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Prepared by Precision Advocacy
As the legislature enters the most consequential phase of budget negotiations, Governor Gavin Newsom is releasing his May Revision on May 14 amid a significantly reshaped fiscal and political landscape.
Early details from the administration indicate that he will propose approximately $1.8 billion in spending reductions, alongside new limits on large corporate tax credit usage, as part of a broader effort to balance the state budget over the next two fiscal years while preserving core state programs. At the same time, stronger-than-anticipated revenues, reportedly exceeding prior projections by roughly $16.5 billion, have modestly improved the state’s near-term fiscal outlook compared to the January budget proposal, though substantial structural pressures tied to Medi-Cal growth, federal instability, housing and homelessness programs, and long-term outyear deficits remain unresolved.
The governor has also previewed major investments in education, wildfire recovery, healthcare affordability, and housing production, while continuing to frame the budget around protecting California from anticipated federal actions tied to H.R. 1 and broader economic uncertainty.
The May Revision release will formally begin the final month of negotiations between the administration and legislative leadership ahead of the constitutional June budget deadline and is expected to heavily influence legislative budget subcommittee deliberations over the coming weeks. Recent legislative hearings have increasingly focused on balancing fiscal restraint with mounting operational and fiscal pressures facing counties and local governments, particularly in behavioral health, homelessness, climate infrastructure, public safety, and healthcare delivery systems.
Assembly Budget Framework
The Assembly Democrats’ “Road Map to a Responsible and Compassionate Budget” released last week, signals that the Assembly is positioning itself as somewhat more protective of safety-net and local government programs heading into May Revision negotiations, while also emphasizing fiscal restraint and reserve-building amid growing concern over federal actions tied to H.R. 1 and broader economic uncertainty.
The Assembly prioritizes protecting Medi-Cal, CalFresh, In-Home Supportive Services (IHSS), and other core safety-net programs that counties administer and help operationalize. The Assembly’s framing suggests continued legislative interest in mitigating at least some federal cost shifts and service reductions affecting counties. The framework’s repeated references to federal instability and health care financing risks are particularly important for county health systems. Recent Assembly budget hearings tied to H.R. 1 highlighted concerns regarding Medi-Cal enrollment losses, Managed Care Organization tax restructuring challenges, reductions in provider financing mechanisms, and significant projected losses for county and public hospital systems statewide.
The document also emphasizes avoiding major new ongoing spending commitments while strengthening reserves and preparing for projected structural deficits. This likely means that while the legislature may be sympathetic to county impacts, competition for discretionary General Fund support will remain extremely intense
On housing and homelessness, the Assembly roadmap signals continued support for housing production, affordable housing financing, and reducing development barriers. The Assembly also continues emphasizing oversight and accountability for major state homelessness and housing investments, which could translate into increased reporting, performance expectations, and scrutiny of locally administered programs.
From a public safety and justice perspective, the roadmap does not include new Proposition 36 implementation funding commitments, which remains a concern for counties statewide.
Politically, the roadmap provides an early indication that Assembly Democrats are attempting to balance progressive safety-net protection priorities with a more cautious fiscal posture ahead of the governor’s May Revision. The coming weeks will likely determine whether stronger-than-anticipated revenues translate into meaningful restorations or whether much of the additional funding is absorbed by Proposition 98 obligations, reserve deposits, and Medi-Cal cost pressures.
Assembly Budget Subcommittee on Health: Behavioral Health Hearing
The Assembly Budget Subcommittee No. 1 on Health hearing on May 4 focused heavily on the intersection of serious mental illness, homelessness, incarceration, and the anticipated impacts of H.R. 1 on California’s behavioral health system. A major theme throughout the hearing was the challenge of treating individuals experiencing anosognosia, a neurological condition that prevents a person from recognizing their own mental illness, and how gaps in the state’s behavioral health continuum contribute to repeated cycles of crisis, hospitalization, homelessness, and incarceration.
For Orange County, the discussion is particularly relevant given the county’s significant behavioral health service demands, homelessness response responsibilities, and ongoing investments in diversion, treatment, and supportive housing programs. The hearing repeatedly emphasized that counties serve as the primary behavioral health safety net for Californians with the most serious and complex needs, especially when private insurance and managed care systems fail to adequately serve individuals experiencing severe mental illness.
Committee Chair Assemblymember Dawn Addis (D-Morro Bay) framed the hearing around growing concern that H.R. 1 will significantly destabilize county behavioral health systems by reducing Medi-Cal enrollment and federal funding support for behavioral health services. She warned that counties are likely to face increasing demand for services at the same time federal resources decline. Witnesses repeatedly described this as cost shifting rather than savings, with individuals ultimately cycling into more expensive emergency, jail, and psychiatric systems.
The hearing agenda noted that county behavioral health systems already face structural financing constraints. Counties rely heavily on a mix of 1991 and 2011 realignment revenues, Behavioral Health Services Act funding, and federal Medi-Cal participation, all of which fluctuate with economic conditions and demand. The agenda highlighted that counties are required to provide behavioral health services “to the extent resources are available,” but warned that federal Medi-Cal reductions under H.R. 1 could leave counties absorbing major fiscal pressures without replacement funding.
This concern is especially significant for Orange County because of the County’s large Medi-Cal population and the substantial role county behavioral health systems play in supporting individuals experiencing homelessness, justice involvement, and untreated severe mental illness. The hearing agenda projected that approximately 89,000 additional individuals statewide could seek county behavioral health services by 2027-28 due to H.R. 1-related coverage losses, at an estimated statewide cost of $828 million ongoing. Counties warned that these pressures would further strain already overburdened systems, particularly in regions experiencing provider shortages and growing behavioral health needs.
Witness testimony repeatedly emphasized the importance of sustained treatment, housing supports, assertive community treatment, peer support, and continuity of care. Providers argued that California’s current system remains too crisis-driven and fragmented, often stabilizing individuals temporarily before discharging them without long-term supports. Several panelists noted that individuals with serious mental illness frequently “fall through the cracks” between Medi-Cal managed care plans and county specialty behavioral health systems when their conditions fluctuate between mild/moderate and severe.
The hearing also highlighted implementation challenges associated with CalAIM and the state’s “No Wrong Door” behavioral health framework. Witnesses acknowledged progress in improving coordination between managed care plans and county systems but stressed that many managed care networks still lack the expertise, provider capacity, or willingness to adequately serve individuals with severe mental illness. This concern is particularly relevant as counties continue working to improve coordination across healthcare, behavioral health, homelessness, and justice systems.
Assemblymember Catherine Stefani (D-San Francisco) delivered some of the strongest comments of the hearing, criticizing what she described as longstanding barriers to involuntary treatment reforms and arguing that California has failed families dealing with severe mental illness and anosognosia. Her remarks underscored the broader policy debate occurring statewide around conservatorship, CARE Court, assisted outpatient treatment, and involuntary medication authority.
The hearing also reinforced concerns that behavioral health reforms adopted through the Behavioral Health Services Act and CARE Court may be difficult to fully implement if federal funding reductions proceed. County representatives warned that counties are already redirecting resources toward the highest acuity populations experiencing homelessness, justice involvement, and untreated serious mental illness, and that further Medi-Cal losses could force reductions in upstream prevention and early intervention programs.
The hearing agenda characterized the discussion as the beginning of a broader statewide conversation about whether California’s behavioral health system is adequately designed to serve individuals with the most severe needs and whether counties will have sufficient fiscal capacity to absorb anticipated federal funding reductions while continuing to operate as the state’s behavioral health safety net.
Senate Insurance Hearing on Protecting Californians from Wildfire Risk
The Senate Insurance Committee held an informational hearing earlier this week on “Bending the Curve: Protecting Californians from Wildfire Risk,” focused on the growing intersection between wildfire resiliency, climate change, and the continued instability of California’s homeowners insurance market. Chaired by Senator Steve Padilla (D-San Diego), the hearing explored both the underlying drivers of the insurance crisis and emerging strategies to reduce wildfire risk at the household and community levels. Witnesses repeatedly emphasized that California’s insurance challenges are fundamentally tied to increasing catastrophic wildfire exposure, expanding development in the wildland-urban interface, aging housing stock, and the need for coordinated statewide mitigation efforts. Panelists also highlighted the significant implications for housing affordability, lending, local infrastructure, and local governments responsible for emergency response and land use planning. The hearing was also attended by Senators Lara Richardson (D-Inglewood), Josh Becker (D-Menlo Park), Roger Niello (R-Rancho Cordova) and Henry Stern (D-Sherman Oaks).
From an Orange County perspective, the hearing was particularly relevant given the County’s continuing exposure to wildfire risk in canyon, foothill, and interface communities, ongoing insurance affordability concerns in high fire severity zones, and increasing state focus on local mitigation and land use responsibilities. Several panelists pointed to the need for stronger coordination between state and local governments around community hardening, defensible space, retrofit standards, evacuation planning, and long-term resiliency investments. Discussion also highlighted the growing expectation that local governments will play a larger role in implementing wildfire mitigation strategies, while policymakers continue debating how to finance these efforts equitably across communities.
Impact of Climate Change Catastrophes on Californians. Amy Bach, Executive Director of United Policyholders, spoke from the consumer perspective and described the current insurance market as deeply strained but beginning to show signs of stabilization. She noted positive developments including the expansion of Firewise communities, the creation of statewide wildfire risk reduction standards for homes, and early indications that the Department of Insurance’s Sustainable Insurance Strategy (SIS) may be helping restore some market participation. However, she expressed significant concern over the rapid growth of surplus line and non-admitted insurers in California’s residential market, warning that many consumers are now being pushed into policies with substantially less oversight and far higher deductibles than would typically be allowed in the admitted market. Bach emphasized that while insurers are beginning to cautiously re-enter some markets, affordability remains a major concern and meaningful progress will ultimately require sustained investment in mitigation, community-wide hardening, and consumer protections. She also stressed that many homeowners still lack the financial resources necessary to implement required mitigation measures without grant support or public assistance.
Discussion between Bach and committee members also focused heavily on underinsurance following recent wildfire disasters, particularly the Los Angeles fires. Bach stated that underinsurance remains widespread and has become substantially worse due to inflation, labor shortages, and rapidly escalating rebuilding costs. She noted that many homeowners are insured at replacement cost values far below actual reconstruction costs, creating major financial exposure after disasters. Members also discussed broader concerns regarding the FAIR Plan’s continued growth, though witnesses acknowledged that enrollment growth has recently begun to slow somewhat.
Bending the Risk Curve. Nancy Watkins of Milliman and Stanford’s Michael Wara focused their testimony on what witnesses repeatedly referred to as “bending the risk curve” through statewide mitigation and resiliency investments. Watkins argued that California’s insurance market challenges are the product of decades of accumulated policy decisions combined with worsening climate-driven wildfire behavior. She emphasized that the current insurance disruption is “a symptom, not the problem,” echoing findings included in the hearing materials. Watkins stressed that wildfire is ultimately a solvable problem if California adopts a comprehensive, large-scale mitigation strategy centered on community hardening, improved data systems, and stronger coordination among insurers, utilities, local governments, and homeowners. She compared the Sustainable Insurance Strategy to a difficult but necessary course of treatment, arguing that rate increases and regulatory reforms are intended to stabilize the market long enough to restore competition and long-term sustainability.
Wara focused extensively on how structure-to-structure ignition drives catastrophic wildfire losses and highlighted research showing that relatively modest interventions, including ember-resistant vents, defensible space improvements, and neighborhood-level mitigation efforts, can significantly reduce risk. He advocated prioritizing investments in community-scale mitigation rather than relying almost exclusively on utility spending and suppression efforts. Wara also emphasized the importance of balancing insurance market reforms with affordability protections for consumers and warned against approaches that shift excessive costs onto homeowners without sufficient public investment in resiliency infrastructure.
Modeling for Fire Risk. Panelists Frank Frievalt, Director, Wildland-Urban Interface Fire Institute, California Polytechnic State University, San Luis Obispo and Michael Gollner, Ph.D., Associate Professor of Mechanical Engineering, University of California, Berkeley further reinforced the growing policy shift toward treating wildfire as primarily a structure ignition and community resiliency issue rather than solely a vegetation management problem. They discussed evolving fire behavior modeling and emphasized that relatively targeted mitigation measures, particularly ember protection and structure hardening, can meaningfully reduce catastrophic losses. Witnesses repeatedly stressed the importance of identifying the mitigation strategies that produce the greatest measurable reduction in risk and integrating those findings into insurance pricing, local planning, and building standards.
Scaling Solutions. Dan Dunmoyer, President and Chief Executive Officer, California Building Industry Association highlighted newer master planned communities, including Rancho Mission Viejo, as examples of communities designed with substantially greater wildfire resiliency. He discussed the importance of incorporating fire-resistant materials, defensible design, and community-wide planning standards into future development while also recognizing the much larger challenge posed by California’s millions of existing structures. Dunmoyer advocated incremental hardening improvements over time as homes undergo renovations or roof replacements and raised the concept of creating buffers of newer, more fire-resistant development surrounding older vulnerable communities.
Insurance Commissioner Ricardo Lara concluded the hearing by defending and highlighting the early progress of the Sustainable Insurance Strategy. Lara stated that several insurers have now submitted filings committing to maintain or expand coverage in wildfire-prone areas and pointed to recent FAIR Plan enrollment trends as evidence that conditions may be beginning to stabilize. He also emphasized the need for broader statewide investments in wildfire resilience infrastructure, including a community-wide wildfire resilience standard, a modern wildfire data system, expanded home hardening programs, insurance discounts tied to mitigation activities, and continued development of a public catastrophe model. Lara repeatedly stressed that California must move toward a more coordinated, statewide resiliency strategy similar to programs adopted in other disaster-prone states.
Throughout the hearing, legislators and witnesses consistently returned to the idea that long-term stabilization of California’s insurance market will require moving beyond piecemeal mitigation efforts toward coordinated, community-scale wildfire resilience planning. Several members also emphasized the increasingly important role local governments will play in land use planning, evacuation preparedness, infrastructure investments, and implementation of mitigation standards. The discussion reinforced the growing state policy focus on wildfire resiliency as both a public safety and economic stability issue, with continued implications for local planning, housing development, insurance affordability, and long-term infrastructure investment decisions.
Background Materials
Cap-and-Invest Hearing on Proposed Amendments
The May 6 joint informational hearing of the Senate Environmental Quality Committee and Senate Budget Subcommittee No. 2 focused on the California Air Resources Board’s (CARB) proposed amendments to the state’s Cap-and-Invest program and the potential impacts those changes could have on California’s climate goals, affordability, and funding for major state climate investments.
The hearing was relevant for Orange County because many of the programs potentially affected by reductions to the Greenhouse Gas Reduction Fund (GGRF) support priorities that directly intersect with county interests, including transportation investments, wildfire prevention, coastal resilience, affordable housing, clean air programs, and climate adaptation infrastructure.
Legislative leadership framed the hearing around growing concern that CARB’s revised proposal may not faithfully implement the intent of AB 1207 and SB 840, the 2025 laws that extended the Cap-and-Invest program through 2045. Committee Chairs Senator Catherine Blakespear and Senator Eloise Gómez Reyes (D-San Bernardino) questioned whether the amendments improperly prioritize additional industry incentives over investments that benefit communities and support California’s long-term climate strategy.
At the center of the debate was CARB’s proposed Manufacturing Decarbonization Incentive (MDI), which would dedicate up to 118 million allowances, valued at roughly $4 billion, to industrial decarbonization projects. Eligible projects could include refinery upgrades, hydrogen investments, electrification projects, renewable energy generation, and carbon capture technologies. CARB argued the proposal is intended to backfill lost federal industrial funding, reduce emissions, preserve California manufacturing jobs, and help avoid additional energy cost increases for consumers.
However, legislators and the Legislative Analyst’s Office (LAO) expressed concern that the proposal could weaken the integrity of the emissions cap while significantly reducing revenues available for the GGRF. The LAO warned that the proposal represents a major shift from existing regulations and could leave insufficient funding for many climate and infrastructure programs historically supported through GGRF revenues. During the hearing, legislators highlighted concerns that reduced GGRF revenues could jeopardize programs such as the Transit and Intercity Rail Capital Program (TIRCP) and Low Carbon Transit Operations Program (LCTOP).
The hearing further reflected broader tensions within the legislature over balancing climate ambition with affordability concerns. Moderate lawmakers emphasized worries that tightening emissions regulations too aggressively could increase gasoline and electricity prices and create additional pressure on California families and businesses. Senator Suzette Valladares (R-Santa Clarita) argued the state must account for affordability and energy reliability impacts alongside climate goals, particularly as refining capacity declines and fuel costs remain volatile.
CARB responded by emphasizing that the revised proposal increases climate-related utility bill credits from $8 billion to $10 billion between 2027 and 2030 and shifts additional allowances toward electric utility ratepayer relief.
The hearing also highlighted growing political divisions among California Democrats regarding the future direction of the Cap-and-Invest program. Background materials included reporting that progressive lawmakers and moderate Democrats are increasingly split over whether CARB’s proposed changes appropriately balance emissions reductions with cost-of-living concerns.
Several legislators questioned whether CARB had adequately demonstrated that additional allowances and incentives for industry would actually lower costs for consumers or meaningfully prevent emissions leakage. Supplemental hearing materials specifically asked CARB to explain whether refinery compliance relief would translate into lower fuel prices and whether the agency had adequately evaluated the impacts of reducing funding for affordable housing, wildfire prevention, transit, clean air, and environmental justice programs.
The LAO presentation emphasized that the proposed amendments create significant policy tradeoffs between affordability, emissions reductions, industry support, and long-term climate investments. The office noted that lower-than-expected GGRF revenues could force the legislature to reconsider funding priorities established only months earlier through SB 840.
Overall, the hearing underscored that California’s climate policy debate is increasingly focused not only on emissions reductions, but also on how climate programs interact with affordability, economic competitiveness, infrastructure funding, and local government priorities. For Orange County, the outcome of CARB’s proposed amendments could have meaningful implications for future transportation, resilience, housing, and environmental funding streams as the state moves toward its 2030 and 2045 climate targets.
Background Materials
Upcoming Hearings
Agendas are typically posted on the committee websites in the Assembly and Senate a few days prior to the hearings. To view hearings after they take place, you may access them in the Assembly or Senate media archives where they are generally available within a few hours of committee adjournment.
Monday, May 18, 2026, Upon adjournment of Session
Assembly Budget Subcommittee No. 2 on Human Services
1021 O Street, Room 1100
May Revision - All Departments
Monday, May 18, 2026, 2:30 p.m.
Assembly Budget Subcommittee No. 6 on Public Safety
State Capitol, Room 447
May Revision - All Departments
Monday, May 18, 2026, 3 p.m. or Upon adjournment of Session
Assembly Budget Subcommittee No. 1 on Health
1021 O Street, Room 126
May Revision - All Departments
Tuesday, May 19, 2026, 9:00 a.m.
Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation
State Capitol, Room 437
May Revision - All Departments
3900 California Air Resources Board - Cap and Invest
Proposed Regulations
Tuesday, May 19, 2026, 1:30 p.m.
Assembly Budget Subcommittee No. 5 on State Administration and General Government
State Capitol, Room 447
May Revision – All Departments
Tuesday, May 19, 2026, 2 p.m.
Assembly Budget Subcommittee No. 1 on Health
1021 O Street, Room 126
May Revision - All Departments
Wednesday, May 20, 2026, 9:00 a.m.
Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services
1021 O Street, Room 1200
May Revision
All Departments - Open Issues
Wednesday, May 20, 2026, 1:30 P.M.
Assembly Budget Subcommittee No. 5 on State Administration
State Capitol, Room 447
May Revision - All Departments
Wednesday, May 20, 2026, 1:30 p.m.
Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government
State Capitol, Room 113
May Revision
All Departments - Open Issues
Wednesday, May 20, 2026, 1:30 p.m.
Senate Budget and Fiscal Review Subcommittee No. 5 on Corrections, Public Safety, Judiciary, Labor, and Transportation
State Capitol, Room 112
May Revision
All Departments - Open Issues
Thursday, May 21, 2026, 9 a.m.
Senate Budget and Fiscal Review Subcommittee No. 2 on Resources, Environmental Protection, and Energy
1021 O Street, Room 2200
May Revision
All Departments - Open Issues
Thursday, May 21, 2026, 9:30 a.m.
Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services
1021 O Street, Room 1200
May Revision
All Departments - Open Issues
Thursday, May 21, 2026, 9:30 a.m.
Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government
State Capitol, Room 113
May Revision
All Departments - Open Issues
Grant Opportunities
Below is a list of the latest grant opportunities released by the state. All opportunities for local jurisdictions may be found here.
Application deadline: 7/8/26 23:59
Title: FY 2025-26 Wildfire Prevention Grants Proposition 4
State Agency / Department: Department of Forestry and Fire Protection
Match Funding? No
Estimated Total Funding: $2,000,000
Funding Method: Reimbursement(s)
Expected award announcement: 7/8/26 23:59
Title: California National Archery in the Schools Program 2026 (CalNASP) Equipment Grant
State Agency / Department: Department of Forestry and Fire Protection
Match Funding? No
Estimated Total Funding: $3,800
Funding Method: Grant is for purchasing equipment kits. CDFW will purchase the kits and send them to the awarded schools.
Application deadline: 6/23/26 23:59
Title: Beverage Container Redemption Innovation Grant
State Agency / Department: Department of Resources Recycling and Recovery
Match Funding? No
Estimated Total Funding: $20,000,000
Funding Method: Advances & Reimbursement(s)
Expected award announcement: 6/12/26 17:00
Title: California Workplace Outreach Project (CWOP) Supplemental Request for Applications (RFA) Program Year (PY) 2026-2027
State Agency / Department: Department of Industrial Relations
Match Funding? No
Estimated Total Funding: $9,600,000
Funding Method: Advances & Reimbursement(s)
Governor’s Press Releases
Below is a list of the governor’s press releases beginning May 6.
May 13: New FBI data: crime drops across California as retail theft enforcement recovers $75 million in stolen goods
May 13: Governor Newsom delivers $760 million in HHAP funding to support communities’ efforts in reducing homelessness
May 13: Governor Newsom announces California’s new $1 billion rebate program for electric trucks, as Trump cedes global clean vehicle market to China
May 13: Governor Newsom announces $30 million for regional wildfire prevention and landscape projects ahead of wildfire season
May 12: Governor Newsom appoints former federal regulator Rohit Chopra to head new Business and Consumer Services Agency amid Trump-era rollbacks
May 12: More than 1,000 LA firestorm survivors have accessed CalAssist Mortgage Relief
May 12: Governor Newsom delivers $111 million in voter-approved Prop 1 funding to communities to get people off the streets and connected to mental health care
May 12: California remains the nation’s top travel destination, tourism spending climbs to a record high $158.9 billion
May 11: Governor Gavin Newsom’s Steve Jobs innovation coin goes into circulation tomorrow
May 11: Governor Gavin Newsom welcomes new members to the Governor’s Council of Economic Advisors
May 8: Governor Newsom announces appointments 5.8.2026
May 8: As Mother’s Day approaches, Governor Newsom highlights a first-of-its-kind in the nation paid family leave program
May 8: Governor Newsom announces major hiring milestone with over 1,000 young adults entering the wildland firefighting force
May 8: Governor requests extension of FEMA disaster funding to help survivors of LA wildfires
May 8: Governor Newsom launches first-in-the-nation program providing free diapers for all new parents
May 7: Governor Newsom proclaims National Teacher Appreciation Week
May 7: California is more prepared for our water future than ever before
May 7: Governor Newsom proclaims Day of Prayer 2026
May 7: During Wildfire Preparedness Week, Governor Newsom announces $70 million available for wildfire prevention and resilience projects statewide
May 7: Film industry and labor leaders celebrate Governor Newsom’s expanded California Film & Television Tax Credit Program as filming grows in the Golden State
May 7: Governor Newsom launches Engaged California statewide for the first time to give all Californians a stronger voice in AI policy
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