Idaho’s total state budget for Fiscal Year 2027 increased by approximately 2.5% over the prior year’s appropriation, reaching $14.453 billion compared to the FY2026 original appropriation of $14.102 billion — a net growth that came despite lawmakers approving reductions across many areas of state government during the 2026 legislative session.

Budget Grows Even as Cuts Pass

The overall increase runs counter to the narrative that emerged from floor debates in both the Idaho House and Senate this session, where lawmakers described the budget as one of cuts and fiscal restraint. In practice, reductions made across most functional areas of government were outpaced by significant spending growth in a single agency: the Department of Health and Human Services.

The FY2027 increase of roughly 2.5% also exceeds the reported year-over-year growth from FY2025 to FY2026, which was approximately 1.5%. Analysts have noted, however, that an estimated $450 million was moved off the books at the end of last session, suggesting the actual FY2026 increase was closer to 5% when accounting for that shift.

Medicaid and a New Federal Program Drive the Increase

The primary spending driver in the FY2027 budget is Medicaid and a newly established federal program called the Rural Health Transformation Fund. Together, those two budget lines account for nearly $527 million in additional spending over FY2026 levels — $299 million for the Rural Health Transformation Fund and $228 million for Medicaid.

That combined increase effectively canceled out all savings achieved through reductions elsewhere in the budget, including cuts made within the Health and Human Services agency itself. Most other functional areas of state government did see year-over-year spending reductions in the FY2027 appropriations.

Mid-Year Cuts and Supplemental Spending

The Legislature also addressed the current fiscal year — FY2026, which runs through June 30, 2026 — during the session. Lawmakers passed Senate Bill 1331, which reduced current-year appropriations by $193 million. Supporters of the measure characterized it as a meaningful reversal of recent spending trends, noting that supplemental appropriations during the COVID-era exceeded $1 billion in some years.

Those current-year cuts, however, were partially offset by supplemental spending increases to cover population growth in both the Medicaid program and the state’s Corrections department during the current fiscal year.

Medicaid Expansion Repeal Stalled

A bill to repeal Idaho’s Medicaid expansion, House Bill 850, did not receive a committee hearing during the session. House Health and Welfare Chairman Rep. John Vander Woude allowed the bill to be printed but did not schedule it for a hearing, effectively preventing the measure from advancing.

Fiscal critics have argued that Medicaid expansion repeal could save the state a projected $1.3 billion per year and that the failure to advance the bill this session illustrates the difficulty of achieving meaningful spending reductions as long as Medicaid expansion remains in place.

What’s Next

With the 2026 legislative session adjourned, attention now turns to the May 19 primary election and the makeup of the next Legislature. Fiscal conservatives and other observers have flagged Idaho’s Medicaid trajectory as an issue likely to return in the 2027 session.

The composition of that incoming Legislature may shape how aggressively lawmakers revisit health and welfare spending. Idaho Attorney General Raúl Labrador’s recent political interventions in Republican primary contests — including an endorsement in a competitive Senate district race — signal that fiscal and policy disagreements within the Idaho GOP could influence which members arrive in Boise next January.

Beyond the state budget, Idaho continues to navigate its relationship with federal spending programs. Decisions made in Washington — including military deployments and federal appropriations — carry downstream effects for state agencies dependent on federal matching funds, including the Medicaid program at the center of the FY2027 budget debate.

State budget analysts and legislative observers have noted that the FY2028 session will face compounding pressure: welfare spending was not reduced this cycle, and ongoing cuts in other areas proved insufficient to offset growth in health entitlement programs.