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Prepared by Precision Advocacy
On June 15, the Assembly and Senate approved AB 109, the legislature’s main 2026-27 budget bill, and sent the legislature’s budget plan to the governor. AB 109 reflects the primary budget bill components of the legislative plan, while additional prior-year budget amendments, budget bill junior measures, and trailer bills implementing statutory changes are now in print, with further action expected as negotiations continue through the end of the month.
A central theme of the plan is responding to federal cuts and uncertainty while maintaining reserves and adopting new revenues. The legislature adopts approximately $5 billion in ongoing new revenues, including a federally compliant Managed Care Organization (MCO) tax, a new sales tax on electronically delivered prewritten software, and a permanent cap on business tax credits. It also establishes a “Fair Share from Big Corporations” framework requiring the Department of Finance to present options by March 1, 2027, to hold large employers accountable when their workers rely on Medi-Cal instead of employer-sponsored health coverage.
Several budget trailer bills implement the revenue and health care financing components of the plan. SB 122/AB 122 and SB 176/AB 176 contain major revenue provisions, including extending the sales and use tax to electronically delivered prewritten software beginning January 1, 2027; extending and making permanent business tax credit limitations; imposing a 10% tax on certain Anti-Vaporization Fund settlement payments; reducing the first-year minimum franchise tax for certain new LLCs, LPs, and LLPs from $800 to $400; and appropriating funding to the California Department of Tax and Fee Administration for implementation. SB 125/AB 125 implements the MCO tax component of the budget by creating a federally compliant MCO provider tax for 2027 through 2029, depositing revenues into the Medi-Cal Stability Fund, and directing funds to support Medi-Cal administrative costs, federally required payments, and program support.
Health and Human Services. On health and human services, the legislature’s plan rejects several of the governor’s proposed reductions and delays others. It rejects proposed In-Home Supportive Services (IHSS) cuts, delays Medi-Cal dental and clinic reductions until July 2027, maintains full-scope Medi-Cal for certain immigrant populations through 2026-27, delays changes to Medi-Cal premiums, and preserves the current Medi-Cal asset test in 2026-27 before lowering it in 2027-28 to $21,000, far above the governor’s proposed $2,000 limit. The plan also provides additional funding for county Medi-Cal and CalFresh workload tied to H.R. 1, supports food banks through CalFood, expands immigration legal services, and rejects the proposed Adult Protective Services reduction.
For Orange County, the county workload and safety-net components are particularly important given the expected administrative and service delivery impacts of federal changes. The plan includes support for county administration, public hospitals, distressed hospitals, and indigent care programs, all of which are intended to help local governments absorb the fallout from potential Medi-Cal coverage losses and increased pressure on county health systems.
Senator Catherine Blakespear highlighted the importance of the plan’s $125 million allocation for county indigent care, describing it as a critical investment to help strengthen California’s health care safety net and ensure people who lose Medi-Cal coverage can still access life-saving care. Senator Bob Archuleta similarly framed the budget as a statewide response to basic local needs, stating, “You can’t tell me that in Orange County there isn’t a need as well as South Central, as well as parts of San Diego. It is across the state. This budget reflects that.”
Housing and Homelessness. The plan also makes significant housing and homelessness investments. It provides $900 million for Homeless Housing, Assistance, and Prevention (HHAP) Program Round 7, which is $400 million above the governor’s May Revision, along with $700 million for affordable housing, including $500 million for the Low-Income Housing Tax Credit and $200 million for the Multifamily Housing Program. It also includes $100 million for housing stability programs and anticipates continued work on a November 2026 housing bond.
Assemblymember Sharon Quirk-Silva framed the budget around what she described as core governmental responsibilities – housing, health care, and human services. On the Assembly floor, she said, “We know that people need homes that they can afford, they need access to healthcare, and we know that part of our job is when people get knocked is to help them stand back up.” She also defended the budget’s balance between fiscal restraint and support for vulnerable Californians, saying, “California has never moved forward by choosing between fiscal discipline and compassion. We move forward when we insist on both.”
Senator Blakespear supported the $900 million HHAP allocation but raised concerns about the lack of longer-term funding certainty. She said, “I’m supportive of funding at least $900 million for round seven of HHAP. These resources will help local governments move people off the streets and into housing. $1 billion would be better.” She also warned that the absence of a commitment to fund HHAP Round 8 and the lack of encampment resolution funding could make it harder for cities and counties to sustain progress, adding that “counties and cities need predictability if we expect them to build long-term homelessness strategies.”
Public Safety and Courts. On public safety and the courts, the plan provides funding for Proposition 36 implementation, Victims of Crime Act backfill, rehabilitation programs, nonprofit security grants, Missing and Murdered Indigenous People grants, Court Appointed Special Advocates, human trafficking prosecution and victim services, and the RIGHT Grant to support nonprofit community-based rehabilitative programming. It also includes major judiciary investments, including $400 million in 2026-27 for courthouse maintenance and construction and $44 million ongoing for new judgeships.
However, Proposition 36 funding remains a point of disagreement among members, including several from Orange County. Senator Blakespear raised concern about the reduction in Prop 36 funding from $100 million to $50 million, saying, “Californians voted for this measure expecting results. Local agencies have expressed concern that demand is exceeding available resources, which is resulting in cost shifts for local governments.”
Assemblymember Diane Dixon was more direct in her opposition to the plan, noting that Proposition 36 passed statewide with 68% support and “in Orange County, it succeeded with more than 74% of the residents voting in support.” She argued that “Proposition 36 cannot work without funding,” and warned that “one way to kill a proposition is simply don’t fund it.” Dixon added that voters were clear that “repeat theft offenders should face meaningful consequences, and the cycle of endless consequence-free theft needs to end.”
Senator Tony Strickland also criticized the plan’s public safety funding, arguing that the budget does not provide “proper funding for Proposition 36 that passed all 58 counties.” He tied that concern to a broader critique of state spending, saying, “California doesn’t have a revenue problem, it does have a wasteful spending problem, an addiction to spending problem.”
Schools, Childcare, and Higher Education. For schools and childcare, the legislature’s plan provides roughly $2.7 billion more for schools and community colleges across 2025-26 and 2026-27 compared to the governor’s May Revision, while committing to work on a schedule to address $3.9 billion in Proposition 98 obligations. It invests in special education, community schools, career technical education, teacher recruitment and retention, paid pregnancy leave for educators, community college enrollment growth, UC and CSU funding, and Cal Grant access. The plan also protects 6,800 childcare slots proposed for elimination and adds 22,770 new childcare slots in 2026-27.
Even with those investments, some Orange County members raised concerns about the plan’s treatment of Proposition 98. Assemblymember Laurie Davies opposed AB 109, arguing that the budget “uses clever accounting to hide a massive education deficit.” She warned that when the state pulls billions from the education system, “it disappears from reading programs, mental health counselors, and our classes.”
Revenues, Business Taxes, and the Innovation Economy. The revenue side of the budget remains one of the most politically sensitive pieces of the plan. The legislature accepts major revenue proposals, including the MCO tax, taxation of electronically delivered prewritten software, and permanent business tax credit limitations. These proposals are intended to support Medi-Cal and other core budget commitments, but they have also drawn concern from members worried about affordability, business competitiveness, and California’s long-term revenue base.
Assemblymember Cottie Petrie-Norris acknowledged the difficult choices reflected in the legislative budget but raised concerns about making the cap on business tax incentives permanent, particularly with respect to research and development incentives. She cautioned against undermining the sectors that drive California’s revenue strength, noting that California’s innovation economy is “the envy of the world” and one of the reasons the state is the fourth-largest economy in the world.
Senator Steven Choi opposed AB 109 on affordability and tax grounds, saying, “Californians want to see real relief and a legislature that is responsible for the tax dollars they already pay to this state government.” He argued that the budget relies on tax increases and singled out the MCO tax on Medicare and commercial health plans, which he said would increase costs for “everyday people and businesses.” Choi also criticized the state’s failure to pay down unemployment insurance debt and said the plan does too little to address affordability and public safety.
Climate, Wildfire, Transit, and Infrastructure. Climate, wildfire, transit, and infrastructure issues remain only partly resolved. The plan includes Greenhouse Gas Reduction Fund (GGRF) support for CalFire and protects continuously appropriated wildfire prevention funds, but several major GGRF and Proposition 4 bond decisions are left for later negotiations. The plan also advances Rainy Day Fund reform through a proposed constitutional amendment intended to allow the state to build larger reserves in strong revenue years.
On transit, Senator Blakespear supported the proposed allocation of $418 million for the Transit and Intercity Rail Capital Program and $814 million for the State and Federal Mass Transit Program using GGRF funds. However, she also argued that the broader GGRF allocation discussion should be reopened, reflecting continued concern over how the state balances transit, climate, wildfire, and other infrastructure commitments.
Legislative Analyst’s Office Overview. The Legislative Analyst’s Office (LAO’s) overview explains that the legislature’s 2026-27 budget plan assumes more available General Fund resources than the governor’s May Revision, primarily from $5.5 billion in higher assumed revenues and a roughly $2 billion reduction in the planned Temporary Surplus Holding Account transfer, creating about $8 billion in additional resources. The legislature uses those resources to reject proposed cuts and make new temporary investments, while leaving the overall reserve picture largely similar to the May Revision. Under the plan, total reserves would be about $19.6 billion in 2026-27, including $15.1 billion in the Budget Stabilization Account and $4.5 billion in the Special Fund for Economic Uncertainties.
Major differences from the governor’s May Revision include increased Proposition 98 funding for schools and community colleges, additional childcare slots, rejection or delay of several Medi-Cal reductions, and added support for counties, indigent health care programs, public hospitals, and distressed hospitals to help address impacts from H.R. 1. The legislature also rejects many proposed human services reductions, including cuts to IHSS and Adult Protective Services, and provides targeted one-time funding for county administration, food banks, and immigration services.
For housing and homelessness, the plan provides additional funding for the Multifamily Housing Program, the Low-Income Housing Tax Credit program, HHAP, and homelessness programs administered by the Department of Social Services. For courts and criminal justice, it includes $3 billion in lease revenue bond authority and one-time funding for courthouse and courtroom construction and deferred maintenance, while also including an unallocated reduction to CDCR and requiring closure of an additional prison.
Ballot Calendar and End-of-Month Negotiations. June 25 is the last day for the legislature to adopt a measure for the November 2026 statewide ballot and the last day for initiative proponents to withdraw a measure from that ballot. As a result, budget decisions around taxes, revenue, health care financing, reserve reform, and other major policy commitments may unfold alongside decisions about which fiscal and policy questions are ultimately placed before voters.
Legislative leaders will continue negotiations with the governor before the final budget is enacted, likely on about June 30, with unresolved issues likely to continue through follow-up budget and trailer bill actions.
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, June 22, 2026, 2:30 p.m.
Assembly Emergency Management
State Capitol, Room 127
Informational Hearing: Fire Apparatus Costs: Prices, Delays, and Adverse Impacts to Communities
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: 7/30/26 00:00
Title: CAL FIRE Forest Health Research Program (FY 2026-27) Proposition 4 California Climate Bond Grants (RP-RFP-2026-03)
State Agency / Department: Department of Forestry and Fire Protection
Match Funding? No
Estimated Total Funding: $3,000,000
Funding Method: Advances & Reimbursement(s)
Application Deadline: 7/30/26 00:00
Title: CAL FIRE Forest Health Research Program (FY 2026-27) California Climate Investments Grants (RP-RFP-2026-01)
State Agency / Department: Department of Forestry and Fire Protection
Match Funding? No
Estimated Total Funding: $4,000,000
Funding Method: Advances & Reimbursement(s)
Application Deadline: 7/17/26 16:00
Title: Upland Game Bird Account Grant
State Agency / Department: Department of Fish and Wildlife
Match Funding? No
Estimated Total Funding: $300,000
Funding Method: Reimbursement(s)
Expected Award Announcement: January 2027
Title: Beverage Container Recycling Grant Program (Fiscal Years 2026-27 and 2027-28)
State Agency / Department: Department of Resources Recycling and Recovery
Match Funding? No
Estimated Total Funding: $1,500,000
Funding Method: Advances & Reimbursement(s)
Governor’s Press Releases
Below is a list of the governor’s press releases beginning June 10.
June 17: Acting Governor Monique Limón signs legislation 6.17.26
June 17: California’s Career Passport to connect qualified workers to employment, with or without a four-year degree
June 17: Governor Newsom announces special free pass to California’s state historic parks in honor of Juneteenth and America’s 250th anniversary
June 17: El Gobernador Newsom anuncia un pase gratuito especial para los parques históricos estatales de California en conmemoración de Juneteenth y del 250º aniversario de la nación.
June 16: Governor Newsom honors public safety officers and state employees for exceptional bravery
June 16: Trump’s own DOJ confirms Governor Gavin Newsom is right
June 16: Governor Newsom calls out Trump’s weaponized DOJ as President rewards his criminal cronies with pardons
June 15: Governor Newsom demands records from Trump’s DOJ about politically motivated investigation
June 15: Governor Gavin Newsom Statement on Donald Trump’s Weaponized DOJ Investigation
June 15: Over 3 months later: Donald Trump’s Iran war continues to drain American wallets
June 15: Governor Newsom and First Partner Siebel Newsom highlight California’s contributions to the America250 time capsule
June 12: Governor Newsom proclaims Immigrant Heritage Month
June 12: 80 candles, one costly record: Trump’s legacy of waste and chaos
June 12: Governor, First Partner statement on the passing of David Hockney
June 11: Governor Newsom convenes tech industry leaders to advance government efficiency and effectiveness
June 11: While Trump drags his feet, Governor Newsom delivers $46M to help address the federally managed water crisis at the border
June 10: Governor Newsom proclaims California State Parks Week
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