A $1.5 billion hospital funding lifeline has left a gaping hole in the Victorian budget, with the treasurer not ruling out taxes or cuts to other areas to fill it.
Premier Jacinta Allan has vowed to find an extra $1.5 billion for cash-strapped hospitals after telling them to tighten their belts to return to pre-COVID spending levels.
The push for hospitals to stop running in the red and speculation of forced mergers led to services such as Western Health and Northern Health imposing hiring freezes.
The top-up funding for this financial year will be accounted for in December's mid-year budget update.
Treasurer Tim Pallas said he and the premier remained committed to preserving the government's fiscal targets.
"We do have some (contingencies) capacity but it will require continuing effort to keep within our targets," he told reporters at state parliament on Wednesday.
The May state budget forecast a return to surplus of $1.1 billion in 2025/26 and net debt to hit $187.8 billion by mid-2028.
Mr Pallas wants to protect the surplus and not slap the $1.5 billion on the state's credit card, leaving tax changes and spending cuts as some of the only other available levers he can pull.
Asked if new taxes on business were no longer an option, the treasurer said he would "never say never".
"I'm not ruling anything in or out at the moment because essentially the number one priority for the government is to maintain its fiscal aggregates, to maintain the things that we said to Victorians we would do when we produced our strategies back in November 2020," he said.
Opposition Leader John Pesutto said Mr Pallas had "gone off the reservation" after Ms Allan's failure to explain where the funding would come from.
"Victorians brace yourself for more tax hikes, brace yourself for more service cuts," he said.
Unveiling the funding boost, Ms Allan categorically rejected advice from an expert review to forcibly merge some of Victoria's 76 separate public health services.
The public health entities will instead be grouped into 11 local networks based on geography with shared payroll, IT and electronic medical records to replace any paper systems.
Some back-office roles will be lost in the administrative shake-up, but the government insists there will be no reduction in frontline services or frontline jobs.
