The Office of Program Research (OPR, nonpartisan staff for the House of Representatives) presented a budget preview to the Appropriations Committee yesterday. OPR’s preliminary estimate of the unrestricted ending balance for funds subject to the outlook (NGFO) is -$4.351 billion in 2025–27 and -$6.700 billion in 2027–29.

The OPR figures incorporate the November caseload forecast. OPR estimates that maintenance level (the cost of continuing current services, adjusted for enrollment and inflation) changes will increase appropriations by $742 million in 2023–25, $4.377 billion in 2025–27, and $6.367 billion in 2027–29. The figures for 2023–25 and 2025–27 are higher—but in the same ballpark—as the numbers I have collected from agency budget requests (which did not reflect the November caseload forecast).

However, OPR’s 2027–29 maintenance level change is over $2 billion higher than is included in the agency requests. It is not clear at this point exactly what agencies or policies are driving this substantial maintenance level increase. During the committee meeting, staff said that the K–12 inflation adjustment, caseloads for Working Connections Child Care and long-term care, and debt service are factors.

Estimates of the shortfall are sensitive to the assumptions about what is included. OPR excludes employee compensation, vendor rates, and other policy changes. The Office of Financial Management’s (OFM) estimate of a $10–$12 billion shortfall includes some policy changes, according to OPR. (Adding in the cost of the collective bargaining agreements would bring OPR’s four-year shortfall estimate up to about $10 billion, for example.)

Both OPR and OFM assume that revenue will grow by 4.5% each year in 2027–29—even though revenues are currently forecasted to grow by just 3.6% in 2028 and 3.5% in 2029. Assuming higher revenue than is forecasted in the second biennium is allowed by the four-year outlook statute, but, as we showed in our report on the projected shortfall, the assumption can trap the Legislature into overspending. (The 2024 supplemental assumed an extra $1.121 billion in revenues for 2025–27, and the appropriations enacted for 2023–25 would not have balanced over four years without them. But those revenues predictably did not materialize, contributing to the projected 2025–27 shortfall.)

The Legislature should instead use forecasted revenues in balancing the second biennium. Using OPR’s estimate of the maintenance level and the November revenue forecast, I estimate that the unrestricted NGFO ending balance is -$4.351 billion in 2025–27 and -$7.749 billion in 2027–29. (If you include the cost of the CBAs, the balance drops to -$5.908 billion in 2025–27 and -$11.029 billion in 2027–29.)

There is another revenue forecast and another caseload forecast before the Legislature writes a budget, so the estimate of the shortfall is still in flux. According to OPR, though, “the underlying conditions of a challenging budget cycle are unlikely to change drastically in the next few months.”

For details about how legislative spending choices caused this projected shortfall, see our report.