Non-partisan legislative staff estimate that the state operating budget has a shortfall of $4.3 billion over the outlook period.

There should be no surprise here. As we wrote of the enacted 2025–27 budget in July,

the sustainability of the 2025–27 budget is highly questionable. In addition to leaving a very small ending fund balance, the Legislature made several worrying choices that mirror the choices that caused the recent shortfall. The Legislature reduced spending and increased taxes, but instead of solving the problem, the budget presages more problems in the future. Indeed, the state is almost certain to face another shortfall in 2026.

Since the end of the 2025 session, the revenue forecast declined by $1.690 billion over the outlook period. And now we have a preliminary estimate of the maintenance level changes (the cost of continuing current services, adjusted for caseloads and inflation), incorporating the November caseload forecast and associated utilization cost changes. The estimated maintenance level change does not include any changes to agency contributions to the state liability account.

According to the Office of Program Research (OPR), the estimated maintenance level change is $1.424 billion in 2025–27 and $1.807 billion in 2027–29. The maintenance level figures will be refined as the budget process continues.

All told, OPR estimates that the projected ending balance in funds subject to the outlook (NGFO) is -$1.519 billion in 2025–27 and -$4.3 billion at the end of the outlook period.

This estimate appropriately does not assume 4.5% annual revenue growth in the second biennium. Assuming revenues not in the official revenue forecast was one reason for the shortfall faced by the Legislature in 2025. That assumption, plus the use of one-time funds, allowed the state to adopt appropriations levels that greatly exceeded forecasted revenues. For example, the Legislature increased appropriations for 2023–25 by 15.8% at a time when biennial revenues were expected to increase by 3.5%. The effects of this continue to be felt in 2025–27.

The chart below reflects the November revenue forecast, the enacted budget for 2025–27, and the estimated maintenance level appropriations for 2027–29. It also includes OPR’s estimated maintenance level changes for 2025–27 and 2027–29.