The Senate Ways & Means Committee Chair’s 2025–27 operating budget proposal would appropriate $78.470 billion from funds subject to the outlook (NGFO). Compared to current appropriations (as revised in 2024), this would be an increase of $6.525 billion (9.1%). According to the estimated outlook, this increase includes $1.630 billion in net new policy items.

The proposal assumes net new revenues of $6.210 billion in 2025–27 and $9.828 billion in 2027–29, including:

• A financial intangible assets tax ($4.116 billion in 2025–27 and $8.116 billion in 2027–29),
• A payroll expense tax ($1.852 billion in 2025–27 and $4.784 billion in 2027–29),
• Elimination of various tax preferences ($403.3 million in 2025–27 and $604.8 million in 2027–29),
• Property tax growth limit increase ($165.9 million in 2025–27 and $613.8 million in 2027–29)
• Elimination of general fund–state (GFS) transfers to the transportation budget ($140 million in 2025–27 and $140 million in 2027–29),
• Shifting some sales tax revenues to the multimodal account in the transportation budget (-$1.725 billion in 2027–29, and
• Reducing the state sales tax (-$495.6 million in 2025–27 and -$2.698 billion in 2027–29).

(I wrote about some of these proposals earlier this week. The financial intangibles tax and the payroll expense tax would be the two largest state tax increases.)

The proposal would transfer a net of $165.5 million from other accounts to the NGFO in 2025–27. That includes a transfer of $1.6 billion from the budget stabilization account (BSA, or the rainy day fund) in FY 2026 to the NGFO. This money would be returned to the BSA in FY 2027.

The proposal would barely balance in 2025–27, leaving an unrestricted NGFO ending balance of just $75 million. To balance, it assumes a higher level of reversions (appropriations that are not ultimately spent) than normal.

Meanwhile, the proposal would leave an unusually high unrestricted NGFO ending balance in 2027–29: $4.613 billion. However, that depends on the new revenues being collected from highly uncertain new taxes.

Appropriately, the proposal assumes the revenue forecast in 2027–29, even though statute allows the Legislature to assume 4.5% revenue growth in each year of that biennium. (Making that assumption would add $995 million in additional resources with which to balance the budget over four years. As we have shown, assuming these phantom dollars in previous budgets is one reason the state faces a budget shortfall.)