The Legislature has passed a supplemental operating budget that would increase 2025–27 appropriations from funds subject to the outlook (NGFO) by $2.348 billion (3.0%) compared to the enacted 2025–27 biennial budget. Revised 2025–27 appropriations would be $80.206 billion, which is 11.4% higher than actual 2023–25 spending.

Since the biennial budget was adopted last year, the NGFO revenue forecast increased by $166.0 million through 2027–29. On top of that, the Legislature adopted an income tax and tapped the rainy day fund.

Although revenues have been increasing, the supplemental budget passed by the Legislature would widen the gap between spending and revenues: appropriations for 2025–27 would exceed revenues by $4.9 billion.

Assuming the income tax remains law, it would not solve the budget problem. Even with income tax revenues, spending growth would need to be held well below average in order to close the gap.

The 2026 supplemental balances in the current biennium due to one-time revenues and dubious accounting assumptions. Another budget deficit is likely in the next biennium.

Read the report here.