House Appropriations reviews governor’s office and Finance & Management FY26 budgets; clean water fund flagged for shortfall

House Appropriations Committee members on Feb. 18 heard the governor’s office and Department of Finance and Management proposed budgets for fiscal 2026, with Commissioner Adam Gresham outlining a modest increase in both budgets, a reallocation of internal charges across cabinet agencies and an expected shortfall of roughly $110,000–$120,000 to the Clean Water Fund tied to a downgraded meals-and-rooms tax forecast.

The presentations matter because Finance and Management controls statewide budgeting, accounting systems and several interdepartmental billing arrangements that affect how agencies are funded and how limited-term positions for enterprise resource planning (ERP) and grants management are paid. Commissioner Adam Gresham said these mechanics, plus rising retirement, medical benefit and IT charges, are the main drivers of budget increases.

Gresham, commissioner of the Department of Finance and Management, said the governor’s office budget shows a 5.4% overall increase and that Finance and Management’s budget is up about 6% (the administration targeted a 3% current‑services increase). He said much of the added cost pressure stems from benefit and IT charges rather than new personnel. "Salaries went up. The exempt positions ... were moved up the same cost of living increase that other state employees received. But really the pressures turned out to be, predominantly benefits, retirement contribution, medical benefits and ADS IT charges," Gresham said.

Gresham described a shift in how the governor’s office bills internal charges (interdepartmental transfers, or IDT). Previously a portion of the governor’s office expense was allocated only to a subset of agencies; for FY26 the administration moved to allocate IDT costs across all eight cabinet-level agencies. He said the change increases the IDT component of the governor’s budget but noted much of that IDT is funded from the same general-fund sources in practice.

On vacancy savings, Gresham said the governor’s office is reducing its assumed vacancy savings; he said the number will be about $156,000 (down from a previously higher projection of roughly $180,000). He cautioned that vacancy assumptions have been volatile since the COVID period and are intended to reflect realistic expectations rather than a directive to hold positions.

Gresham reviewed staffing tied to the statewide ERP modernization effort. He said Finance and Management will house several limited‑service ERP positions and that two of those ERP roles remain open; one ERP hire, Wendy DuBois, has been filled. He said those ERP positions will be paid in part from an ERP appropriation the Legislature approved about two years ago, which he stated as $11,800,000. He also identified three other limited‑service positions in Finance and Management (two ERP positions not yet hired and one ARPA‑funded grants administrator), and noted one exempt position — Pat Moulton, the central recovery officer — is technically placed within Finance and Management for exempt‑position accounting and is billed via FEMA to the recovery office.

Gresham told the committee that the department ended fiscal 2024 with an available fund balance of about $850,000 in the financial operations area, which provides some cushion against vacancy‑savings risk.

On the Clean Water Fund, Gresham said estimates for the meals-and-rooms tax were downgraded by the revenue consensus process and that the revision reduces the 6% portion that flows to the Clean Water Fund by roughly $110,000–$120,000. He said an $800,000 appropriation to the Agency of Administration tied to Clean Water Fund interest estimates may need adjustment and that Finance and Management will coordinate with Joint Fiscal to return with precise numbers and a proposed change.

Committee members asked how vacancy‑savings targets are set; Gresham said departments are asked to report realistic vacancy expectations and that Finance and Management does not direct departments to hold positions to hit targets. "We ask departments to give us a real view of what they think that will be," he said.

No formal votes or motions were taken on Feb. 18 during this presentation. Gresham closed by inviting questions and indicated staff will follow up with exact figures for the Clean Water Fund change.

Looking ahead, staff said they will bring updated numbers on the Clean Water Fund and that Finance and Management will continue to present the administration’s FY26 budgets to the committee ahead of deliberations and any appropriation language changes.