Governor Proposes Balanced State Budget for Fiscal 2026
LITTLE ROCK – The governor proposed a balanced budget for legislators to consider during the 2025 session when they set spending levels for state government agencies.
Arkansas operates under a balanced budget, but the governor’s proposal is important because it outlines her spending priorities for Fiscal Year 2026. We are now in the middle of Fiscal Year 2025, which ends on June 30, 2025.
Under the governor’s proposal, state government would grow 2.89 percent next fiscal year. The governor listed her priorities as education, maternal health, public safety and government efficiency.
Next year all Arkansas students will be eligible for Education Freedom Accounts, which were created by the legislature in 2023 when it approved the LEARNS Act. The EFA program helps families pay tuition at private schools.
Because of high interest in the EFA program, the governor said, her budget proposal includes $90 million in additional funding to accommodate new students. Another $90 million in one time “set aside” money would be available in case demand exceeds expectations.
The Public School Fund would be almost $2.5 billion. Institutions of higher education would receive $777 million in state aid.
About $50 million would be added to the budget of state prisons, bringing the total to about $483 million.
The Department of Human Services (DHS) would receive almost $1.9 billion in state funds. Its total budget is much larger because it receives federal matching funds. The agency’s total budget is more than $11 billion.
The Division of Youth Services would receive an increase in state funding of $4.3 million, raising its budget to $53.4 million.
Legislators questioned whether the Division of Developmental Disabilities Services would get a budget increase. Administration officials said that employees within the division would qualify for raises under the governor’s proposed pay plan.
The governor has announced a proposed pay plan for state employees that would pay for salary increases for frontline workers.
The governor’s proposal includes $13 million in new Medicaid funding to pay for improvements in maternal health care recommended by the Strategic Committee on Maternal Health. The division that administers Medicaid is slated to receive about $1.4 billion in state funding. Federal funding accounts for about 71 percent of Medicaid spending in Arkansas, which totaled more than $9 billion last fiscal year.
Under the state Constitution the legislature has ultimate authority to approve budgets for state government. Arkansas operates under a balanced budget law known as the Revenue Stabilization Act, which prioritizes state agency spending requests.
The state’s general revenue budget comes mostly from sales taxes, individual income taxes and corporate income taxes. Under the governor’s proposal, next year’s general revenue budget will be an estimated $6.8 billion, with a surplus of almost $300 million.
Setting budgets is one of the legislature’s most time-consuming duties. During the legislative session that begins January 13, the Joint Budget Committee and its subcommittees will meet more often than any other committees.