RCPA Shares Initial 2026/27 Budget Overview
Author
Jim Sharp
Date
July 13, 2026
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With the passing of the 2026/27 budget, RCPA has begun the process of deciphering its contents in order to inform our members on what they can expect regarding funding for the upcoming fiscal year. Below is a general update as well as specific items for each division.
General Overview
The General Assembly reached an agreement on the Fiscal Year (FY) 2026/27 State Budget and various related code bills. Similar to last year’s budget, the FY 2026/27 budget provides for increases in Medicaid and Education (K-12). The state appropriation of $50.85 billion represents a 3.7% increase over last year’s budget after accounting for supplemental appropriations and payment cycle rolls for the Medicaid Capitation programs. The final budget spend number is $1.1 billion below the spending level the Governor proposed in February.
This budget does not include any new taxes and does not transfer any funds from the Rainy-Day fund, which has a current balance of $7.74 billion.
Key Provisions of the State Budget:
The key pieces of budget legislation are as follows:
Behavioral Health:
Medicaid Capitation
The final appropriated behavior health Medicaid capitation budget is still unclear. Part of the uncertainty stems from the fact that the final budget assumes a one-month cycle roll retroactively applied to fiscal year 2025/26 and another one-month cycle roll applied to the fiscal year 2026/27. Savings from two cycle rolls, which are essentially delayed payments to primary contractors and Medicaid managed care organizations, is approximately $2.6 billion split over the two fiscal years. The cycle rolls will apply to all capitated Medicaid programs (Physical HealthChoices, Behavioral HealthChoices, and Community HealthChoices).
Payments to providers are not expected to be delayed.
In addition, although final budget documents indicate a 16 percent increase in Medicaid capitation, this line item appears to cover both physical and behavioral health capitation. RCPA is working to determine what increase behavioral health may have received.
OMHSAS, Mental Health, Child Welfare
This year’s budget indicated a $41 million increase to the OMHSAS mental health budget, but it appears these funds appropriated will be used for the continuation and maintenance of the existing network of portals that provide comprehensive services and supports for those with mental illness, including resources for veterans.
The budget includes $10 million for the 988 crisis line as well as crisis stabilization walk-in centers. RCPA is reviewing if this is tied to a separate allocation or is part of the OMHSAS $41 million increase.
Unlike last year, the 2026/27 budget reflects an increase of $20 million to fund the County Mental Health Base Funds. When conferring with the County Commissioners Association of PA (CCAP), it appears OMHSAS will anchor it to previous funding. There was also a reference to OMHSAS’s budget with language associated with this funding stream, but RCPA will need to further investigate any budgetary intersects. At this time though, it indicates the Counties will again experience a second consecutive year of flat funding on county-based mental health funding.
There will also be investments of $658,000 to enhance ChildLine staffing and provide more training to all workers, which will allow case workers more time and resources to effectively triage calls before referring them to the counties or appropriate agency.
Lastly, increases for the Commonwealth’s investment into the county child welfare system by $50 million are indicated to ensure counties have the resources to hold abusers accountable and keep our kids safe. CHIP also received an increase of 6.1%.
School-Based Mental Health and Safety Grants
The budget includes a continuation of the $100 million investment in school safety and mental health for K-12 schools, with an additional source of funds from any money that has been unexpended, uncommitted, or unencumbered from previous years (75% of remaining funds will be available). The PCCD grant process or applicable uses for the funding remain unchanged, despite RCPA’s recommendations to divide the allocation to ensure funding is used for the delivery of mental health services. There is an additional $20.7 million for targeted school safety grants but not additional funding specific to student mental health.
Substance Use Disorder
Although DDAP’s general operations and funding to support SUD programs are level-funded in the appropriated budget, the Department’s funding was shifted from the state’s General Fund to its Gaming Fund as part of the overall effort to pull money from special funds to balance the budget.
Early Intervention:
Despite aggressive advocacy and a rate study indicating severe underfunding, the 2026/27 Pennsylvania budget bill includes a $5.2 million reduction to Part C Infant and Toddler Early Intervention. This accounts for a 2.6% decrease to current funding for this program. Policymakers have indicated they intend to use carryover funds to maintain current funding levels and prevent service reductions; however, the source of these funds are unclear. The promised level-funding would retain a 7% program increase implemented in the 2025/26 fiscal year.
Other adjacent child-serving programs did receive an increase in this current budget. Below is a more complete breakdown of what is included in the FY 2026/27 state budget for early care and education:
- Part C Infant and Toddler Early Intervention (DHS): $5.2 million reduction (carryover funds to be used to maintain current rates)
- Part B Preschool Early Intervention (PDE): $41.221 million increase
- Child Care Staff Recruitment and Retention Program: $5 million increase
- Pre-K Counts: $3.75 million increase
- Head Start Supplemental Assistance Program: $1.043 million increase
- Child Care Assistance Line Item: $1.129 million increase
- Child Care Services Line Item: Level funding
- Home Visiting (Community-Based Family Centers): Level funding
- Home Visiting (Nurse-Family Partnership): Small reduction due to federal match changes
IDD Division:
Overall funding across Intellectual and Developmental Disabilities (IDD) line items fell in line with expectations. The enacted FY 2026/27 budget provides for small increases to recognize carrying costs, alongside modest expansions in the number of community waiver slots.
The budget is not expected to provide any material rate increases over current-year reimbursement rates. However, please note that a rate refresh is required to be completed this year per Chapter 6100 regulatory mandates.
Individual Line-Item Impacts:
- Intellectual Disabilities – State Centers: Funding decreased by $1,203,000 (1.1%). As required by statutory mandates, these savings were transferred directly to the Home and Community-Based Services (HCBS) – Individuals with Intellectual Disabilities budget line.
- Intellectual Disabilities – Community-Based Program: Received an additional $11,800,000, representing a 7.2% increase over current-year levels.
- Intellectual Disabilities – Intermediate Care Facilities (ICF): Received an additional $15,614,000, representing a 9.5% increase in funding for ICF programs.
- Intellectual Disabilities – Community Waiver Program: Received an additional $76,770,000, representing a 2.8% increase over current-year levels. These additional funds are projected to cover approximately 1,200 new waiver slots (split between the Community Living and Consolidated Waivers) for this fiscal year.
As additional details develop regarding specific line-item operational impacts, further updates will be shared.
Rural Health Transformation Program
Article II-H of the Fiscal Code establishes the program in DHS to distribute funding and implement a plan per federal law (HR1). The Department shall administer the program to the extent federal funds are appropriated and received.
Further Updates and Government Affairs Meeting
RCPA will continue to update members as we evaluate the budget and will be holding our monthly Government Affairs meeting next Tuesday, July 21, from 9:00 am – 10:00 am. This meeting will be open to all RCPA members, and we encourage you to register for the meeting in order to hear the latest on the budget.
