Governor’s Proposed 2026–2027 California State Budget

Initial Summary (January 9, 2026)

Governor Gavin Newsom’s proposed 2026–2027 California State Budget outlines the state’s spending plan and priorities for the upcoming fiscal year. This summary highlights key budget areas that can directly affect Californians who rely on disability and support systems, including people with intellectual and developmental disabilities, their families, and caregivers. It also covers major funding proposals tied to DDS and Regional Centers, IHSS, and broader health and education programs that influence services across the state.

California Budget Overview (2026–27)

Although earlier forecasts suggested a substantial deficit, the Governor’s proposal reflects stronger-than-expected revenue projections, totaling more than $42 billion above prior estimates. As a result, the state anticipates a relatively small shortfall of $2.9 billion for the 2026–27 fiscal year.

The budget is structured to remain balanced and includes required deposits into state reserves, often referred to as the Rainy Day Fund, to address unforeseen expenses.

Looking ahead, the outlook becomes more challenging. A $22 billion gap is projected for 2027–28, with continued pressure expected in subsequent years. Updated financial assumptions and spending adjustments will be presented in the Governor’s May Revision, which will outline how the state plans to manage these future deficits.

California DDS Budget (2026–27)

The proposal dedicates $21.1 billion to the Department of Developmental Services, supporting more than 527,000 Californians. This reflects a $2.4 billion increase over the previous fiscal year and accounts for approximately 37,600 additional individuals receiving services.

Notable components of the DDS budget include:

• Higher Medicaid reimbursement levels, generating over $154 million in annual savings
• Ongoing development of the Life Outcomes Improvement System (LOIS), funded at over $14 million for 2026–27
• A planned cold shutdown of Fairview Developmental Center, expected to save $8 million

California Regional Centers (2026–27)

Funding within the DDS budget continues to support California’s Regional Center network, which delivers services and case management to individuals with intellectual and developmental disabilities across the state. The proposal reflects continued system-wide investment as caseloads grow and service demands increase.

California Health Budget (2026–27)

Federal policy changes under HR 1 are expected to place significant cost pressure on California’s health and nutrition programs. In 2026–27, these changes are projected to add $1.1 billion in Medi-Cal costs and $300 million in CalFresh costs, in addition to normal program growth.

Other impacts associated with HR 1 include:

• A new work requirement starting January 1, 2027, reducing spending by $373 million in 2026–27 and $13.1 billion by 2029–30
• Lower federal reimbursement for emergency services, shifting the match rate from 90 percent to 50 percent, adding $658 million in costs in 2026–27 and $872 million by 2029–30
• Reduced federal participation for Medi-Cal coverage for certain immigration categories, which would cost the state $786 million in 2026–27 and $1.1 billion in later years if services continue
• More frequent eligibility reviews, moving from annual to six-month redeterminations, resulting in savings of $463 million in 2026–27 and $3 billion by 2029–30
• Required changes to Medicaid provider tax structures, adding $1.1 billion in state costs for 2026–27
• Federal investments of over $233 million to expand access to care, strengthen the workforce, and improve health infrastructure in rural and frontier areas through the Federal Rural Health Transformation Program

California IHSS Budget (2026–27)

The Governor’s proposal allocates $33.4 billion to In-Home Supportive Services (IHSS) in 2026–27, serving more than 875,000 participants statewide.

Beginning in future years, the proposal includes several program changes:

• Starting in 2027–28, the state would no longer cover the cost of county-approved IHSS hour increases, shifting those expenses to counties and producing $233 million in state savings
• The IHSS Backup Provider System would be discontinued, saving $3.5 million
• State-funded IHSS would end during the Medi-Cal waiting period, saving $86 million, with services beginning only once Medi-Cal coverage is active

California Education and Childcare Budget (2026–27)

The proposal includes broad investments across education, childcare, and nutrition programs, including:

• Nearly $90 million for cost-of-living adjustments to childcare programs administered by the California Department of Social Services
• Almost $383 million in CalFresh funding tied to federal changes, along with $66 million in savings from eligibility adjustments
• Approximately $150 billion for TK–12 education, serving close to 6 million students across more than 10,000 schools
• Continued funding for the Learning Recovery Emergency Block Grant through 2027–28, totaling over $757 million
• Ongoing support for the Home-to-School Transportation Program, including $33 million in one-time funding and $239 million annually
• Cost-of-living increases for multiple programs, including special education and child nutrition, exceeding $228 million annually
• One-time funding for early reading risk screenings, wildfire recovery for LA County schools, and a $100 million flexible block grant for community colleges

California Civil Rights Budget (2026–27)

The proposal continues implementation of civil rights initiatives established in prior budgets. Funding is included to permanently staff the Bureau for Descendants of American Slavery, with allocations beginning in 2028–29 and ongoing funding in future years.

The budget also extends funding for the Commission on the State of Hate through 2030, with varying annual allocations to support its continued work.

California Housing Budget (2026–27)

Housing programs continue to be reorganized under the California Housing and Homeless Agency and the Housing Development and Finance Committee. As part of this restructuring, $560 million would be shifted to HDFC to administer affordable housing initiatives.

Budget Resources

• Governor’s Proposed 2026–2027 Budget

What This Means for Californians

The Governor’s proposed 2026–2027 California State Budget shows a stronger near-term outlook than expected due to higher projected revenue and a smaller shortfall for 2026–27. It also points to significant challenges ahead, with a much larger shortfall projected for 2027–28 and beyond.

For Californians with intellectual and developmental disabilities and their families, the proposal maintains substantial funding for DDS and Regional Centers, while outlining cost pressures tied to HR 1 and major proposed IHSS changes beginning in 2027–28. This summary will be updated as new details emerge, especially following the May Revision.

At Galt Advocacy, we help families across California navigate IHSS and related systems, including applications, assessments, and appeals. If you have questions about how proposed budget changes could affect your services or hours, our team is here to support you.

Frequently Asked Questions