NSW’s Treasury has revealed a projected deficit of almost $2 billion by 2026-27. 

The financial forecast comes as the Minns Labor government prepares for its first budget release on September 19, grappling with soaring costs left by the previous Perrottet administration.

In May, Treasury models showed a deficit of $1.5 billion by 2026-27, which has since surged to $1.9 billion. 

Key drivers include declining National Partnership Payment revenues, rising employee expenses, and additional interest and depreciation expenses.

Treasurer Daniel Mookhey faces a challenge in fulfilling campaign promises to increase public sector wages and maintain a $115 billion infrastructure program while managing this budget shortfall.

The deficit projection remains subject to change after the federal budget in May and further spending decisions. 

The government is exploring revenue-boosting measures, such as capturing windfall profits from property developers near new public infrastructure.

NSW is also considering raising mining royalties, mirroring Queensland's success, which netted an additional $15 billion. 

Major transport and infrastructure projects face potential revisions, with scrutiny on projects like the Metro West rail initiative and the broader Metro rail project due to escalating costs.

Economists had previously warned of budget constraints due to pre-election spending, and rising interest rates are adding further financial pressure, pushing up borrowing costs by half a billion dollars over five years.