Ann Hollingshead
Table of Contents
Appendix 1: General Fund Discretionary Spending Proposals
Appendix 2: General Fund Spending Solutions
Appendix 3: May Multiyear Revenue Outlook
Update (5/21/26): Upon further review and receipt of additional information from the administration, we estimate the amount of discretionary spending in the May Revision is $1.1 billion, rather than $1.3 billion.
May 18, 2026
The 2026-27 Budget
Initial Comments on the Governor's May Revision
Appendix 2:
General Fund Spending Solutions in the 2026-27 May Revision
- General Fund Spending Solutions (Fund Shifts) Proposed in the 2026‑27 May Revision
- General Fund Spending Solutions (Reductions) Proposed in the 2026‑27 May Revision
- General Fund Spending Solutions (Reversions) Proposed in the 2026‑27 May Revision
- Other General Fund Solutions Proposed in the 2026‑27 May Revision
Appendix 2, Figure 1
General Fund Spending Solutions (Fund Shifts) Proposed in the 2026‑27 May Revision
(In Millions)
|
Department or Program |
Description |
2025‑26 |
2026‑27 |
|
CARB |
Ongoing shift to special funds |
— |
$2 |
|
CalEPA |
Ongoing shift to special funds |
— |
3 |
|
DHCS |
Behavioral Health Services Fund offsets |
$9 |
182 |
|
DPH |
Behavioral Health Services Fund offsets |
— |
6 |
|
DSH |
Behavioral Health Services Fund offsets |
— |
10 |
|
DTSC |
Ongoing shift to special funds |
— |
4 |
|
HCAI |
Behavioral Health Services Fund offsets |
— |
9 |
|
Medi‑Cal |
Proposition 35 (2024) support for provider rate increases |
— |
1,700 |
|
Medi‑Cal |
Managed care tax for behavioral health |
— |
122 |
|
Totals |
$9 |
$2,038 |
|
|
CARB = California Air Resources Board; CalEPA = California Environmental Protection Agency; DHCS = Department of Health Care Services; DPH = Department of Public Health; DSH = Department of State Hospitals; DTSC = Department of Toxic Substances Control; and HCAI = Department of Health Care Access and Information. |
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Appendix 2, Figure 2
General Fund Spending Solutions (Reductions) Proposed in the 2026‑27 May Revision
(In Millions)
|
Department or Program |
Description |
2025‑26 |
2026‑27 |
|
APS |
Reduction of Adult Protective Services Expansion |
— |
$70 |
|
CDTFA |
Operational savings |
— |
10 |
|
Child Care |
Cost of Living Adjustment percentage reduction |
— |
48 |
|
Child Care |
Alternative Payment administration shift into contract |
— |
5 |
|
Child Care |
Rescind prospective pay support |
$30 |
— |
|
CSAC |
0.5 position swept as authorized under Control Section 4.12 |
— |
— |
|
DOJ |
Prior funding for federal‑related litigation made limited term |
— |
— |
|
HBEX |
One‑Dollar Premium Subsidy Program |
20 |
20 |
|
HCD |
Encampment Resolution funding reversion |
1 |
— |
|
IHSS |
Stricter Medi‑Cal asset limit for seniors and disabled adults |
— |
63 |
|
IHSS |
Streamlining of IHSS eligibility to align with Medi‑Cal |
— |
56 |
|
IHSS |
Elimination of IHSS Permanent Back‑up Provider System |
— |
3 |
|
IHSS |
Authorized hours per case cost shifta |
— |
— |
|
Medi‑Cal |
Stricter asset limit for seniors and disabled adults |
— |
216 |
|
Medi‑Cal |
Work requirements and 6‑month renewals for adults with UIS |
— |
60 |
|
Medi‑Cal |
Restructured Enhanced Care Management benefit |
— |
41 |
|
Medi‑Cal |
Opioid Settlement Fund offsets |
— |
35 |
|
Medi‑Cal |
Rate reduction for PACE providers |
— |
34 |
|
Medi‑Cal |
Restructured Community Supports services |
— |
27 |
|
Medi‑Cal |
Medi‑Cal loss ratio remittance redirection |
— |
25 |
|
Medi‑Cal |
End of acupuncture benefit |
— |
5 |
|
Medi‑Cal |
End of comprehensive coverage for certain groups |
— |
— |
|
Medi‑Cal |
Monthly $50 premium for UIS adults |
— |
— |
|
State Preschool |
Cost of Living Adjustment percentage reduction |
— |
8 |
|
State Preschool |
Rescind prospective pay support |
— |
— |
|
Totals |
$51 |
$727 |
|
|
aAdministration estimates the Governor’s proposal to remove the states share of cost associated with growth in IHSS hours per case to yield a savings of $361 million in 2027‑28, increasing to $415 million in 2029‑30. |
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Note: The Governor also proposes solutions that yield savings in the out‑years. Notably, the administration proposes reducing Middle Class Scholarship award coverage by half in 2026‑27, for ongoing General Fund savings of $524 million. Given the program is being funded in arrears, this savings would be achieved in 2027‑28. |
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|
APS = Adult Protective Services; CDTFA = California Department of Tax and Fee Administration; CSAC = California Student Aid Commission; DOJ = Department of Justice; HBEX = California Health Benefit Exchange; HCD = Department of Housing and Community Development; IHSS = In‑Home Supportive Services; and UIS = unsatisfactory immigration status |
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Appendix 2, Figure 3
General Fund Spending Solutions (Reversions) Proposed in the 2026‑27 May Revision
(In Millions)
|
Department or Program |
Description |
2025‑26 |
2026‑27 |
|
EDD |
Reversion of unused EDDNext project funding |
$71 |
— |
|
SSGP |
Unspent State Supplemental Grant Program Funds related to Los Angeles Fires |
65 |
— |
|
Totals |
$136 |
— |
|
|
EDD = Employment Development Department and SSGP = State Supplemental Grant Program. |
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Appendix 2, Figure 4
Other General Fund Solutions Proposed in the 2026‑27 May Revision
(In Millions)
|
Solution Type |
Description |
2025‑26 |
2026‑27 |
|
Revenue Related |
Require delivery network companies to register as marketplace facilitators |
— |
$30 |
|
Revenue Related |
Permanent business tax credit limit |
— |
850 |
|
Revenue Related |
Digital software tax |
— |
450 |
|
Revenue Related |
New managed care organization tax |
— |
575 |
|
Borrowing |
Proposition 98 settle up |
$3,940 |
— |
|
Reserves |
Suspend BSA true up in 2025‑26 |
5,413 |
— |
|
Totals |
$9,353 |
$1,905 |
|
|
BSA = Budget Stabilization Account. |
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