Special session yields $253 million in tax credits, delays AI law; counties warned of budget cuts

Special session revenue changes, a delayed AI law and proposed state budget cuts were the focus of a Lake County Board of County Commissioners work session update led by Elizabeth Rosen, political advocacy representative with Political Advocacy Incorporated.

Rosen told commissioners the special session produced about $253,000,000 in tax-credit revenue that the state expects to collect this fiscal year and that, after that action, the state still faces roughly $530,000,000 in shortfalls before the next regular session.

The state also delayed implementation of Senate Bill 205 — the 2024 AI consumer-notification law — until June 30, 2026, and advanced a financing package tied to hospital reinsurance, Rosen and staff said. County staff and commissioners spent the meeting pressing for details about which programs could face cuts and how local governments and schools may be affected.

Rosen said the special session focused first on changes to tax credits that state leaders tied back to federal rule changes in the federal HR 1 legislation; she said the package “sailed through” the session while other issues created drama at the capitol. Rosen said the tax-credit package will produce about $253 million in additional revenue this fiscal year, leaving roughly $530 million the legislature and governor must address before the next regular session.

Rosen and Alan Morris, who joined the presentation and assists with budget issues, described House Bill 106 as a roughly $100 million financing effort intended to bolster a reinsurance program and slow projected health-insurance rate increases that some analysts expect to reach 30 to 38 percent in parts of the state. Morris said the $100 million in HB106 will be raised in part by selling tax credits to outside entities; proposals to use the unclaimed property trust fund were withdrawn.

Rosen said Senate Bill 205 — the 2024 AI bill that imposes notice and other obligations on developers and deployers of AI — carried an estimated fiscal note of $6 million to $7 million and placed much of the compliance burden on deployers such as counties, schools and hospitals. "It delays it until 06/30/2026," Rosen said. She and Morris explained that the delay was intended to buy time for lawmakers to rebalance responsibilities between AI developers and entities that deploy AI systems.

Participants described unexpected items that surfaced in the special session. Rosen said wolves and associated funding became a major topic; Morris and a commissioner noted tensions in mountain districts over the scope and rising cost of wolf reintroduction, with one speaker saying initial budget assumptions near $800,000 had grown to about $8,000,000. Rosen and others characterized the connection between wolves and the special session as a budget tie-in rather than a planned subject of the session.

On the broader budget picture, Rosen said the governor planned to seek roughly $300,000,000 in program cuts announced by executive order and to draw down general-fund reserves. Rosen and Morris said the state reserve stood near 15 percent and the administration was considering reducing that reserve by about 2 to 2.5 percentage points to raise roughly $253,100,000. Rosen said some of the easiest short-term savings will be clawbacks to recent Medicaid rate increases: during the 2025 regular session Medicaid provider rates were increased by about 1.6 percent and those increases are likely to be targets for reductions.

Rosen flagged potential impacts to K–12 and higher education funding; she said higher education may be particularly vulnerable because it is a discretionary portion of the state’s budget. Rosen also noted the state is preparing a ballot measure this November to raise additional revenue for two voter-approved programs: the Healthy School Meals program and a state-level component to cover SNAP reimbursements that HR 1 affected. Rosen said the measure would increase an existing income-based tax threshold to generate additional revenue and that local districts are already making up gaps: "In Lake County, the school district pays about $200,000 to make up the gap," one commissioner said during the meeting.

Rosen and Morris concluded by telling commissioners staff would share a written report on the special session and that advocacy teams would provide templates and a regular meeting cadence to keep county staff plugged into legislative developments.

Less-critical meeting details and next steps included scheduling regular coordination meetings between county staff and the advocacy team and providing templates for how staff can package county-originated legislative ideas for statewide advocacy.