California State Senate Moves Forward on Budget Following May Revise

What You Need to Know: Governor Gavin Newsom released his updated budget proposal to reflect new revenue numbers in California. The May Revise provides a more accurate reflection of the economic health of the state. With these new numbers, the Legislature can move forward with negotiations for a finalized 2026-27 budget.

SACRAMENTO – California has moved one step closer in crafting the budget plan following the release of the May Revise. This update is an encouraging development toward passing an on-time budget that puts California on a fiscally responsible path for the future. 

While this May Revise is positive, there are still some key points that need further negotiation. Our state must continue to maintain funding for programs like: HHAP, affordable housing, homeownership, and the Middle Class Scholarship. It is also critical that we delay the implementation of cuts to dental programs, clinics, and Medi-Cal premiums.

The Senate budget plan provides a responsible framework for balancing the budget and protecting core programs. We are encouraged that, while not identical, the May Revision from the Governor aligns with the Senate framework and is a positive next step in the crafting of the upcoming state budget. Our subcommittees will continue their work crafting the final Senate version of the budget by the end of the month. We look forward to working with our partners in the Assembly and the Governor’s Office to deliver an on-time budget that strengthens the fiscal foundation of the state. 

 

- Senate President pro Tempore Monique Limón

The budget plan released by the Senate in April highlights three key priorities: responsible budgeting, maintaining essential programs that Californians rely on, and improving the long-term budget. To do that, the Senate proposed increasing the Rainy Day Fund to manage our volatile revenue system. It also means continued investments for Prop 98, HHAP, and Medi-Cal while adding 44,000 childcare slots in 2026-27.

The Senate put forth the Fair Share Contribution, which acts as a special fund revenue that requires the top 1%-2% of the largest California corporations to contribute to the Medi-Cal costs of their workers. This is to offset the Medi-Cal costs to taxpayers and is expected to generate between $5 billion and $8 billion annually.

The May revision reflects a more balanced budget outlook than what appeared possible early this year. Last month the Senate proposed a budget framework, Foundation for the Future, that took advantage of additional revenues to balance the budget for the next two years, cut the structural deficit in half, and boost reserves - reflecting a ‘balanced approach’ to budget challenges and supporting long-term fiscal stability. The Governor’s May revision overall framework is very similar to the Senate framework, including its emphasis on maintaining strong reserves, and we thank him for that.

There are still differences about paying off education settle-up funds, adequately supporting the HHAP funding to local governments to address homelessness, increasing Child Care slots, delaying implementation of pending health care reductions, maintaining support for the Middle Class Scholarship, and creating new judgeships for underserved counties – among other things. We hope to work together on Rainy Day Fund improvements and addressing the unemployment insurance debt.

There are proposals in the May revision that the Legislature will want to examine closely, and there are areas where we will continue looking for better alternatives. Our job now is to work with the Assembly and Governor to finalize a budget that protects Californians, maintains long-term fiscal stability, and recognizes both the opportunities and uncertainties facing the state in the years ahead. 

 

- Senator John Laird, Chair of the Senate Budget and Fiscal Review Committee

To revisit the Senate “Foundation for the Future” budget plan, please click here.