The Governor initiated the fiscal year 2026 budget cycle by presenting the Administration’s version of the budget at the end of January. The budget includes a 3% COLA for the State and Teachers system. FY26 marks the final year of the three-year pension appropriation schedule. While the budget includes the full appropriation of $4.933 billion, there is a deviation from the traditional funding mechanism. The budget appropriates $4.5006 billion from the general fund, with the remaining amount appropriated through the excess capital gains line item. Historically, the direct appropriation of the full amount from the general fund has been the standard funding mechanism.
Also included is funding for the Group Insurance Commission. It is important to note that the premium split language for state retirees and active employees was omitted from the GIC line item. The Governor’s office has acknowledged that the omission of the retiree language was an oversight, and we will meet with House Ways and Means on this issue before their version of the budget is released.
We are confident that this omission will be corrected and have included the traditional GIC premium splits that will be in effect for FY26 on pages 10 and 11.
However, the omission of language concerning active employees appears to be a separate issue, and we have formally opposed the proposed increase from an 80/20 to a 75/25 split, which would affect approximately 17,000 active members.
The budget process will continue with the House releasing its version in April, followed by the Senate in May. The new fiscal year begins on July 1, 2025.