Governor’s FY27 budget closes near‑term gap but projects growing long‑term shortfall

The Department of Legislative Services told the Ways and Means Committee on Jan. 27 that the governor’s proposed fiscal 2027 budget totals about $70.7 billion and narrows a near‑term cash shortfall while leaving large structural challenges later in the decade.

“Starting there on that, first page, the governor's proposed budget is about $70,700,000,000 for fiscal 27,” said David Romans, fiscal and policy coordinator for the Department of Legislative Services. Romans said the plan is roughly $500 million — a little under 1% — higher than the FY26 plan, noting FY26 included about $3.0 billion of efficiency appropriations.

Romans said the administration meets the spending‑affordability committee’s minimums, leaving an estimated general fund balance for the end of FY27 of about $108 million and maintaining a rainy day fund of roughly $2.2 billion, or about 8% of general fund revenues. “He left a general fund balance for the end of fiscal 27 of a 108,000,000 in his plan,” Romans said.

Despite the near‑term balance, DLS analysts warned of larger structural gaps in later years. Romans described improvements in FY27 but projected a persistent structural shortfall that grows through the decade: “further out, though, you can see we continue to have a substantial, budget challenge ahead, growing to almost 4,000,000,000 over $4,000,000,000 by 2031.”

Many of the governor’s near‑term solutions rely on transfers and one‑time actions that require legislative implementation. DLS estimates roughly $1.5 billion of budget solutions require legislation, with about three‑quarters of the governor’s closing strategy coming from spending reductions and the remainder from revenue adjustments and transfers.

Romans identified several material budget items that mask longer‑term pressure: use of Strategic Energy Investment Fund balances, shifting capital projects to bond financing, and the continued reliance on one‑time transfers such as amounts from the local income tax reserve and the fiscal responsibility fund. He also flagged the blueprint fund, which DLS estimates will use roughly $1.3 billion of fund balance to cover implementation and have only about $131 million left by FY28 — after which the general fund would need to assume roughly $1.7 billion of those costs.

A separate fiscal exposure stems from pending litigation under the Child Victims Act. “There have been about 12,000 claims filed against the state,” Romans said, adding that individual settlements could reach as much as $890,000. DLS noted there is no specific out‑year reserve in the budget to address that potential liability.

Theresa Tusinski, principal policy analyst at DLS, briefed the committee on economic drivers behind revenue forecasts, including labor market changes and tax receipt volatility. Tusinski pointed to a 4.2% unemployment rate in November 2025 and significant federal employment declines as drivers that affect withholding and other revenue lines.

The committee deferred legislative hearings until later in the day. Chair Delegate Janelle Wilkins thanked the presenters and scheduled a short recess before proceeding to hearings.