December 18, 2025

2027 Fiscal Year Governor’s Budget Proposal: You Might Want to Know

Gov. Cox and Lt. Gov. Henderson have released their Fiscal Year 2027 (FY27) budget proposal. Keep in mind that the Governor’s recommendations are exactly that – recommendations. The legislature ultimately makes funding decisions, and the Governor’s recommendations help inform legislative appropriations each year.

This year’s recommendations include several items for state agencies, including proposed Total Rewards Rebalance initiatives focused on strengthening our ability to recruit, retain, and support a high-performing workforce.

The three focus areas include:

• Compensation and Classification Modernizing – Updating job classifications, pay ranges, and job architecture to create a more transparent, market-based salary structure.

• Retirement Revisions – Proposing a shift for Tier 2 employees from a fixed $26 401(k) match to a percentage-based match (50% of up to 2% of salary), pending legislative approval.

• Leave Reforms – Exploring a combined Paid Time Off (PTO) system that offers more flexibility, increased carryover limits, and payout at separation or retirement, while preserving existing sick leave balances.

The FY27 budget also recommends a 2.6% COLA, continuation of Pay-for-Performance, and increased funding for health and dental insurance.

The governor’s team developed these proposals using feedback gathered through surveys, focus groups, and discussions. More information will be shared as details are worked out prior to the 2026 Legislative Session.