2026 Government Relations Legislative Update - Week 12

Capitol Update

Senate Republicans released their budget targets this week, proposing a 1.2 percent increase for FY 2027 over the current FY 2026 budget. Fiscal year 2027 will mark the second full year under the state's 3.8 percent flat income tax. The Senate Republican proposal sets a budget target of $9.623 billion, $47 million less than the amount proposed by Kim Reynolds for FY 2027. The proposed budget includes nearly $100 million in new funding for K–12 education approved earlier this session and reflects a total increase of $114 million in new spending for the next fiscal year.

Under this framework, the state is projected to maintain a combined balance of approximately $4.8 billion across the ending balance, the Taxpayer Relief Fund, and the rainy day funds at the close of FY 2027. This budget plan now sets the stage for negotiations with the House and the Governor in the coming weeks.