Governor Newsom announces revised budget that eliminates California’s deficit, maintains investments for working families, healthcare, education, and businesses

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 Governor’s plan prioritizes fiscal restraint, long-term sustainability, and protecting the state against future economic volatility. 

To strengthen California’s long-term position, the budget deposits $9.7 billion into the state’s 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 Governor Newsom 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 at ebudget.ca.gov. A fact sheet is available here. 

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