Senate Finance hears OMB outline of Governor Dunleavy’s FY2026 budget; committee warned of deficit and CBR drawdown

Lacey Sanders, director of the Office of Management and Budget for Governor Mike Dunleavy, told the Senate Finance Committee on Jan. 27 that the governor’s proposed fiscal 2026 budgets would require drawing on the state’s rainy-day account to balance the books.

Sanders said the governor’s FY2026 package consists of four appropriation bills — operating, capital, a combined mental-health appropriation, and a fast-track supplemental bill — and that the administration included supplemental requests totaling $75 million. She told the committee the budget uses the most recent Department of Revenue forecast and that the state faces an overall deficit that, as presented, would be reduced by withdrawals from the Constitutional Budget Reserve (CBR).

The nut graf: The presentation framed a budget shaped by statutory spending requirements and the governor’s stated priorities — public safety, education, a balanced budget and attracting outside investment — while warning lawmakers that supplemental costs and formula-driven programs will increase the pressure on unrestricted general funds and reduce the state’s reserves.

Most important details first: Sanders said unrestricted general fund (UGF) revenue in the governor’s proposal is smaller in FY2026 than FY2025 and that the governor is proposing the full statutory permanent fund dividend, which by law must be submitted at…