The House and Senate have passed their respective budget proposals, both of which rely heavily on one-time money transferred from the state’s Rainy Day Fund, and new taxes including assumed future revenue from a proposed millionaire’s income tax to balance the budget over four years.
At the same time, both plans increase spending beyond current revenue levels, raising serious concerns about long-term fiscal sustainability and the potential impact on infrastructure investment.
Key Budget Highlights
Spending Growth: Both proposals raise total spending to approximately $80 billion—more than $8 billion (11%) above the prior biennium. The Senate budget increases spending by 2.9%, or about $2.9 billion, over the 2025–27 budget adopted last April. The House plan relies on roughly $2 billion in new spending increases.
Rainy Day Fund Withdrawals: Both budgets depend on significant reserve transfers. The Senate proposes withdrawing $750 million, while the House calls for $880 million.
Lawsuit Costs: The Senate sets aside $1 billion to address escalating lawsuit expenses; the House allocates $400 million.
Fund Redirects: The Senate identifies $2.4 billion in reductions over four years, primarily through changes to a childcare program for low-income residents. The House identifies $1.1 billion in cuts. However, in both proposals, these savings are redirected to new spending.
Public Works Assistance Account (PWAA) Sweeps: Both budgets divert funds from the PWAA, an account AGC helped establish to provide critical low-interest loans and financial assistance to local governments for water, sewer, road, and bridge projects.
Medical Aid and Accident Funds: Both proposals use Medical Aid and Accident Fund dollars to cover programs previously funded through the general fund. Continued diversion of these accounts will likely result in increased workers’ compensation rates.
Michele Willms told members of the House Appropriations and Senate Ways and Means committees, “Balancing a four-year budget with one-time reserves and revenue that may never materialize is not a sustainable fiscal strategy.”
If you have questions, contact AGC’s Michele Willms.