Enacted Budget – Fiscal Year 2026
Governor Gavin Newsom signed the state’s fiscal 2026 budget into law on June 27. The budget provides for total state expenditures (excluding federal funds) of $321.1 billion for fiscal 2026. This includes $228.4 billion in general fund spending, a 2.2 percent decrease from fiscal 2025. The budget is based on forecasted general fund revenues of $208.6 billion before transfers, representing a 6.0 percent decrease from fiscal 2025. The budget also provides for a revenue transfer from the state’s rainy day fund, the Budget Stabilization Account (BSA), to the general fund of $7.1 billion. After transfers, the enacted budget projects a balance of $11.2 billion in the BSA. Additionally, the budget projects a general fund ending balance of $22.5 billion, including $4.5 billion in the Special Fund for Economic Uncertainties (SFEU) – the state’s discretionary reserve account – and the remainder in the Reserve for Liquidation of Encumbrances. The ending balance and rainy day fund balance combine to an estimated total balance of $33.7 billion for fiscal 2026.
The budget for fiscal 2026 includes targeted investments in education, health care, housing, and other areas focused on supporting the residents of California, while also addressing a projected $11.8 billion budget deficit. The budget includes statutory changes to reduce regulations and streamline housing and infrastructure production to address the state’s housing affordability challenges, while also making one-time investments in the Low-Income Housing Tax Credit and the Homelessness Housing, Assistance, and Prevention Program. The budget also continues investments in other key priorities, including: funding to support full implementation of universal transitional kindergarten; expanding before, after, and summer school programs; a one-time block grant to help school districts set up learning recovery initiatives; one-time funds for specialized equipment and training to support universal school meals; continued Encampment Resolution Fund grants; spending authority to support recovery efforts from the Los Angeles Fire; infrastructure funds for the City of Fresno; and a series of investments to strengthen CAL Fire personnel capacity. Additionally, the budget provides tax relief for veterans by excluding military retirement income from taxation. Meanwhile, to address the projected deficit, the budget makes targeted spending reductions to ongoing programs, in addition to other budget management strategies including borrowing from other funds, fund shifts, and a scheduled withdrawal from the state’s rainy day fund.