Popular major state projects – including the Airport Rail Link — have been put on the backburner as part of the Victorian government's pitch to be more fiscally responsible, in Treasurer Tim Pallas's 10th budget.

Parents will get the biggest budget sweetener, with $400 to help with education expenses for children at government schools, as Premier Jacinta Allan tries to focus on families in her first budget in the top job.

Despite the rhetoric of better economic management, Victoria's net debt continues to climb.

Net debt is now forecast to hit $187.8 billion by 2027-28, when Victorians will be paying roughly $25 million each day on interest payments.

The budget faces a $2.2 billion deficit this financial year but is projected to return to a surplus of $1.5 billion by 2025-26.

Treasurer Pallas has defended the budget as one that strikes a responsible balance without taking "the economic momentum out of the economy".

Mr Pallas said his government was focused on moving past COVID debt by reducing net debt as a proportion of the state's economy.

Budget figures show debt debt represented roughly 20 per cent of gross state product (GSP) in 2022-23, and is set to climb to 25.2 per cent in 2026-27, before dropping slightly to 25.1 per cent the following year.

When pressed on the impact of that debt on future generations, the treasurer said it was important the figures were viewed in context.

"I can assure Victorians that our priorities are on the commitments we gave them and recognise the material circumstances of the time and do no harm to the continuing growth and resurgence of the Victorian economy," he said.

Mr Pallas said a reduction in government advertising and selling government office spaces were among the measures that would keep government expenditure at an average growth rate of 2.2 per cent per year.

"Pretty profound in anyone's language," he said.

Credit ratings agency says 'thin' forecast surplus key to maintaining AA rating

Credit rating agency S&P Global Ratings downgraded Victoria's credit rating from AAA to AA in 2020 — the lowest of any state or territory in Australia.

The agency said this year's budget confirmed the government's accounts were in "large structural fiscal cash deficit".

"This is the highest among the Australian states and stems from successive operating deficits and its large capex [capital expenditures] since the pandemic hit in late fiscal 2020," the agency said in a statement after the budget was released.

"On the flipside, we believe Victoria maintains strong access to global capital markets.

"This will allow the government to fund its budget and avoid any acute stress scenario, despite rising interest expenses and market volatility."

The agency said it expected Victoria's AA credit rating would be supported by the state's wealthy and diverse economy, but pressure on the rating could build if the "thin" operating surplus forecast in the budget was not achieved.

State Opposition Leader John Pesutto said the budget was a missed opportunity to make life easier for Victorians and change the direction of the state.

"With record debt, record interest, record taxes, service cuts and poorer outcomes, it's clear Labor cannot manage money and Victorians are paying the price," he said.

Worker shortages drive delays across mental health, pre-prep programs

The government will also scrap the COVID-era sick pay guarantee, which was introduced to assist casual workers who needed to isolate while unwell.

As recently as last year, the government had considered extending the scheme permanently through an industry levy, but the budget papers confirmed it would be discontinued.