Finance commissioner outlines $197 million budget adjustment, cites Medicaid and education fund impacts

Commissioner Adam Gresham, Commissioner of Finance and Management, told the Ways & Means Committee that a recent forecast upgrade and departmental reversions produced roughly $197,000,000 available for a budget adjustment and that the administration proposes about $110,000,000 in uses.

Gresham said the package is mostly “nuts and bolts” spending to cover cost pressures and noted healthcare-related programs account for the largest portion of the increase. “We had a large increase in our Medicaid program…that required roughly $78,000,000,” Gresham said, adding the state share of that increase is about $28,000,000.

The nut graf: the adjustment is intended to address higher-than-expected program costs this fiscal year (largely in Medicaid, the Choices for Care long-term services program and state employee health coverage) while reserving a substantial sum for use in fiscal 2026.

Gresham told members that the emergency board’s upgraded revenue forecast in July produced about $184,000,000 in additional revenue; combined with about $19,000,000 in reversions, and after offsets, the administration arrived at roughly $197,000,000 available. Of that, he said, the administration proposes about $110,000,000 in new general fund uses and will place roughly $85,000,000 in a temporary reserve to carry forward into fiscal 2026.

Discussion focused on where the increases are occurring. Gresham identified a roughly $78,000,000 gross increase in Medicaid (about $28,000,000 state share), significant increases in the Choices for Care program tied to nursing-home costs and labor pressures, and large increases in the state employee health special fund tied to higher utilization and self-insurance payouts. He said those increases are driven mainly by utilization and higher labor costs in long-term care, including use of agency/travel nurses.

The administration also outlined effects on the Education Fund. Gresham said sections 40–44 of the adjustment contain small net savings for the Education Fund totaling about $13,900,000 this fiscal year in addition to roughly $24,000,000 in reversions that were already factored into December estimates. He described an $8,000,000 lower-than-expected education payment (a “truing up” of the large education payment line) and about $3,000,000 the administration attributes to correcting a double booking tied to a separate English language learner line item established in prior legislation.

Gresham noted the larger context for education financing: total pre-K–12 payments are shown at about $2,900,000,000 in the outlook, including roughly $350,000,000 in federal funds and about $210,000,000 in a general-fund payment tied to the teachers’ pension unfunded liability.

Committee members asked for more detailed data on program participation and on the Ed Fund outlook; staff indicated the Education Committee would be the appropriate venue for deeper testimony on program-specific reversions and universal school meals costs.

Gresham also explained how Act 181 (the recent biodiversity/land-use law) affected property transfer tax allocations in the budget adjustment. Because Act 181 changed the percentages allocated from the property transfer tax and became effective immediately after override, the administration worked with the Joint Fiscal Office to reconcile the big-budget bill and the later statute in the adjustment language to reflect legislative intent.

The presentation did not record any formal committee votes. Members and staff indicated they would review the adjustment language in detail and pursue follow-up testimony as needed.