California Budget Brings Aid, Gaps for Counties

SACRAMENTO — Governor Gavin Newsom signed California’s 2026–27 state budget June 29, approving a $351.7 billion spending plan after negotiations with legislative leaders over healthcare, homelessness, public safety, schools, and county services. The final budget includes $251.5 billion in General Fund spending, and the governor’s office described the plan as balanced, with no projected deficit for the current or next fiscal year and nearly $30 billion in reserves.

The budget followed the usual June deadline process, but major pieces were still negotiated late in the month. Lawmakers passed an initial budget bill on June 15 and sent it to Newsom, while the final deal was later announced as a three-party agreement among the governor, Senate President pro Tempore Monique Limón, and Assembly Speaker Robert Rivas.

Compared with last year’s enacted budget, the new plan is larger. The 2025–26 budget totaled $321.1 billion, including $228.4 billion from the General Fund, while the newly signed budget totals $351.7 billion, including $251.5 billion from the General Fund.

The budget also changes how the state plans to cover future costs. According to CalMatters, the agreement relies in part on higher revenue projections, tax changes, and limits on some business tax benefits to delay or soften cuts to social services. The governor’s office highlighted other statewide pieces of the plan, including a temporary cut to the LLC tax for new small businesses, additional funding for special education, continued universal school meals, expanded child care, housing programs, and money for election administration.

For counties, one of the largest unresolved issues is the local effect of H.R. 1, the federal law expected to increase workload for county eligibility offices and reduce health coverage for some Californians. The California State Association of Counties said the budget includes $420 million in one-time funding for county Medi-Cal and CalFresh eligibility work and $250 million in grants for public hospitals, but no funding for indigent care for residents who lose Medi-Cal coverage.

“We’ve always said H.R. 1 will require a multi-year partnership between the state and counties — and this budget is a good starting point,” CSAC CEO Graham Knaus said in the association’s statement. CSAC also warned that counties remain legally responsible for basic indigent care and may have to draw money from public health, public safety, homelessness programs, and other local services if coverage losses grow.

The hospital funding could be particularly important in rural areas, where smaller hospitals often have fewer financial reserves and fewer nearby alternatives for patients. CSAC said the final budget provides up to $140 million for distressed hospitals, describing the money as support for facilities facing significant financial pressure, “particularly in rural California.”

Several other county priorities survived the final negotiations. The budget rejects Newsom’s proposed cost shift for In-Home Supportive Services, protecting counties from what CSAC described as hundreds of millions of dollars in new ongoing costs. It also preserves the Medi-Cal mobile crisis benefit for another year, allowing counties to continue behavioral health crisis response outside hospital emergency rooms and jails.

Homelessness funding also remains in the budget. The plan includes $900 million for Round 7 of the Homeless Housing, Assistance, and Prevention program, with CSAC noting that a larger share will be distributed as grants to counties, cities, and continuums of care. The governor’s budget materials also list $500 million for low-income housing tax credits, $200 million for the Multifamily Housing Program, and $100 million for a Disaster Rebuilding Fund intended to help homeowners rebuild after disasters.

Some smaller rural programs are also included in budget materials tracked by the Rural County Representatives of California. RCRC identified $50 million over five years to expand beverage container redemption access in up to 40 rural jurisdictions, along with ongoing funding for Rural Certified Unified Program Agency reimbursements in several small and rural counties. The budget package also includes major wildfire-related spending, though CalMatters reported that broader Greenhouse Gas Reduction Fund negotiations were pushed into the summer.

On public safety, counties received less than they had sought for Proposition 36 implementation. CSAC said the budget includes $20 million for county behavioral health planning and capacity building, $20 million to restore proposed pretrial services cuts, and $10 million for trial courts, but the association said the total “falls well short” of what counties need to carry out the voter-approved measure increasing penalties for certain drug and theft crimes.

The final budget also answers a question raised by the Legislature’s earlier proposal to close another state prison. The governor did not sign a budget requiring an additional prison closure; the final AB 111 budget analysis states that the agreement removed language that would have required another closure by 2027–28. The already planned closure of the California Rehabilitation Center in Norco remains separate from that proposal.

County groups say they will continue pressing the state for a longer-term response to federal health care changes. In a joint statement with groups including CSAC, RCRC, the County Welfare Directors Association, and county health organizations, local advocates urged the state to create an alternative for residents who lose coverage and said counties cannot absorb the full cost shift on their own.