By SDCN Staff
Sacramento, CA–Governor Gavin Newsom unveiled a revised 2026-27 state budget proposal that fully eliminates California’s projected deficit through July 2028 while maintaining strong reserves and protecting core services amid economic uncertainty and federal attacks on healthcare and working families.
The revised budget delivers a $1.8 billion reduction in General Fund spending and:
- $0 deficit this budget year
- $0 deficit next budget year
- $0 structural deficit through July 2028
The proposal cuts California’s long-term operating imbalance by more than half for the 2028-29 budget and marks a significant multi-year fiscal stabilization effort.
At the same time, the proposed budget delivers for California with transformative investments in child care, schools, higher education, public safety, healthcare, housing, clean energy, new businesses, and the protection of the state’s natural resources.
“California is proof that fiscal discipline and progressive values go hand in hand. We’re balancing the budget, eliminating the deficit, cutting spending, and building reserves — all while protecting healthcare, education, and essential services for Californians,” Governor Newsom stated in a release.
The revised budget balances both the 2026-27 and 2027-28 fiscal years while making substantial progress in reducing long-term operating deficits in future years.
The revised budget does not propose significant new ongoing General Fund spending commitments. Instead, the Newsom’s plan prioritizes fiscal restraint, long-term sustainability, and protecting the state against future economic volatility.
To strengthen the state’s long-term position, the budget deposits $9.7 billion into the Surplus Holding Account to help support future fiscal years and avoid overcommitting revenues during uncertain economic conditions. It also maintains nearly $30 billion in combined reserves — which has grown 30% since the governor took office-including a growing Rainy Day Fund balance.
While restoring fiscal stability, the revised budget continues major investments in affordability and essential services, including:
- A $300 million investment to protect healthcare affordability after Trump’s failure to renew Affordable Care Act subsidies
- A 50% tax cut for hundreds of thousands of new small businesses through lower LLC fees
- A record $5 billion block grant for priorities such as teacher training and support
- The largest special education investment in California history- a $2.4 billion ongoing increase
- A $500 million investment to expand literacy and math support in high-need schools
- A new $100 million disaster rebuilding fund to help wildfire survivors rebuild homes
- New affordable housing reforms to reduce construction costs and build more housing
The full text of the governor’s budget summary document is available here.
