May revise shows multiyear shift; $9.7 billion set aside for reserves and county costs

The Director said the administration’s May revise proposes multiyear changes intended to leave the state on sound financial footing, including positive balances in the Special Fund for Economic Uncertainties (SFEU) and a $9.7 billion surplus holding account. The Director said the SFEU balance is $4.5 billion in the budget year and $2.1 billion in budget year plus one and that part of the $9.7 billion includes new revenue solutions and reductions.

Why this matters: The May revise reduces previously projected out‑year operating deficits substantially, the Director said, and signals the administration’s focus on smoothing the budget across two fiscal years instead of budgeting only for the upcoming year. The administration also included an ongoing $1.1 billion allocation intended to help counties manage cost pressures linked to recent policy changes.

The Director described how the May revise compares with the governor’s January budget, saying the governor had projected a roughly $22 billion deficit in budget year plus one, while the May revise shows about a $2.1 billion positive balance after accounting for updated revenues and incorporated solutions. The Director said approximately $6.7 billion of the adjustments are the budget’s identified solutions and that roughly $3.0 billion could be viewed as pre‑solution surplus.

The Director attributed the roughly $24 billion swing between the earlier projection and the May revise to four main components: using resources over the next two budget years (including the $9.7 billion surplus holding), higher revenue estimates since the governor’s budget, ongoing solutions incorporated into the plan, and workload‑driven costs that affect the multiyear general fund outlook. The Director also singled out a programmatic change—moving a UIS population from managed care to fee‑for‑service—as one of the more significant workload changes affecting costs.

Committee members pressed for clearer apples‑to‑apples comparisons of January projections versus the May revise. The Director responded that precise comparisons are difficult but reiterated the headline numbers: operating deficits projected for 2028–29 fell from −$22.4 billion to −$10.3 billion and for 2029–30 from −$23.1 billion to −$9.6 billion under the May revise.

The Director said the administration is discussing any proposed rainy‑day fund changes with the legislature and that timing and whether voter approval would be required remain part of that discussion. The Director said staff (noted in the briefing as "Lupe") would follow up on several technical questions, including income‑bracket details for subsidy changes.

The briefing closed with no formal vote recorded in the transcript; the administration is expected to continue discussing the May revise with the legislature and stakeholders.