As of January 1, 2026, nine governors had released proposed budgets for state fiscal year (SFY) 2027. With the phase down of federal funding and substantial policy changes approved in the 2025 budget reconciliation act (P.L. 119-21, OBBBA), these proposals offer insights into how governors plan to manage mounting fiscal pressures, navigate new federal mandates, and position their programs for long-term sustainability.
Today, 量子资源网 Information Services (量子资源网IS) published its first preliminary review of proposed SFY 2027 budget proposals. The initial installment includes budgets from Alaska, Colorado, Florida, Mississippi, New Mexico, South Dakota, Utah, Virginia, and Wyoming, with the latter two proposals covering the fiscal 2026鈥�28 biennium.
量子资源网IS will release periodic updates as additional governors publish their budget proposals鈥攖he same rolling approach we used in 2025 (here and here). Because 15 states enacted 2025鈥�27 biennial budgets last year, 量子资源网IS also might review substantial mid-biennium health-related adjustments or supplemental funding.
The remainder of this article provides a snapshot of several notable themes and emerging trends detailed in the full report.
Implementation of New Federal Requirements
State leaders are preparing budgets for SFY 2027 at a time of heightened fiscal stress and structural uncertainty. Entering 2026, governors are facing reductions in federal funding, particularly in Medicaid and Supplemental Nutrition Assistance Program (SNAP) funding. In addition, they are preparing for new federal requirements that will begin to take effect later this year, including narrower flexibilities for financing and Medicaid community engagement policies and more frequent eligibility redeterminations.
Against this backdrop, governors are using FY 2027 budget proposals to comply with OBBBA鈥檚 mandates and to stabilize their safety net programs and realign state operations around stricter fiscal realities.
Medicaid Work Requirements. Virginia鈥檚 proposed budget includes funding to implement federal Medicaid community engagement requirements, including a recommendation to add nine new authorized positions in SFY 2027 and 12 more in fiscal year 2028 to meet workload demands. In addition, South Dakota鈥檚 governor proposed amending the state鈥檚 2026 budget to secure funding to implement these requirements.
Eligibility and Redetermination. Several governors are proposing investments to support heightened eligibility checks across Medicaid, SNAP, and Temporary Assistance for Needy Families (TANF). For example, Colorado Gov. Jared Polis鈥檚 budget proposes $19.1 million to improve the state鈥檚 eligibility system for programs such as Medicaid, SNAP, and TANF. Utah鈥檚 proposed budget includes a recommended allocation of nearly $16.5 million to the Department of Workforce Services for 鈥淗.R. 1 Medicaid Eligibility Administration,鈥� and nearly $10 million for the 鈥淗.R. 1 SNAP Administrative Services.鈥�
SNAP Changes. States are backfilling lost federal funding and investing in error reduction and system modernization. New Mexico Gov. Michelle Lujan Grisham鈥檚 proposed budget, for example, includes $37 million to replace the decrease in federal funding for SNAP administration ($4 million of which will support 150 new full-time positions), as well as $8.9 million for systems improvements to reduce payment errors in SNAP. South Dakota Gov. Larry Rhoden鈥檚 proposed budget includes $5.5 million to offset a reduction in SNAP federal funding.
Strategic Cost Containment
Considering OBBBA implementation and the effects that it will have on their budgets, our first review of governors鈥� budget proposals signals that states are taking an aggressive posture toward limiting expenditure growth in 2026 and 2027. Initial proposals include targeted reductions, tighter utilization management, and restrictions on benefits.
Since the 2025 legislative session, Colorado has taken multiple steps to prepare for declining federal revenue. For example, Governor Polis鈥檚 proposed budget accounts for multiple actions approved through an amended executive order that would reduce spending to brace for OBBBA鈥檚 impacts. Examples include:
- Reducing provider rates to 85 percent of the Medicare reimbursement rate聽
- Establishing limits on Community First Choice services聽
- Adjusting聽the聽home health nursing and therapy services payment聽methodology聽
- Introducing cost controls for Medicaid benefit categories that have shown disproportionate growth聽
- Implementing聽a聽$3,000 annual cap on adult Medicaid dental benefits聽and a聽$750 annual cap on dental benefits for individuals in the Cover All Coloradans program聽
- Changing聽the聽Cover All Coloradans behavioral health program from managed care to fee for service聽
- Reviewing provider fees聽in anticipation of聽possible State聽Directed Payment approval from the Centers for Medicare & Medicaid Services (CMS)聽
Former Virginia Gov. Glenn Youngkin鈥檚 budget鈥攏ow inherited by Abilgail Spanberger following her inauguration January 17, 2026鈥攊ncludes multiple cost-containment proposals, such as:
- Anticipated adjustments to capitation rates after a review of Medicaid managed care organizations聽
- A $2,000 annual limit on adult dental services Medicaid coverage聽
- Elimination of聽both聽automatic rate increases for psychiatric residential treatment facilities and qualifying聽addiction聽and recovery treatment services providers聽and聽automatic biennial inflation increases for聽medical聽assistance聽providers聽
- Restrictions on聽emergency聽maternity services to Medicaid聽enrollees聽who聽are ineligible聽for Medicaid聽because聽of their citizenship status聽
- Standardized聽hourly limits across home and community-based聽services聽waivers聽
- Actions聽related to聽鈥渆nsuring appropriate utilization鈥� of services,聽such as聽applied聽behavioral聽analysis and crisis services聽
States are expected to include additional cost-containment tools throughout 2026 and beyond as OBBBA鈥檚 fiscal effects become clearer over the coming months and years.
What to Watch
The budget proposals indicate the resources that executive agencies need and preview governors鈥� policy agendas for the year ahead. Stakeholders should track program reductions and rate changes, eligibility system investments, and shifts in care models.
In addition, some of the announced budget proposals consider federal awards to states under the Rural Health Transformation Program (RHTP). For example, the Alaska Department of Health budget request addresses the state鈥檚 RHTP implementation plans, and Wyoming鈥檚 budget proposal outlines RHTP priorities. Many states are preparing RFP processes to operationalize their RHTP strategies and make progress on the goals of their initiatives.
Connect with Us
As federal funding uncertainties continue, states and other stakeholders will need to adapt their delivery systems, administrative structures, and financing models throughout OBBBA鈥檚 multiyear rollout. 量子资源网 offers expertise, analytics, and strategic advisory services needed to navigate this evolving landscape. For details contact Andrea Maresca and Kathleen Nolan.
The full state of the states and governor budget report is available to 量子资源网IS subscribers. In addition, 量子资源网IS maintains a that incorporates details of each initiative and the first year award.
