5 Budget Priorities for the Second Half of 2026

Key Takeaways

• Reforecast with Real-Time Data (July–August): Rebuild P&L projections through December using actual run rates. Move away from outdated spring assumptions and variance reports to identify structural gaps while you still have time to act.
• Track Converging Policy Triggers (Monthly through Q4): Monitor state budget cycles, CMS guidance, and federal appropriations. Map out explicit best-case and downside revenue scenarios, especially if Medicaid represents more than 30% of your funding.
• Get Ahead of Workforce Costs (August–September): Request preliminary benefits renewal quotes early and model realistic Direct Support Professional (DSP) and clinical wage pressures instead of relying on flat cost-of-living assumptions.
• Address Structural Deficits Early (September): Establish your FY27 budget calendar now. Bring underwater service lines and cross-subsidization issues to the board for strategic discussion in September, rather than rushing them into a December vote.
• Insulate Operating Cash Flow (October–December): Review days’ cash on hand monthly. Separate operational cash flow metrics from year-end fundraising goals, and secure lines of credit before seasonal cash crunches hit.

Managing the Midpoint: Proactive Financial Governance

As health and human services organizations cross the midpoint of the fiscal year, establishing clear HHS budget priorities is crucial for proactive financial leadership. For most organizations, July marks either the exact midpoint of the fiscal year or the start of a new one. These next six months leading into December are critical for establishing the narrative your board will review in January.

The organizations that end the calendar year in a strong position aren’t the ones that successfully avoided surprises. They’re the ones who used the summer and early fall to anticipate operational shifts, giving their leadership teams the runway needed to build a plan before a board meeting where the numbers finally force a difficult conversation. It can be challenging to create and stick to a budget calendar, but this level of discipline is essential, especially when multiple external factors converge. 

5 HHS Budget Priorities for CEOs and Boards.

1. Reforecast Against Actuals, Not Against the Budget You Approved in the Spring

A budget approved in March or April was built on assumptions that are now six months old. Reimbursement timing, vacancy rates, utilization, and reserve draws rarely land exactly where projected. July and August are the window to run a true reforecast—not a variance report, but a rebuilt projection through year-end using current run rates. If the reforecast shows a widening gap, the board needs that information now, while there is still time to act, not in November when options have narrowed to a spending freeze.

• Action Item: Rebuild the P&L through December using actual run rates for revenue, payroll, and vacancy.
• Action Item: Identify which variances are due to timing versus structural factors. A structural gap needs a plan, not a wait-and-see approach. This includes nuanced negotiations with key stakeholders such as legislators, funders, union representatives, and community leaders.
• Action Item: Board Chair, CEO, and finance committee strategize, then bring the reforecast to the board as a distinct agenda item, separate from the routine financial statement review.
• Board and CEO Strategy: If current trends hold through December, where do we land relative to budget, and, if so, what do we need to do differently as a result?

2. Track Federal and State Budget Action That Touches Your Revenue

Medicaid rate-setting, state budget cycles, and federal appropriations all move on their own calendars, and several of those calendars converge in the fall. State legislatures finalize budgets that affect provider rates and waiver funding, the Centers for Medicare & Medicaid Services (CMS) and state Medicaid agencies issue guidance tied to federal fiscal year changes in October, and continuing federal budget negotiations create real uncertainty around Medicaid financing, Medicare Advantage rates, and discretionary grant funding that behavioral health, Intellectual and Developmental Disabilities (IDD), and home care and hospice providers depend on. Waiting for final numbers before scenario planning leaves no time to react.

• Action Item: Assign someone, internally or through your state association, to track state budget and rate developments and report to leadership monthly through year-end.
• Action Item: Build best-case, base-case, and downside revenue scenarios tied to specific policy triggers, not vague uncertainty.
• Action Item: Flag any single revenue stream that represents more than 30% of total revenue as a concentration risk worth board-level visibility (usually Medicaid).
• Board and CEO Strategy: What percentage of our revenue is exposed to a policy or rate decision outside of our control, and what is our response if it moves against us?

3. Get Ahead of Workforce Costs Before Benefits Renewal Season

Direct care wages, competitive labor markets, and benefits renewals all come to a head in the fall. Health plan renewals for January 1 effective dates typically arrive in September and October, often with double-digit premium increases, and Direct Support Professional (DSP), nursing, and clinical wage pressure hasn’t eased in most markets. Compensation and benefits are usually the largest line item in an HHS budget, which means a modest percentage miss here has an outsized effect on the bottom line. This is the moment to model renewal scenarios and revisit plan design before the numbers are locked in for FY27.

• Action Item: Request preliminary benefits renewal projections in August rather than waiting for the formal quote in October.
• Action Item: Model the FY27 budget impact of realistic wage adjustments for direct care and clinical staff, not just a flat cost-of-living assumption.
• Action Item: Evaluate plan design changes, contribution strategy, or level-funded options if renewal increases exceed what the budget can absorb.
• Board and CEO Strategy: What is our projected total compensation cost increase for the next six months and how does that compare to projected revenue growth? What are our negotiation tactics during benefits renewal, union negotiations, and compensation review, and how do we prepare now?

4. Build the FY27 Budget Calendar Now, Including the Hard Conversations

Whether your fiscal year starts in July or January, fall is budget season, and the organizations that produce a credible FY27 budget are the ones that start the difficult conversations early rather than compressing them into a single November retreat. If service lines are underwater, if a membership or fee structure needs to change, or if a program is being cross-subsidized past the point of sustainability, the board needs to wrestle with that in September, not approve a budget in December that everyone knows is aspirational. If December is the midpoint of the fiscal year, that is the time to reforecast using actuals if the budget is showing significant variances.

• Action Item: Set a budget calendar with named milestones: assumptions review, department submissions, finance committee first look, and full board approval.
• Action Item: Require every program or service line to show its direct margin, not just organization-wide totals, so cross-subsidization is visible.
• Action Item: Bring any structural, multi-year problem to the board as a strategic discussion before it appears as a line item in the budget for a vote.
• Board and CEO Strategy: Is there any program or service line in this budget that the organization is subsidizing indefinitely, and is that an intentional strategic choice or is it time to discuss a different plan?

5. Protect Cash Flow and Reserves Through the Year-End Giving Push

The fourth quarter is when annual giving, year-end appeals, and grant renewals concentrate, but it’s also when many HHS organizations feel the most cash flow strain—waiting on reimbursement timing while covering payroll and holiday-driven overtime. A strong December fundraising result does not fix a cash flow problem in October. Boards should have current visibility into days’ cash on hand and a realistic reserve policy, not just a year-end giving goal.

• Action Item: Review days’ cash on hand and reserve levels monthly through year-end rather than only at fiscal year close.
• Action Item: Separate year-end fundraising performance reporting from operating cash flow reporting. They answer different questions.
• Action Item: Confirm the line of credit or reserve draw plan is in place before it’s needed, not negotiated under pressure.
• Board and CEO Strategy: If a major reimbursement or grant payment were delayed by 60 days, could we still meet payroll without drawing on a line of credit? If not, how do we prepare now for the possible scenarios?

The Common Thread

Every one of these issues rewards the same discipline: surfacing the hard numbers in September instead of December. Boards can’t govern well on information they receive too late to act on. The CEOs who come into their December or January board meeting with a credible plan are, without exception, the ones who put these five items on the agenda starting in July.

Questions about how these apply to your organization’s specific budget cycle? Reach out to schedule a conversation.