Myers' FY2027 plan keeps discretionary cushion but taps one‑time 'sheet' funds for OPEB; aims for 2% employee pay raise

Governor Myers’ recommended budget for fiscal 2027 aims to rein in a projected structural gap while funding targeted investments in education, housing, health care and state pay increases. Director Brian Maxwell told the Joint Finance Committee on day one that the administration built the plan around “efficiency and transparency” and would appropriate 98% of estimated revenues to preserve a cushion for economic uncertainty.

The nut of the budget, Maxwell said, was a four‑part strategy to close an initial $511.6 million deficit: updated cost forecasts and program reductions, $131.1 million from agency reallocation and 1% reductions, $168.7 million from reducing one‑time cash to capital, and a proposed $146.9 million revenue package that includes modest fee increases and a revised business‑formation fee structure. “This budget only appropriates 98% of revenues,” Maxwell said, framing the plan as intentionally conservative.

Why it matters: the administration pairs near‑term reductions with a handful of strategic investments — including a 2% across‑the‑board pay increase for state workers and $25.3 million for early‑childhood and school formula start‑up costs — but also recommends using accumulated special fund balances (commonly called “sheet” funds) to meet the statutory 1% OPEB contribution. Deputy Director Anne Visalli told the committee that the code does not require the 1% to be general fund dollars and that using unobligated sheet funds is “a proper use,” but cautioned it may not be a sustainable annual approach if those balances are not reliably available.

Health and program drivers: Medicaid, personnel costs (collective bargaining and step increases) and student unit growth together accounted for two‑thirds of the budget’s cost drivers, Maxwell said. The budget includes $139 million for Medicaid and $21.7 million for the 2% personnel pay policy. Maxwell highlighted SNAP administrative costs as a new pressure, citing federal rule changes that will shift administrative cost‑sharing toward states unless error rates fall.

Contested choices and next steps: Committee members pressed OMB on the OPEB swap and its implications. Visalli said the move meets current legal tests but left open whether the administration will need to legislate a longer‑term solution if special fund balances shrink. The administration plans to provide supplemental documentation and implementation breakouts (for example, for the education funding reform start‑up costs) as hearings continue.

What’s next: The budget will proceed through committee hearings and likely be refined in the weeks ahead. OMB and the affected agencies will return for line‑item questioning; the revenue changes discussed by Maxwell will require separate legislation to implement.