On Thursday, Governor Matt Meyer unveiled his proposed state operating budget for the new fiscal year that begins July 1.
The $6.938 billion FY 2027 budget would represent a 4.99% increase over the current one.
The governor’s staff faced a difficult challenge in keeping growth below 5% amid inflationary pressures, reduced federal funding, and ongoing costs built into the budget by sharply higher spending in recent years.
House and Senate Republicans have repeatedly warned that state spending growth has far outpaced revenue growth. As the governor noted in Thursday’s presentation, in FY 2024, spending growth exceeded revenue gains by 9.1%. The following year, the negative spending-revenue gap was nearly 4%. In the current fiscal year, it is about 5%.
Just covering existing budget items in the new spending plan — expenses called “door openers” in budgetary parlance — would have led to an 8% increase and a shortfall of almost $525 million.
Among the factors driving higher costs were increased expenses for Medicaid ($188 million), personnel ($118 million), school student funding ($41 million), child and dependent care ($37 million), and higher healthcare expenses for inmates, state employees, and retirees ($67 million).
Governor Meyer’s Fiscal Year 2027 recommended budget eliminated the initial projected deficit and significantly reduced the gap between spending growth and revenue growth through targeted reductions, reprogramming, one-time spending adjustments, and operational efficiency savings. The proposal also seeks increased “business formation fees” and hikes to various tobacco taxes.
The plan includes new or increased spending targeting education, housing, healthcare, and economic development initiatives.
While significantly lowering spending growth compared to the last three fiscal years, the governor’s proposed budget still outpaces revenue by about 1.5%.
After the presentation, House Republican Leader Tim Dukes (R-Laurel) and House Republican Whip Jeff Spiegelman (R-Townsend, Clayton, Smyrna) offered their perspectives.
Both Republican leaders were supportive of the governor’s efforts to rein in spending growth. They also applauded the plan for leaving untouched two critical contingency funds: the Rainy Day Fund ($366.5 million) and the Budget Stabilization Fund ($469.3 million).
The governor’s recommended budget now comes under the consideration of the Joint Finance Committee (JFC), a 12-member group of lawmakers (eight Democrats and four Republicans). Over the next four to five months, the committee will hold budget hearings with every state agency, consider the legislature’s own spending priorities, and pay increasing attention to state revenue estimates, which will be issued monthly, from March through June. Taking all those factors into account, the JFC will submit a modified state operating budget in June for a legislative vote, without amendment.
Rep. Spiegelman said keeping the lid on spending growth is now in the legislature’s hands.
“I think this is going to take some discipline to keep the budgetary growth within what the governor is targeting,” Rep Spiegelman said. “We want our glidepath to be in line with sustainable growth, and to do that, it’s going to require some uncomfortable conversations where we’re going to have to say ‘no’ to things. That is not only going to involve the 62 members of the General Assembly, but also our constituents.”
- To see a video of House and Senate Republicans reacting to the governor’s budget proposals, click here.
- To see a copy of the governor’s budget presentation, click here.
- For detailed information on the governor’s spending plans, click here.
- To access the Joint Finance Committee budget hearings, which begin next week, click here.
IN PHOTO, FROM LEFT: State House Republican Leader Tim Dukes, State Senate Republican Leader Gerald Hocker, and State House Republican Whip Jeff Spiegelman discuss the governor’s recommended FY 2027 budget.
