As Governor Josh Shapiro and state lawmakers grapple with crafting the 2026-2027 state budget respondents to the Spring 2026 Keystone Business Climate Survey largely favor aligning spending with projected revenue rather than dipping into the state’s “rainy day” fund to cover the deficit.
The survey of business owners, CEOs, top line and local managers found a spike in those thinking business conditions in the commonwealth have gotten worse over the past six months with inflation and finding/keeping qualified employees topping the list of business concerns.
A new state budget is constitutionally mandated to be in place by the close of business on June 30th, although that deadline has been missed every year during Josh Shapiro’s governorship. That possibility looms large again this year as the governor and state House Democrats have advanced a proposed budget that calls for spending over $5 billion more than projected revenue.
When asked whether the state should tap into the “rainy day,” or reserve fund to cover the spending gap or align spending with projected revenue, 59% said spending should be aligned with revenue, 27% favored drawing from the “rainy day” fund.
Drawing from the “rainy day” fund would virtually deplete the fund requiring a broad-based tax hike to cover costs in future years. Rather than raising taxes, 39% of the respondents said the state should cut spending. If taxes are raised, 11% favor an increase of the personal income tax from the current 3.07% to 4.07%; another 11% said retirement income should be taxed at the same rate as the personal income tax; 4% say increase the sales and use tax from 7% to 8%; 6% said all of the above. Twenty-two percent supported a pause in the decrease of the Corporate Net Income Tax at 7.49%.
In addition to the over $5 billion delta between proposed spending and projected revenue, Governor Shapiro’s budget includes revenue from two sources that do not currently exist: taxes on the sale of recreational marijuana (which is currently illegal), and taxes on skill games. Nineteen percent of the respondents to the Spring 2026 Keystone Business Climate Survey are opposed to any new taxes. However, 36% said recreational marijuana should be legalized/taxed and skill games should be taxed. Twenty-six percent favored legalizing/taxing marijuana; 11% would support taxing skill games.
Business Climate
The number of respondents saying business conditions in Pennsylvania have gotten worse over the past six months has jumped from 36% in the Fall 2025 survey to 48% in the Spring 2026 Keystone Business Climate Survey. Eleven percent said economic conditions have improved over the past six months compared to 18% who saw improving conditions last Fall. Thirty-five percent said business conditions remained about the same.
Looking ahead six months, 16% forecast improving business conditions while 42% expect conditions to get worse. Thirty-five percent expect business conditions to remain about the same.
Employment levels edged slightly lower over the past six months with 25% reporting fewer employees and 20% reporting having more employees. Looking ahead six months, 21% forecast having fewer employees and 18% expected to add employees.
Twenty-seven percent of the companies reported a decrease in sales over the past six months while 20% said sales have increased; 42% said sales remained about the same. Twenty-six percent project an increase in sales over the coming six months, 23% expect sales to drop; 26% say sales will remain about the same.
Locating and keeping qualified employees (26%) continued to be the top concern of those on the front lines of conducting business in the commonwealth. Seventeen percent said inflation/rising costs are their top concern. Despite that those citing current economic conditions as their top concern dropped from 19% last Fall to 13% in the current survey. There was, however, a two percent rise in concern over future economic conditions.
There continues to be legislative proposals to increase Pennsylvania’s minimum wage phased into as high as $15.00 per hour. Such an increase would result in 19% of the business raising prices; 12% would reduce their number of employees; 11% would cut employee hours; 5% said they would go out of business. Twenty-two percent said such an increase in the mandatory minimum wage would have no impact on their business. Twenty percent said all employees are currently paid above that level.
Economic Conditions
Several current economic conditions are driving negative perceptions of the state’s economy: 29% said the recent spike in gasoline/diesel prices has had a significant impact on their business; 26% said the impact has been moderate; 20% said rising gasoline/diesel prices have had a minor impact. Nineteen percent said the price increases have had no impact.
Twenty-nine percent of the businesses participating in the survey report tariffs have had a significant impact on them; 23% report tariffs have had a moderate impact; 19% a minor impact and 20% say tariffs have had no impact on their business operations.
Inflation is having the biggest impact on businesses. Thirty-four percent say inflation has had a significant impact; 24% a moderate impact; 20% a minor impact with 15% reporting inflation has had no impact on their business.
Job Approval
The Spring 2026 Keystone Business Climate Survey found little movement from the Fall survey in the job approval ratings of major officials except for President Donald Trump. His positive job approval dropped from 47% last fall to 36% in the current survey while his negative rating increased from 41% last Fall to 53% this Spring. Likewise, Vice President J.D. Vance received a 36% positive rating with 49% disapproving of his performance in office.
U.S. Senator John Fetterman saw an increase in his job approval from 37% last fall to 42% in the current survey with 35% disapproving. U.S. Senator David McCormick posted a 36% positive/29% negative job approval rating.
In the final job approval test for now former Federal Reserve Board Chairman Jerome Powell, respondents gave him a 23% positive/36% negative rating. U.S. Secretary of the Treasury Scott Bessent scored 30% positive/33% negative in the survey.
Among statewide elected officials Governor Josh Shapiro was viewed positively by 45% of the respondents with 31% having a negative opinion. Attorney General David Sunday’s job approval stood at 22% positive/28% negative. Auditor General Tim DeFoor received a 21% positive/28% negative rating. State Treasurer Stacy Garrity earned a 28% positive/24% negative rating.
Turning to institutions; the United States Senate posted a 29% positive/56% negative job performance rating, the U.S. House of Representative was upside down with a 25% positive/ 58% negative rating. The Supreme Court of the United States received a 34% positive/45% negative rating.
At the state level, the Pennsylvania Senate’s job approval rating stood at 30% positive/41% negative. The Pennsylvania House of Representatives rating came in at 30% positive/45% negative. The Pennsylvania Supreme Court received a 33% positive/38% negative rating.
Methodology
The Spring 2026 Keystone Business Climate Survey was conducted electronically May 15-17, 2026 by the Lincoln Institute of Public Opinion Research, Inc. A total of 206 business owners, CEOs, top line managers and local managers from throughout Pennsylvania participated in the survey.
Complete numeric results are posted at www.lincolninstitute.org and www.patownhall.com.
(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly American Radio Journal and Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org.)
Permission to reprint is granted provided author and affiliation are cited.