Overview

Governor Gavin Newsom has announced a revised budget proposal for the 2026-27 fiscal year that aims to eliminate California's projected deficit through July 2028. This plan emphasizes maintaining investments in crucial areas such as healthcare, education, and support for working families while ensuring fiscal responsibility.

The budget is designed to balance the state's finances in the short term and reduce long-term operating deficits, reflecting a commitment to both fiscal discipline and progressive values.

Key details

  • No deficit is projected for the current or next fiscal year.
  • The proposal aims to eliminate California's structural deficit, reducing it to $0 through July 2028.
  • A $1.8 billion reduction in General Fund spending is included in the revised budget.
  • The long-term operating imbalance is cut by more than half for the 2028-29 budget.
  • Investments are made in child care, schools, higher education, public safety, healthcare, housing, clean energy, and new businesses.
  • Nearly $30 billion in combined reserves is maintained, which has increased by 30% since Governor Newsom took office.
  • The budget includes a deposit of $9.7 billion into the state’s Surplus Holding Account for future fiscal support.
  • The revised budget does not propose significant new ongoing General Fund spending commitments.
  • Fiscal restraint and long-term sustainability are prioritized in the budget proposal.
  • The budget balances both the 2026-27 and 2027-28 fiscal years.
  • A growing Rainy Day Fund balance is part of the reserves maintained.
  • The budget reflects a significant multi-year fiscal stabilization effort amidst economic uncertainty.

Context

This revised budget comes at a time when California faces economic uncertainty and challenges related to federal policies affecting healthcare and working families. The Governor's proposal aims to provide stability and support essential services while navigating these challenges.

What happens next

The revised budget will undergo review and discussion in the state legislature, where lawmakers will evaluate its provisions and potential impacts on California's fiscal health and public services.

What we don't know yet

Details regarding the specific impacts of the budget on individual programs and services, as well as the potential reactions from lawmakers and stakeholders, have not been confirmed.