Fiscal year 2026, which begins on July 1, 2025 and is the first year of the 2025–27 biennium, appears to be the trickiest year to balance in the operating budget. First, the deficit between the maintenance level (the cost of continuing current services, adjusted for inflation and enrollment) and forecasted revenues is larger in 2026 than in 2027. Second, the tax proposals in the Senate and House Chairs’ proposals wouldn’t really kick in until FY 2027. (Similarly, in the Senate Ranking Member’s proposal, the $2.5 billion transfer from the Law Enforcement Officers’ and Firefighters’ System Plan 1 retirement fund to the general fund–state wouldn’t occur until FY 2027.)

Each proposal barely balances in 2026: the Senate Chair would leave an unrestricted ending balance in funds subject to the outlook (NGFO) of $66 million, the House Chair would leave $100 million, and the Senate Ranking Member would leave $42 million.

To balance in FY 2026, the proposals include some budgetary shifts. For example, the Senate Chair would transfer $1.6 billion from the budget stabilization account (BSA, the rainy day fund) to the general fund–state (which is part of the NGFO) in FY 2026. The $1.6 billion would be transferred back to the BSA in FY 2027.

Additionally, both the House and Senate Chair would shift apportionment payments to school districts. The House Chair’s proposal would save $396.7 million in 2025–27 by changing the apportionment schedule for SY 2025–26 and SY 2026–27 (HB 2050). Under current law, 22.5% of apportionment payments are made in July and August. HB 2050 would make 25% of the payments in July and August for two years. Effectively, this would shift state spending from FY 2026 into FY 2028 (which is in the 2027–29 biennium).

The Senate Chair’s proposal would shift $386.2 million in school district apportionment payments from SY 2025–26 to SY 2026–27. Effectively, this would shift state spending from FY 2026 into FY 2027; there would be no net impact in 2025–27.

There are also several cases in the proposals where spending wouldn’t begin until FY 2027 or where reductions would occur only in FY 2026. For example, both the Senate and House Chair would delay child care subsidy rate increases until FY 2027. The Senate Chair’s proposal of temporary compensation reductions for state employees would only apply in FY 2026 (SB 5792).

For more on the budget proposals, see our side-by-side.