns remain as the digital ad tax proposal may violate the federal Internet Tax Freedom Act, which prohibits states from imposing discriminatory taxes on electronic commerce. The digital ads tax is estimated to create $329 million annually and would be directed to a restricted account within the Property Tax Relief Fund to be disbursed as property tax rebates for seniors.

Two seemingly conflicting bills both passed in the House this week. House Bill 2198, legislation eliminating the state’s sales tax exemption for purchases related to building and maintaining data centers, was approved by a vote of 197-5. The Commonwealth reportedly is projected to forgo $2 billion in accumulated tax revenue by 2031 due to existing exemptions. Closing the exemption could remove an attractive incentive for building the data centers in Pennsylvania, which supporters argue can generate billions of dollars in economic benefits and state revenue. Conversely, the House also approved House Bill 2650, legislation establishing a series of requirements data center operators must satisfy to access an exemption from the state’s 6% sales tax, effectively codifying the governor’s GRID certification standards. The bill was approved by a 134-68 vote.

Revenue Estimates

Pennsylvania is also bringing in more revenue than anticipated at a level that will certainly play a factor in budget negotiations. The Independent Fiscal Office projects that fiscal year to-date (FYTD) collections of $44.97 billion are $846 million, or 1.9 percent, above estimate. The Department of Revenue projects that FYTD General Fund collections total $45 billion, which is $927.8 million, or 2.1 percent, above estimate.

Spending Priorities

Several big-ticket items will garner attention in this year’s budget negotiation once a general agreement on spending and revenue can be reached.

Basic Education Funding
Democrats will continue to prioritize the state’s responsibility to close a $5.1 billion adequacy gap – as described by the majority report of the Basic Education Funding Commission – over a seven-year timeframe, with another $567 million adequacy gap payment. Republicans have consistently stated that nothing in the Commonwealth Court ruling, which ruled that the state was not equitably funding basic education, says that the state needs to provide more money for basic education.

Public Transit
Funding for mass transit was the flashpoint that contributed to last year’s budget impasse. Despite stopgap measures that have kept SEPTA from enacting draconian service cuts, the issue of dedicated, adequate, and sustained funding remains unresolved. Governor Shapiro’s sales tax allocation proposal would generate more than $300 million annually for transit agencies statewide, although the recent court ruling on skill games has resurfaced a past linkage between transit and skill games that could either accelerate a deal or produce another stalemate.

OMB Proposes Significant Changes to Federal Grant Uniform Guidance

The Office of Management and Budget (OMB) has issued a proposed rule that would make substantial changes to the Uniform Guidance governing all federal grant funds. Key provisions include replacing peer review recommendations with political appointee oversight, giving preference to institutions with lower indirect cost rates, and establishing a new 90-day suspension authority allowing federal agencies to terminate an award when it no longer serves “the national interest as it exists at the time of the termination.”

These proposed changes carry significant implications for Greater Philadelphia. The region’s life sciences corridor, construction and trades sector, hospital systems, and research universities are deeply interconnected with federal research funding, leveraging those dollars to attract private investment, support job creation, and drive regional economic growth. Regulations that increase uncertainty for multi-year projects, restrict international collaboration, or subject award decisions to political, rather than merit-based, review risk deterring the private sector co-investment that transforms federal research dollars into commercial products, lifesaving innovations, and quality jobs.

The Chamber is preparing a public comment urging OMB to withdraw or substantially revise the proposed rule. The comment submission period closes Monday, July 13, 2026. If your organization has data that would strengthen our submission, please send it to Renee Androckitis (randrockitis@chamberphl.com).

House Committee Releases BUILD America 250 Surface Transportation Bill

In May, the House Committee on Transportation & Infrastructure released BUILD America 250 (BUILD), the proposed successor to the Infrastructure Investment and Jobs Act (IIJA), as the current surface transportation authorization approaches its Wednesday, September 30, 2026 expiration.

The bill authorizes $63.9 billion for rail programs, including $10.4 billion for Amtrak’s Northeast Corridor – down significantly from the $22 billion provided under IIJA – along with $1.5 billion for the Federal Railroad Administration and $9.1 billion for the Consolidated Rail Infrastructure and Safety Improvements Program (CRISI). The proposal also consolidates several existing intercity passenger rail programs into a new $18.5 billion National Intercity Passenger Railroad Partnership Program. Further still, BUILD authorizes $103.3 billion for public transit over five years, down from the previous authorization baseline of $119.9 billion. Funding tables for public transit and passenger rail detail annual levels and comparisons to prior authorization.

Notably absent from the bill are advance appropriations, with funding instead subject to the annual congressional appropriations process. The Chamber will continue to monitor the bill’s progress, activity in the Senate, and advocate for Greater Philadelphia’s transportation priorities as the reauthorization process advances.

Market your business: Sponsor one of the Chamber’s advocacy events. Gain exposure and build promising relationships with top-level business professionals, civic leaders, and elected officials. Learn more about our upcoming local, state, and federal advocacy sponsorship opportunities by contacting Laura Williams, Manager, Member and Investor Relations, at lwilliams@chamberphl.com.

ChamberPHL Political Action Committee
Help us advance the business community’s agenda by contributing to support state and local candidates in key elections who share our commitment to a healthier business climate.

We invite you to reach out to our advocacy team directly with your questions:

• Shannon Williams, Senior Vice President, Advocacy – swilliams@chamberphl.com
• Scott Hoeflich, Senior Vice President, External Affairs and Government Relations – shoeflich@chamberphl.com
• Anselm Sauter, Vice President, Regional Advocacy – asauter@chamberphl.com
• Renee Androckitis, Senior Manager, State and Federal Advocacy – randrockitis@chamberphl.com

Chamber members are invited to join legislative update calls hosted by our advocacy team to hear the latest legislative matters concerning our community.