Joint finance committee adopts FY2025 revenue number, delays FY2026 decision; approves contract inflation and cost-allocation changes as health insurance and a

The Joint Finance and Appropriations Committee adopted a general fund revenue projection of $5,990,000,000 for fiscal year 2025 on a unanimous roll call Thursday and approved routine contract inflation and statewide cost-allocation adjustments, but could not agree on a FY2026 revenue projection or on competing health-insurance funding proposals.

The decisions came during a regular JFAC session that also included technical corrections to the current-year (FY2025) budget package and extended debate on personnel benefit costs that centered on how much to fund the state employee health-insurance plan.

Janet Jessup, a budget and policy analyst with Legislative Services, opened committee business by walking members through a set of technical corrections in a yellow packet of materials, including correcting where broadband reappropriations were recorded and fixing a drafting error that left a $2,000,000 transfer intended for the CAFO Improvement Fund recorded against the Department of Environmental Quality general fund. "The monies in fiscal year 2025 were reappropriated into the Commerce program, not the broadband program," Jessup said, explaining the packet moved amounts between program lines so the broadband costs could be tracked in the broadband program. She also described reclassification of two Department of Health and Welfare lines from trustee-and-benefit-payments to operating expenditures because the monies are paid under contract to third-party vendors.

Revenue projections and votes Senator Woodward moved the Economic Outlook and Revenue Assessment Committee's (ERAC) recommended FY2025 general-fund revenue projection of $5,990,000,000 for setting state agency budgets; the motion carried on a roll-call vote read separately for the Senate and the House (Senate: 10 ayes, 0 nays; House: 10 ayes, 0 nays; total 20-0). Woodward told the committee the motion reflected updated revenue numbers from ERAC.

The committee next considered FY2026 revenue. Representative Penske initially moved that JFAC adopt ERAC's FY2026 recommendation of $6,400,000,000. Senator Woodward offered a substitute of $6,330,000,000 as a compromise figure. After floor discussion and separate roll-call tallies, neither motion achieved a majority in both houses sitting in JFAC and both failed: the substitute received a combined 8 ayes, 12 nays (failed to secure the required majority in both houses) and the original motion likewise failed to get a majority of both chambers. The committee postponed final action on the FY2026 revenue number to a later time.

Contract inflation and statewide cost allocation The committee approved a routine package of contract inflation requests totaling $3,356,400 (request described by staff) on a unanimous 20-0 vote. Representative Miller moved the motion and it was seconded and carried.

Separately, the committee approved statewide cost-allocation adjustments that shift billing amounts among agencies (including Attorney General billings, legislative audit, state controller and treasurer fees, risk management, and Office of Information Technology Services adjustments). Co-Chair Orman moved the governor's recommendation to adjust those line items for a net total change of $5,540,500; the motion passed on a roll-call vote (Senate: 10 ayes, House: 10 ayes; total 20-0).

Health-insurance funding debate A lengthy discussion focused on how much to set as the base health-insurance per-eligible-FTE amount for FY2026. Staff presented two competing figures: the CEC committee recommendation to set the base at $13,960 per eligible FTE and the governor's recommendation of $14,300 per eligible FTE. Keith Bibby, Division Manager of the Budget Policy Analysis Division, explained the two figures and noted the Milliman actuarial materials that project the plan's total cost and contingency reserve impacts.

Staff and agency witnesses warned that cutting the reserve too close carries contractual risk. Laurie Wolf, administrator for the Division of Financial Management, said the plan's contract requires a 10% contingency reserve and that "if we do [fall] below the 10% contingency reserve, then a risk charge can be assessed to the state." Faith Knowlton, administrator for the state's Office of Group Insurance, told the committee she was still working with the insurer on the precise size of any risk charge but said the governor's proposal would leave about $10 million more cushion than the CEC recommendation.

The committee first considered a motion to adopt the governor's $14,300 recommendation and then a substitute to adopt the CEC's $13,960 recommendation. The substitute motion (CEC figure) failed on a combined vote (9 ayes, 11 nays). The original motion (governor—igure) also did not secure a majority in both houses sitting in JFAC and therefore failed. Staff provided Milliman projections during debate that the CEC figure would reduce the reserve to about $51.6 million (near the 10% statutory minimum) and the governor figure would leave about $61.4 million.

Change in employee compensation deferred Members spent substantial time on competing approaches to change-in-employee-compensation (CEC) proposals: one approach (the CEC committee) proposed a $1.55-per-hour across-the-board uplift (which amounts to a larger percentage increase for lower-paid staff), special market or targeted increases for certain IT/engineering and public-safety classifications, and other targeted adjustments; an alternative substitute proposed a merit-based 4% floor or $1.55 per hour, whichever was higher. Committee members debated equity, merit, recruitment and retention across classifications and levels of state employment. After extensive discussion and last-minute corrections to the motion text, sponsors of competing motions withdrew them to allow staff time to prepare corrected language; the committee recessed with the personnel-compensation items to be taken up at a later meeting.

What the committee decided and what is next - Approved: FY2025 revenue projection of $5,990,000,000 (20-0), contract inflation requests ($3,356,400 total) (20-0), and statewide cost-allocation adjustments ($5,540,500 total) (20-0). - Not approved / postponed: FY2026 revenue figure (both ERAC and the compromise failed to attain a majority of both houses in JFAC), competing health-insurance funding motions (neither the CEC nor the governor—igure passed), and competing employee-compensation motions (sponsors withdrew motions to allow staff to correct omissions and to return with revised language).

The committee adjourned with plans to continue maintenance-budget work the following day and to revisit the unresolved FY2026 revenue, health-insurance, and compensation items after staff complete corrected language and updated projections.